Q1 2025 NN Inc Earnings Call
Speaker Change: Good day, and welcome to the NN Inc. 1st quarter 2025 earnings conference call. All participants will be in a listening only mode.
Speaker Change: He's a genetic assistant. Please see the whole comfort specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star, then one on a touchstone phone. So what's your question? Please press star, then two.
Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference call over to Mr. Stephen Poe and Mr. Relations, Mr. Poe the floor is yours sir.
Speaker Change: Thank you, operator. Good morning, everyone, and thanks for joining us. I'm Stephen Poe with Annihng's Investor Relations team, and I'd like to thank you for attending today's earnings call and business update.
Speaker Change: Last evening we issued a press release announcing our financial results for the first quarter ended March 31, 2025, as well as a supplemental presentation which has been posted on the after-relations section of our website.
Speaker Change: If anyone needs to copy the press release or the supplemental presentation, you may contact Dr. Alpha IR Group at NNBR at alpha-IR.com.
Speaker Change: Our presenters on the call this morning will be Harold Bevis, President and Chief Executive Officer, Chris Bohnert, Senior Vice President and Chief Financial Officer, and Tim French, our Senior Vice President and Chief Operating Officer.
Speaker Change: Please turn the slide to where you'll find our four-looking statements in disclosure information.
Speaker Change: Before we begin, I'd ask that you take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation, and in the risk factors section in the company's quarterly report on Form 10Q for the fiscal quarter ended March 31, 2025.
Our presentation today will contain forward-looking statements regarding sales.
Margins,
Speaker Change: inflation, supply chain constraints, foreign exchange rates, cash flow, tax rates, acquisitions and investitures, synergies, cash and cost savings, future operating results, performance of our worldwide markets.
Speaker Change: General Economic Conditions and Economic Conditions in the industrial sector, including the potential impacts and ramifications of tariffs, the impacts of pandemics and other public health crises and military conflicts on the company's financial condition, among other topics.
Speaker Change: The statement should be used with caution and are subject to various risks and uncertainties many of which are outside of the company's control which may cause actual result to be materially different from such forward-looking statements.
Speaker Change: The presentation also includes certain non-GAAP measures as defined by SEC rules. The reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release and the supplemental presentation.
Speaker Change: Please turn to slide three and I will now turn the call over to our CEO , Harold Bevis.
Thanks, Siemens, and good morning, everyone.
Harold Bevis: I'd like to address a few points at the beginning of the update today, and the first point is regarding market demand tariffs and new business.
Harold Bevis: Business uncertainty increased during the quarter and since we last reported and it caused us to have lighter sales than planned in Q1 at a few customers.
Harold Bevis: Especially in global automotive, which is now about 40% of our sales.
Harold Bevis: and quite a few public companies in our segment, so reporting down sales and negative outlooks.
Harold Bevis: We're reporting flat sequential sales and flat year-of-year sales on a performance basis.
Harold Bevis: We're able to do that due to our successful in the business program, which keeps delivering results gaining, sharing, gaining positions.
But during the quarter, we did see our base business softening.
Harold Bevis: and we shifted our business development focus on the closing and wedding immediate wrap-up sales.
and it's working well.
Harold Bevis: We nicknamed it the pig's program for profitable immediate growth strategy and it was a focus on immediate ramp up business and the complexion of 2025 already looks different.
Harold Bevis: We now have 120 programs that we've won, wrapping up this year, we're 55 million in annual I-Sales, which is a steep increase since we last reported, and our biggest new win is in industrial products, where we will convert certain automotive production assets over to produce these new products.
and this 55 million in new business is ramping up.
Harold Bevis: During the remainder of 25, and it adds to whatever our base business will be.
Harold Bevis: and at this point we're assuming a flat-based business market environment from our legacy customers.
Harold Bevis: with this additional layer of business. It bolsters our outlook and it gives us confidence to confirm our guidance, which Chris will walk through.
Harold Bevis: So this has turned out to be a speed bump, not a roadblock and we're working through it and winning immediate business.
Harold Bevis: NFR based markets improved and it's all a better one to add additional to our outlook.
The second point is on operations on operations.
Harold Bevis: Given the base business uncertainty, we decided to go ahead and increase the amount of cost reduction.
Harold Bevis: that we have underway for 2025. And our operations team is well underway with this and we've already actions of any staff reductions during Q1, which will further bolster our profit rates in Q2, Q3, and Q4. Tim French is going to cover that in a few minutes.
Harold Bevis: We've progressively increased our cost out plans and new product launch plans [inaudible]
Harold Bevis: from 2023 to 2024 and now to 2025 and we're on track for this year's $15 million cost reduction plan as well as the 120 wrap-up plans which almost every plant is participating in.
Harold Bevis: and it gives us confidence with the rest of the year and gives us a good carry-in for 2026 as well.
Harold Bevis: Our third point is that the combination of our commercial performance and operational performance gives us confidence to update our 2025 guidance and five-year goals.
Harold Bevis: and we are reinterrating our full-year guidance free but DA and for new business awards and we're initiating free cashflow guidance.
Harold Bevis: 14 to 16 million. And in the first quarter, we cannot be aggressive with our cash management activities as we refinance our ABL at the very beginning of the quarter, and we refinance our term on at the very end of the quarter.
Harold Bevis: So we kept our balance as comfortable to fund all activities and go through bank transfers. This was temporary and it's not the case going forward.
Harold Bevis: and our fourth point is that our company transformation is on track.
Harold Bevis: on the commercial side, a key point to remember is that we have a significant amount of open capacity globally. We're largely running one-shift operations everywhere in the world, and this enables a full-blast new business program for existing products.
Harold Bevis: We're set up to pursue a wide spectrum of additional business for legacy products.
Harold Bevis: On the pivoting side, we're selectively adding new assets that are market based for those products.
Harold Bevis: and this balanced program of both leveraging existing capacity and know-how, as well as adding new capacity in certain areas is working well, and we've now won $160 million of new business.
Harold Bevis: and we've kept our growth cap expending modest and we continue the game momentum in our new targeted areas and we're going to cover that today as well.
Harold Bevis: On the operational side, this one-shift plant situation gives us many opportunities for footprint optimization and we're progressively squeezing the redundancy and excess cost from our global cost and working capital structures.
Harold Bevis: We have a full program for 2025, but we also are opportunity rich on a bill-forward basis.
Harold Bevis: I'd like to say that a key summary point is that we're optimistic about both 2025 and our long-term goals and we look forward to discussing them with you. Please turn to page 4
Harold Bevis: where CFO Chris Bohnert will cover some key performance metrics. Chris?
Chris Bohnert: Thank you, Harold. We added this slide to focus on some of our key metrics first. I'll get into our more detailed quarterly results later. First up is our net sales for the quarters. Harold mentioned we were...
Chris Bohnert: Flat on a pro-formative basis and roughly flat sequentially from the fourth quarter. Our Jessica Gross margins were 16.9 percent.
Chris Bohnert: We feel like we're on track to hit our five-year goal in the 19-20% range as we continue our cost-out programs and layer-in new business in the coming quarters and years.
Chris Bohnert: Arjusted Operating Income was actually positive at 2 million, which was an increase of 2.7 million quarter on quarter. Arjusted EBITDA came in at 10.6 million, and as Harold mentioned, we're reconfirming our guidance in the range of 53 million for the full year of 2025.
Speaker Change: Jesse, but how margins came in about 10% for the quarter, on track with our five-year goals in the 13 to 14% range.
Speaker Change: We also spend a lot of time working on working capital.
Speaker Change: Tim will cover this in more detail, but I work in capital.
Tim French: through the first quarter was 84.8 million. It's on track for our goals to be down 4.6 million
Speaker Change: and our working capital is a percent of our trailing 12-month sales is 19.1 percent.
Speaker Change: and that's down considerably as Tim will talk about here shortly. New business winds came in at 16.4 million. We're again reconfirming our guidance there in the 60 to 70 million range for the full year. And we also obviously track cash cap-backs and cash very closely. Cash cap-backs for the first quarter was 3.9 million, and we're roughly going to target about 10 million for the full year, keeping it pretty stringent for the year.
Speaker Change: So those are just a few of our key metrics. I'll talk about the quarter in more detail, but with that I'd like to turn it back over to Harold.
Harold Bevis: Thank you. One of our key charts that we've been providing updates around is our transformation plan and our tracker.
Harold Bevis: and our enterprise transformation is roughly 70% complete after our first seven quarters and we're on track with our targets for the full year of 2025.
Harold Bevis: Going down the list, we're about 90% complete with enhancing our leadership to mirror our new Ford agenda.
Harold Bevis: Secondly, we've been isolating and actioning against the underperforming parts of the company. These are customer-specific, program-specific and plant-specific.
Harold Bevis: This requires aggressive customer interactions, arriving at mutual agreements to either improve economics or professional transitions.
Harold Bevis: We're about 70% complete with this. We nicknamed this the Group of Seven because it was concentrated into seven plants and 2025 will be a turning point for those plants and they will deliver positive margins for us.
Margin Expansion is a result of these fixes, but also…
Harold Bevis: Leaning out of our cost structure globally, we call it our one team program and it's a multi-year endeavor with a strong 2025 game plan that's underway and we're about 60% complete with that.
Harold Bevis: But to make our turn around a little bit more challenging, we inherited a debt structure that was nearing the end of its life expectancy, and we were able to extend the duration of our capital structure for another five years.
Harold Bevis: and along the way we learned that we had plenty of options to alter the complexion of our China operations.
Harold Bevis: and we are underway with doing this. This will materially help our domestic debt profile.
and the last point is regarding organically growing sales.
Harold Bevis: You need to follow the comparatives here as we sold the Lubbock Business in July of 2024 and we began rationalizing money-losing business in multiple plants in 2024.
Harold Bevis: We call it price clearing, and if we could get the price as we needed to keep the business we did, and this is largely done, and we're on a pro forma basis, as we've reported, and crystal characterized, we were flat in a quarter.
Harold Bevis: and conversely on a go-forward basis. We have about 55.9 in a business that's launching now and we have a likely another 100 million in 2026.
Harold Bevis: So we believe we're at a turning point here. So we're calling this about 60% complete because it's yet to happen although we have a tremendous amount of business in hand.
Turning to page six [inaudible]
Harold Bevis: I would like to talk a little more deeply about our new business program due to the importance of it.
Harold Bevis: and we wanted to be more transparent about exactly what we're doing and we get a decent amount of questions about this so we're sharing more specifically today.
Harold Bevis: and here you can see our overall plan, our specific targets and our specific status against those targets.
Harold Bevis: and our targets are based on leveraging our significant open capacity, which is largely cap-ex-free when we quote it, as well as our most investment-intense portfolio pivot.
Harold Bevis: It's almost topological that to increase our positions in new areas we need something new. And for us it's generally a few people and some specific investment and we're doing this progressively.
Harold Bevis: and if you add up some of the columns, you'll see that. It's almost exactly half.
Will Gaining Stain in Medical
Harold Bevis: And in this area, we are almost one for one needing additional machines.
Harold Bevis: As we gain business in which we are and.
Harold Bevis: And we've had a lot of wins in the industrial market this year.
Harold Bevis: As another point and Theyre largely immediate ramp up.
Harold Bevis: And in fact, our largest win of the year is in industrial products win.
Harold Bevis: There has been a global rebalance.
Harold Bevis: Amongst our automotive business and our customers between ice EV and hybrid we read a lot about it in the U S. But it is indeed global.
Harold Bevis: And basically the kind of rapid transitions that were underway have all slowed down globally.
Harold Bevis: And it's more of a com business development environment.
Harold Bevis: And turning to page seven here.
Harold Bevis: We wanted to share some summary facts and figures.
Harold Bevis: And a key point.
Harold Bevis: To make is that we're progressively wanting a higher amount of programs were at the higher amount of revenue.
Harold Bevis: If you see the statistics here, we want 118 programs in 2023 to 188 programs in 2024, and we're on pace to went over 200 programs. This year.
Harold Bevis: It's a steady increase in performance.
Harold Bevis: And we are steadily adding people.
Harold Bevis: That have relationships that we don't have or product knowledge that we don't have.
Harold Bevis: And we continue to open new doors with new and existing teammates.
Harold Bevis: Another interesting point is that our new business prospects in activity has not slowed down.
Harold Bevis: With global uncertainty and the tariff wars.
Harold Bevis: Not at all in fact, our activities have increased.
Harold Bevis: And we are now also getting a decent amount of tariff RF queues on top of our own prospecting.
Harold Bevis: And some of the Rfps are quite large and would alter our game plans and we're participating in those that fit us.
Harold Bevis: And we're well along with multiple targeted RF skus that are at the contracting stage. So we look forward to continuing to report out on this are prospecting pipeline also continues to increase in size were not necessarily chasing that it's at.
Harold Bevis: It is a byproduct, though of our activity and is now almost $50 million.
Harold Bevis: And well balanced this part of our game plan is working quite well and we can foresee that our pipeline will continue to grow as we get better and better at this game.
Speaker Change: Please turn to page eight.
Speaker Change: And we wanted to give further insight into a couple of new business win areas by sharing two vignettes with you.
Speaker Change: We get a decent amount of questions around medical and so we wanted to share about medical what we're doing.
Speaker Change: And we wanted to show exactly where our metal part, making knowhow is ending up in the medical market.
Speaker Change: The big a big area for US is in the extremities and instruments markets, which are metal based.
Speaker Change: It's it's funny to say, but you're obviously not gonna find plastic parts going in going in for these activities. They have to be sterilized. They have the rigid they just have to work.
Speaker Change: And their model and so it fits right into our metal, making knowhow our number one product in the first quarter is the ratcheting handle used in shoulder surgery kits and you can see.
Speaker Change: The picture here.
Speaker Change: And if you look at the picture at the bottom of this page you'll see that it's the same basic shape is a rack and pinion shaft.
Speaker Change: And hence the extrapolation of our Knowhow to make long thin high tolerance parse is transferable to this market.
Speaker Change: And these are slightly different machine. Unfortunately.
Speaker Change: As it turns out but its close cousin to what we already do and already know how to do and it's easy for us to get into that game and that's an example of our top metal metal part that we've made for the medical business and we now have a $40 million pipeline, which is the peak pipeline since we reentered.
Speaker Change: This business and we're quite optimistic about the rest of the year here.
Speaker Change: On page nine.
Speaker Change: Similar to our other plants.
Speaker Change: Or and then plant in France has been a one shift operation with ample open capacity and for those of you that follow transplants.
Speaker Change: It's also a short work week. So it's a lot of open capacity and so we have been very actively prospecting for additional business and we've had three recent wins there that financially correct. This plant and the wins are listed here I'm not I'm not listening to customers.
Speaker Change: We're now underway with three ramp ups in that plant, which will well financially turn the plant around.
Speaker Change: And it will become accretive for us on an EBITDA and a positive free cash flow basis. So that's just a couple of examples to share with you.
Speaker Change: And we'll take your feedback on whether you want more of this or less of this as we go forward, but we wanted to share.
Speaker Change: The direct impact of the new business and what it's doing for us.
Tim French: With that I'd like to turn it over to Tim.
Tim French: French who's going to walk through our operational performance Tim.
Tim French: Thank you Harold and good morning, everyone.
Tim French: On slide 10, the operation team continues to focus on achieving the cost reduction targets in an effort to improve our EBITDA and cash flow metrics key aspect of this initiative is right sizing our workforce in all the areas of the company direct indirect.
Tim French: [noise] salaried and SG&A.
Tim French: The data on the slide demonstrates the progress that has been made since Q2 2023.
Tim French: Total head count has declined 16, 1% during that time period, which is equal to about 525 net had reduction 67 are salaried or SG&A positions.
Tim French: Which is 65% reduction in this category. It also should be noted that during this time period.
Tim French: Excuse me some areas such as our APAC region added employees to handle significant growth, they're experiencing these additions, although when necessary to effectively run the business and meet customer demand muted the impact of the overall reductions.
Tim French: Key metric on this slide is the impact these actions had on our adjusted EBITDA for salaried head count. This metric has increased significantly from 115000 in the first quarter of last year to a one.
Tim French: Third and 42000 this quarter. This is a 25% improvement over the last 12 months.
Tim French: An example of our efforts to right size and improve the efficiency of our team.
Tim French: Our efforts in this area are continuing direct labor will always need to flex reflected man.
Tim French: However, we are continuing our <unk> implementation, creating a shared service infrastructure across facilities to support our manufacturing operations. This will allow us to progressively improve the efficiency of our salaries and SG&A workforce and better match our team to the needs of a company the size of that and then in subsequent earnings calls I'll be excited to talk to you about additional acts.
Tim French: It was planned for 2025.
Tim French: Now turning to slide 11.
Tim French: Okay.
Tim French: Another area of focus has been reducing our working capital requirements, which has had a favorable impact on our free cash flow.
Tim French: Overall, working capital has been reduced by 20% or 21 6 million over the last nine quarters from $4 8 million compared to Q1 of 'twenty four.
Tim French: Working capital as a percent of revenue finished at 19, 1%, which is down from 22, 4% in Q1 'twenty three.
Tim French: Again, we're not done focusing in this area. Our goal is to further reduce working capital by additional $5 million over the next two quarters with our ultimate goal of reducing it to 16% to 17% of revenue.
Tim French: Overall, we are happy with our progress in these two areas, but we're not sooner. So we know there's more to be done to reduce our cost structure improve our profitability and generate additional free cash flow.
Tim French: Before I turn it over to Chris to review, our financial performance I'd like to give a brief snapshot on the start of Q2.
Tim French: April finished strong with our consolidated volumes exceeding our internal forecasts are finishing operation had its best revenue month since June of 2022, our key North American machining facility had its best shipments since March 22.
Tim French: And our medical facility had its best shipments a lot.
Tim French: Within the last 12 months.
Tim French: We are optimistic that we are initially seeing in April will represent the balance of the year.
Chris Bohnert: With that I'll turn it over to Chris to review, our financial performance Chris.
Chris Bohnert: Thank you Tim similar.
Chris Bohnert: Similar to last quarter I'll be presenting information on both a GAAP and pro forma basis to provide transparency into our operating results due to the recent changes such as the sale of the Lubbock facility back in July of 2024, and the exit of certain unprofitable business, which we call rationalize volume. We hope this presentation will be indicative of.
Chris Bohnert: How we're making changes and decisions to transform and then overtime.
Chris Bohnert: On slide 12, where I detailed the financial results for the first quarter. This slide shows our as reported GAAP and non adjusted numbers on the left side again.
Chris Bohnert: Again lined out the pro forma adjustments to our quarterly results in the table in the middle with our quarterly pro forma results on the right side of the table. The pro forma adjustments include last year's contribution from the Lubbock plant, which was sold in July 2024, rationalized sales volume the impact of foreign currency translation last year's quarter.
Chris Bohnert: Included $5 4 million of net sales and zero point $6 million of adjusted EBITDA associated with the Lubbock plan strategically rationalize volumes of unprofitable business totaled $5 9 million in the prior year and a $2 8 million impact from FX rounds out the three pro format changes that we that we highlight.
Chris Bohnert: On an as reported basis.
Chris Bohnert: Net sales for the quarter were $105 7 million declining $15 $5 million versus last year's first quarter. As we note here on a pro forma basis accounting for the items I noted earlier net sales modestly declined one 3% or $1 $4 million, our adjusted operating income for the first quarter was $2 million.
Chris Bohnert: An increase of $2 7 million compared to the loss of 700000 in the prior year first quarter on an add it suggested pro forma basis operating income increased $2 $5 million.
Chris Bohnert: Adjusted EBITDA results for the quarter were $10 6 million compared to $11 3 million for the prior year period on a pro forma basis inclusive of the impacts I outlined earlier, our adjusted EBITDA was flat with the prior year first quarter as we were able to drive profitability through solid operational execution.
Chris Bohnert: I'll now turn it over to our segment results starting on slide 13.
Chris Bohnert: In our power solutions segment, where our business consists largely of stamps products net sales for the quarter were $43 5 million down $4 7 million compared to $48 2 million in the prior year period, due primarily to the impact of the Lubbock facility and $800000 of unfavorable impact from foreign exchange.
Chris Bohnert: Nation. These items were partially offset by volume.
Chris Bohnert: I am in mix with precious metals pass through driving much of that increase on a pro forma basis, excluding the contribution from Lubbock first quarter net sales increased $1 5 million or 4% as noted in the chart on the right.
Chris Bohnert: Power solutions adjusted EBITDA results of $6 $3 million declined $1.5 million versus last year's first quarter of $7 8 million driven by the non recurrence of Lubbock contribution and unfavorable mix adjusted EBITDA margins either on a percentage basis tend to compress during periods of rising precious metal costs. However, these costs.
Chris Bohnert: Or pass through to customers.
Chris Bohnert: On a pro forma basis, our power solutions adjusted EBITDA results were down zero point $7 million compared to last year's first quarter with a slight year over year comparison, driven by the same volume mix factor I noted with precious metals, it's worth noting that during the quarter, we bolstered our power solutions sales team strengthening with additional industry.
Chris Bohnert: Experts and thus far we've seen immediate increases in our new business pipeline for industrial Stampings. Our team has achieved multiple new wins year to date through April a number of which have immediate launches. This year in order to support our continued progress in new business growth, we have been strategically, adding physical assets and equipment and we intend.
Chris Bohnert: Continuing this pace as we go forward.
Chris Bohnert: Now turning to slide 14, highlighting our mobile solutions segment, which covers primarily machine products our machine products business.
Chris Bohnert: Net sales for the first quarter was $62 2 million for the period compared to $73 1 million last year and last year's first quarter net sales comparisons were impacted by the rationalized business of $5 9 million lower automotive volumes of $3 million and unfavorable foreign exchange effects of $1 9 million on a pro forma.
Chris Bohnert: Basis, net sales of $62 2 million were down $3 1 million or 5% compared to pro forma net sales of $65 3 million in last year's first quarter. The decline was driven largely by lower overall volumes in the automotive business.
Chris Bohnert: First quarter adjusted EBITDA in the mobile solutions segment was $8 1 million down <unk> 5 million from last year's first quarter on an as reported and pro forma basis. The slight decrease was due to lower volumes and foreign exchange impacts while our adjusted EBITDA results showed slight compression our cost out actions and the ongoing REIT.
Harold Bevis: Profiling of our sales mix drove a notable increase in our adjusted EBITDA margins to 13%. The margin growth is also supported by the right sizing of our cost structure to more appropriately fit the business, where we're headed which Harold touched on earlier in the call. As we look ahead, our new business wins for the segment are outpacing our plan in Q1.
Harold Bevis: We installed new machining equipment dedicated to specifically to our medical business and we are utilizing capacity converted from strategically rationalize the automotive business. We've also recently won new programs that are set for launch in the first quarter of 2026, which will contribute $5 $6 million in peak sales.
Harold Bevis: And we will use this freed up capacity to serve these wins from the industrial market.
Harold Bevis: Slide 15 presents our updated outlook for 2025, which I noted a few items earlier. This morning, given the uncertainties that have negatively impacted U S. E. P. In the first quarter. We now expect net sales between $430 million to $460 million due to current economic uncertainties and a lack of transparency on volumes primarily in the north.
Harold Bevis: Can market. This is going to be partially offset by our S. O PS during 2025 stemming from new business Awards from prior years, we have no change to our adjusted EBITDA range of $53 million to $63 million. However, as we mentioned previously we expect future market conditions to push our results to the lower half of the range countering this.
Harold Bevis: We're going to step up our cost out program, which we believe will help offset the impact of lower net sales new business wins remain unchanged between $60 million to $70 million. Our Q1 2025 results have and then on pace to achieve full year guidance and we anticipate maintaining this pace through 2025.
Harold Bevis: Finally, we're initiating free cash flow guidance in the range of $14 million to $16 million for the year. This reflects the impact of our cost out actions improved margin capture and anticipated proceeds from the cares Act.
Harold Bevis: That I will turn the call back over to Harold for some final remarks Harold.
Harold Bevis: Thanks, Chris.
Speaker Change: On page 16, I wanted to remind our investors of the pillars of our five year plan to drive profitable growth.
Speaker Change: And convert that into improve sustainable shareholder value our plan still remains intact.
Speaker Change: The kind of volume speed bump we had in Q1 here is only caused us to be recommitted and re convicted to the successful outcomes.
Speaker Change: And we've listed our near term progress against each of them.
Speaker Change: And we are fully committed to it.
Speaker Change: So thank you for paying attention here and listening to us.
Speaker Change: And we will now turn the call back over to the operator for questions.
Speaker Change: Mike.
Mike: Hey, Thank you Sir.
Speaker Change: We'll now begin the question answer session.
Speaker Change: That's a good question you May Press Star then one on your Touchtone phone.
Speaker Change: Speaker phone please pick up your handset before pressing the keys.
Speaker Change: Our net timber question has been addressed me like you've got your question. Please press Star then two.
Speaker Change: Again it is star then one to ask a question.
Speaker Change: This time, we will just pause momentarily to assemble our roster.
Rob Brown: And the first question, we have will come from Rob Brown of Lake Street Capital. Please go ahead.
Rob Brown: Good morning, Congratulations on all the progress.
Speaker Change: Thank you Rob.
Speaker Change: First I just wanted to get a little more detail on some of the tariff related RF queues, you've talked about seeing some incremental activity.
Speaker Change: For clothing, I guess, an interest just wanted to get a sense of what's happening there and what you sort of you know where your plants have capacity to take on that business.
Speaker Change: Yes, so the biggest the biggest two material stream.
Speaker Change: Of tariff related activity, one is reassuring into the United States.
Speaker Change: And one is Europeans.
Speaker Change: Supply moving to China.
Speaker Change: In the case of our U S opportunities.
Speaker Change: There from Canada, moving reassuring from Canada to the U S and reassuring business from China to the U S.
Speaker Change: They're fairly fast paced and they're large.
Speaker Change: So.
Speaker Change: In some cases, we have the equipment and in some cases, we don't.
Speaker Change: They're in the quoting stage and of course like everything Theres multiple people bidding on them.
Speaker Change:
Rob Brown: And it's primarily automotive Rob.
Rob Brown: So our desire to spend a lot of money on U S based automotive is.
Lower than other areas. So the numbers are going to have to be terrific.
Rob Brown: For us to be in <unk>.
Rob Brown: Interest rate at the end of the day, but we have a couple that fit us.
Rob Brown: On Europe to China.
Rob Brown: We're seeing a lot of activity from.
Rob Brown: Currently sourced metal parts that are that are in Europe.
Rob Brown: In Europe for Europe, and Europeans are looking to dramatically lower their Pos to become neutral to the tariffs into the U S.
Rob Brown: And they are quoting large chunks of business to move to China.
Rob Brown: Then be shipped to Europe assemble the tier one system assemble the vehicle.
Rob Brown: Shifting to the U S. So again, it's a way it's a and.
Rob Brown: An attempt to lower the price of the vehicle.
And in that case, we are underway with certain expansions and we do have certain up on capacity and other other parts of the programs would require capital so.
Rob Brown: This is mainly automotive.
Rob Brown: And it's working around if it's meant to work around the tariff to cough neutralize them into <unk>.
Rob Brown: Primarily involved.
Rob Brown: 50%, new capital, 50% reuse of existing capital.
Speaker Change: Okay, great. Thank you that's great color.
Speaker Change: And then on the AD.
Speaker Change: Motive market, particularly you talked a little bit about sort of the activity in the EV and hybrid sort of moderating a little bit an imbalance with the ice activity, but just a sense of how that's changing your new business opportunities in some of the stuff that's going on there.
Speaker Change: Is that rate of change.
Speaker Change: Changed.
Speaker Change: Yep.
Speaker Change: It's generally helpful for us.
Speaker Change: This has slowed down.
Speaker Change: And has it become balance to a lot of our legacy assets in Europe.
Speaker Change: And in South America, and in North America were kind of dialed in for fuel systems.
Speaker Change: And so our move just straight E V would be a declining market situation for us, but a move into hybrid is balanced because it needs either a generator or an engine. In addition to the battery so.
Speaker Change: The popularity of hybrid rising causes us to have a higher available market to us.
Speaker Change: And on the EV side, we initiated a the shielding and connector.
Speaker Change: Stamped products business, which we highlighted on our new wins chart.
Speaker Change: That continues to have legs that was a brand new market entry for us so at.
Speaker Change: At this point, we have a balanced portfolio, we're using existing assets.
Speaker Change: Almost exclusively including the staff products.
Speaker Change: Different dies on the same machine so.
Rob Brown: For us it gives us a larger available market Rob to use our legacy assets, both machining and staffing.
Speaker Change: Okay.
Speaker Change: Okay. Good thank you I'll turn it over.
Speaker Change: Thank you.
Hans: Next with Hans <unk> of noble capital markets.
Hans: Hi, Thanks for taking my questions and great progress on the transformation.
Hans: Thank you I was hoping yep I was hoping you could talk a bit more about that $55 million of new business wins expected to be seen this year as well as the $740 million and the pipeline.
Hans: Can we talk about the timing of those or are they going to be weighted in the back half of the year or can we expect them evenly distributed.
Hans: Yes, a good question so the what we call immediate win programs.
Hans: It is a program, where we have a green light to ramp up and that means that we have to hard tool go through the prototyping go through the customer testing.
Hans: And then lock in in what we call a Pee Pap.
Hans: Or a standardized way too.
Hans: Find the product in the process of the materials, so that it's repetitive quality.
Hans:
Hans: And generally speaking an immediate ramp up has about a six month lag.
Hans: In order for it to hit revenue so some of them.
Hans: Or it could be done maybe in three months, but is that three to six month kind of a ramp up as the timing now we mentioned that we had a big one that we won that where the customer was targeting a Q1 'twenty six start and that's because generally speaking, they're either ramping out of their current supplier and ramping in.
Hans: Our new supplier, so theres, a stranded inventory to work through which is a part of the agreement either coming in or going out.
Hans: And you work to their their dates and or their program launch so.
Hans: I guess, it's three to three to nine months overall, but the immediate ramp up that we focused in on with our pigs program.
Hans: The profitable immediate growth strategy was to impact this year. So a big portion of it will impact the second half of this year.
Speaker Change: Okay, that's very helpful.
Hans: About half of it.
Speaker Change: Okay about half in the second half.
Speaker Change: Yeah.
Speaker Change: Okay, Great and then a similar question with the $50 million of cost savings you're targeting.
Speaker Change: Is that expected to be evenly distributed throughout the year as well.
Tim French: Yeah, Tim I'll give that one to you.
Speaker Change: Yeah.
Speaker Change: A lot of it evenly distributed theres, a little bit of backend loading but for the most part it's it's evenly distributed throughout the year.
Speaker Change: Okay. Thank you.
Speaker Change: And couple of more questions. So with the remaining plants are you expecting any more closures with those or are the seven plants, you know that the base to go forward with.
Speaker Change: We have a we have a couple more that we're looking at and aggressively.
Aggressively on the payback of the consolidations, it's it's down to two plants. There's two there's two left on the list that are on the bubble.
Speaker Change: That are dilutive to our overall goals.
Speaker Change: But we don't have a firm plan in place right now to start or announce anything we're in the evaluation stage on both of those plants.
Speaker Change: Okay understood.
Speaker Change: That's everything for me thank you.
Speaker Change: Again as a reminder, if you'd like to participant on today's Q&A. The Star then one to ask a question.
Speaker Change: Won.
Speaker Change: The next question, we have comes from Don a friend's Rab of Sidoti and company.
Speaker Change: Good morning, guys and thanks.
Speaker Change: I apologize if this has been addressed or been juggling conference calls this morning, but I'm curious about the free cash flow guidance.
Speaker Change: Does that include the cares Act, we fund and what's the.
Speaker Change: Okay.
Speaker Change: Yeah, Chris I'll give you that one sure sure John you broke up a little bit there, yes. The free cash flow guidance does include the cares Act and the cares Act is at about $12 three to $12 4 million in that range.
Speaker Change: Okay and is there any.
Speaker Change: Yeah.
Speaker Change: Yeah.
John: John you broke up again, but I think is there anything else in there generally its operational activities and as we mentioned we.
John: We spent about $4 million in cash capex on capital so far in the first quarter.
John: And then we've got a target of $10 million for the year.
John: So you can kind of build it up from there. Okay does it include capex or not or is it capex.
John: They like it it includes it meaning it's net of it right yeah. Okay.
John: Okay, just wanted to make sure okay, and what are you seeing as far as trends in the April early may timeframe.
John: Compared to what you expect it to stay three months ago.
John: Okay.
John: Tim and Jim address that a little Tim address that a little bit Tom do you want to go ahead and repeat that sorry.
John: Sorry about that.
Speaker Change: I'm sorry, you cut out for me could I get you to please repeat the question.
John: April I'm sure.
John: Yeah.
Speaker Change: I can answer it so Tim Tim covered it that are initial start to the quarter here has been stronger than our forecast.
Speaker Change: And we have actually had and it's broad based and he gave a few examples.
Speaker Change: Several plants.
Speaker Change: And it.
Speaker Change: It makes us optimistic about our comments today and are recommitting to our our guidance John.
Speaker Change: Fair enough you know what I'll just read we read the transcript and I apologize for asking the question is yes.
Speaker Change: Thank you. Thank you all.
Speaker Change: Thank you John.
Speaker Change: Thank you.
Speaker Change: Again as a final reminder, if you'd like to participate in today's Q&A. This star then one to ask a question again, we will just pause momentarily.
Speaker Change: Well at this time, we're showing no further questions. We will go ahead and conclude todays conference call.
Speaker Change: Again, we thank you all for attending today's presentation. Thank you for management time.
Speaker Change: Hey.
Speaker Change: At this time you may disconnect. Your lines. Thank you take care and have a great day everyone.
Speaker Change: [music].