Good afternoon, everybody. My name is John Franzreb. I'm the Senior Capital Equipment Analyst here at Sidoti & Company. Our next presentation for the day is NN, Inc Ticker NNBR. For those of you not familiar with the name, NN manufactures components, the automotive, industrial, power control, and medical markets. We are fortunate to have with us today CEO Harold Bevis, COO Tim French, and CFO Chris Bohnert. Following the presentation, there will be time for questions and answers. Should you have a question, please put it in the Q&A box in the bottom of the page, and I'll present it to management. That said, gentlemen, thank you for all being here. The floor is yours.
Thank you very much, and thank you for joining us for a few minutes. Today, we are just going to go over some basics for us and give you our first reported result for the first quarter, which we're proud of, and reconfirm our guidance as well. If you don't know us at all, we are a maker of high-precision metal parts. We've been doing it for 45 years, and we've been public for about 30 years. We're considered a strategic partner to our customers as we co-develop parts that go into their systems. We have a global manufacturing platform with plants in six countries, as well as a very successful JV in China, where we own 49% of it. We have two primary product categories. One is stamped parts.
If you know stamping processes, these are the big presses that basically form metal through tons pressed and progress through dies. Then we have Mobile Solutions, which are machined parts, which start with bar stock and go through lathe and CNC equipment. In terms of us as an investment, we began an EBITDA advancement program six quarters ago, and we just completed our first full year. It was successful and on track with the five-year plan we articulated. This year will be another strong improvement year also. In terms of an investment and a new team, we're just getting started, really, and we're on track with our initial efforts. We've achieved over $150 million of new business wins already through Q1 of 2023 to Q1 of 2025. We're targeting about $65 million of new business per year.
In the first quarter, we'd like to report that we made our objective for the quarter and have already recorded over $16 million of new business. We also equally are focused on cost out. Tim leads that by and large, and it's through employee rightsizing, plant consolidations, and a continuous improvement program. The year that just ended in the last quarter reported at the end of the year 2024 put us at $464 million of revenue, $48 million of EBITDA, which was about 10%. We have over 1,100 customers. We don't have customer concentration. We have about 3,000 full-time employees, and then the JV employees are about another 700. That's us at a glance and an investment as a glance. A little bit further down into the details here, where are our plants? We primarily serve China, the United States, Brazil, and Europe.
Our machine centers are what we're all about. Machines matter a lot in the stamping business. Only 6% of our cost is direct labor. It's mainly the machine and its capabilities. On the machine product side, labor is a little higher, so around 20% of the cost. The location of the plant does matter as well as the machine capabilities. We are close to the markets we serve, and we're considered to be a tier-one competitor for what we do. On the next page, just a couple of investment highlights for you to consider. One is we do make mission-critical parts. Our parts are very important in the systems that they're in. We are considered a small part maker, so we make very precise, in some cases, micron-level parts. We have a new leadership team. I've been here six quarters.
Tim's been here five quarters, and Chris has been here two quarters. We are a new team. We've all worked together, though, before. This is not our first rodeo together, but we've come here together to lead a strong transformation and stock price increase program. All three of us are compensated on the share price, so we're aligned with common stock investors. The enterprise transformation program is underway fully and delivering results. We have taken a new approach to winning business, and it's working very well, and it's capability-based. We are running a new program that's very tethered into what our capabilities are by plant, by machine. It's led to a much higher hit rate on winning when you do it in that manner. Obviously, we want to lower our cost of capital. If you've studied us, we're underway with refinancing our capital structure.
Chris is going to give an update on that later. On the two business segments, here are some pictures to bring it to life on the Stamped Product side. In the lower left corner, you can see connector shields. Those are very thin strips of metal that are gold-plated, silver-plated, tin-plated, nickel-plated. We do plating in-house. It goes through a progressive die process and ends up with a little square shape like that. In the middle is a contact for a smart blade, a smart meter, and medical instruments also. Very precise stamped parts that go through primarily progressive dies that we make and design in-house. On the next page is our Mobile Solutions business, which is the machined metal products, which start with bar stock. Stamped products start with sheet or coil. We turn parts into precise dimensions, and we can start with bar stock.
We also can start with near-net shapes, forgings, but we primarily use bar stock. You can see a couple of the pictures here of parts that come off our machines that are very sophisticated tolerances and heat treating as well. Those are the two main sides of our company. As I mentioned in the beginning, we're a little low, almost $500 million. We're not a very big company, but we're big at what we do. We're one of the biggest in the world at what we do. Here is our five-year plan for growing sales and profits and the stock price. We have a goal to grow our sales to $650 million, $600 million organically and $50 million through bolt-ons. We've already been looking at bolt-ons to help accelerate our organic plan. The acquisitions are not to go in a different direction.
It's to further solidify where we're headed here. Cost reduction, as I mentioned, and Kaizen and Six Sigma, CI Culture, and all of our plants globally, as well as fixing some leakers. We had a couple of plants that lost money when we walked in the door. Cash flow is very important to us, and we progressively lowered our leverage as we've been here, and it's helping us with our refund processes. We have a goal of hitting 12%-13% EBITDA over the long term here. Some people have already picked up that our guidance is 12% this year, and that's true. Perhaps we'll be increasing that number in the future. That's where we started six quarters ago. We just got there a little faster than we thought, mainly on the strength of cost reduction.
Our growth plan is multifaceted, and we're basically leveraging the capabilities that we have. That means that we can leverage the assets that we have. We have about $340 million worth of machines and $56 million of leasehold improvements that are dialed in to make the products we make. We've been leveraging the capabilities, and therefore it's been CapEx-friendly, our growth has been. Actually, our CapEx this year will be the least it has been in the last four years, cash CapEx. We're also leveraging our leasing abilities to do that. Primarily, it's been lower because we've been leveraging our assets. I could go through the details here, but I want you to know that we don't have just one thing we're trying to do. We're trying to leverage our Stampings into Electrical Markets and Industrial Markets.
We're leveraging our machining into the Medical Markets as well as Automotive. On the inorganic side, the M&A side, we see ourselves buying an Electrical Business. We need a few higher tonnage presses. That's what it amounts to. They're expensive to buy, or you can acquire them. On the Medical side, same thing on machines. We see ourselves needing Medical Machines in order to hit our goals. Just a minute on our key markets. We are in three main markets and five smaller markets. Our top two markets are North American Automotive and China Automotive. They don't have the same story. The China Market's doing extremely well. It's two times the size of the U.S. Market. It's growing strongly, and they're winning the export markets around the world and beating out the previous leader, which was Japan, with all their name brands.
We are tethered to a good story there. North America is going sideways a little bit with trade policy discussions that are in the news every day. That's actually our goal. Our five-year goal is to hold our own in North America, and that's what we're doing. Next big market for us is Electrical, and that market is steady. Primarily, we're tied to grid-edge devices that are sold to utilities and smart meters and distribution panels and that kind of a thing. That base business is quite steady. We have a few sub-markets beneath that as well. Our markets are healthy overall, really strong in China, a little bit weak in North America. The rest is steady and overall kind of where we want them to be. Transformation Plan. We've put this in most of our presentations. Getting new leadership in place.
We're pretty close to being done with that. Just a couple more spots where we see that we need some additional leadership. Fixing nonprofitable plants. Tim has led that. The game plan there was to confront the plants that lose money, negative cash flow, and deal with it. Sitting here today, we've already cut our losses in half, and we have a 25 plan to resolve the rest of it. In terms of expanding gross margins, we have a plan to get to 20%. In the first full year, we made a strong improvement in our gross margins, which led us, obviously, to flow it down to EBITDA rates that were a little in advance of what we thought. Also, we took down our SG&A. Deleveraging, refinancing, the ABL. We have a term loan. We have preferred stock, and then we have China growing.
The basic change we've made since we've been here is to get China on its own and finance its own growth, which it is. On top of that, they send money back to us. In fact, the first quarter here was a lot of money they sent to us. Grow sales and grow the company. That's the New Wins Program, as well as our base business that we have and the health of the base markets we serve. This will be the first year where we get some benefit from the wins that we've achieved in 2023 and 2024. Vintage year 2023, 2024, we have our first launches this year. We're really happy about that. Tim, you want to talk about China for just a minute?
Sure. China, for NN, includes three facilities. We've been there a very long time.
We have a company-owned machining plant in Wuxi, a company-owned stamping plant in Foshan. As Harold mentioned earlier, we have a 49% ownership in a JV machining facility that's also located in Wuxi. The operations that we own are about $75 million in sales and are very profitable at 20% EBITDA and growing significantly. There seems to be a very opportunity-rich area. JV operations, about $125 million and also very profitable at 25% EBITDA. The China operation is best in class. They have single-digit PPM quality, which is world-class, a very cost-effective operation. 600 machine centers. We added 70 machines in 2024 with 15 more on order. We are implementing next-generation manufacturing capabilities that are helping us win new business in mission-critical steering components and braking components.
On the operations, and we've secured over $50 million of new business wins, and we're on track to double the business in a very short period of time. The JV is also growing at a good rate. Now, we are pursuing bigger opportunities in Europe, and China is doing make-to-ship to Europe using its lower-cost profile. We're already the approved supplier to all the top buyers in Europe and via the China subsidiaries and NN Business in APAC. So we're dealing with these larger global customers in APAC, and now they're looking to have us help supply into their European operations.
Chris, do you want to cover our refund?
Sure. Sure. Just to give you a little update, we did discuss it in our Q4 and full-year earnings update, but we finished our ABL at the end of the year.
The next step in our improvement of our overall capital structure is to refinance our term loan. We're pretty far into that process, and we said we definitely expect to finish by the first half of the year, although we're getting a little further along in the process. We're very pleased by that. Once we finish the term loan, we'll take a look at the prep and see what we can do as far as refinancing the prep, with the overall goal of refinancing the ABL, term loan, and prep of reducing our cost of capital. With the term loan, we're hoping to get maybe slightly lower rate as well as improved flexibility on the leverage covenant and maybe a little bit of extra money for a small tuck-in acquisition. All this is in process right now.
It's top of mind for the management team and hope to have that done here in the near term.
We do these Sidoti Conferences regularly, and we're a frequent flyer customer with Sidoti. This is kind of a cadence update for some of you that might be following us or might be investors. We just wanted to give you an update on current events that are happening that matter to us. One is the tariffs and North American uncertainties. We have experience going through this as a management team, and it's not a big stress item for us because passing metal through is our company business process. That is the business we're in. We buy metal, process it, and sell it. The cost basis for metals and the passing through of it is what we do.
Any changes that are tariff-related or not tariff-related, we are set up for that. It's not something new that we're scrambling around about. It's just that we're watching our input costs and then making sure that we change our prices properly. We generally carry about $60 million of inventory. We have inventory profiles that quote the old costs. We have some time, and we have verification processes with our customers that we have to show proof that we've actually incurred cost changes and then pass them through. Number two is China Auto Production is higher than we expected and still growing. We're close to 24/7 in those operations. Tim's very focused on capacity and tethering business that we say yes to versus how much capacity do we have. We do have a measured growth program there.
We're not going crazy and saying yes to everything, but it is part of our growth profile going forward. It is playing to our strength. We've been in China for almost 20 years, and we're well-known and serve the market, and we're approved everywhere. We are right in the middle of it, and we're tethered to the big guy who's BYD, who's doing very well. The third is robotic surgeries are growing fast. When we re-entered medical, we targeted the disposable medical pieces on robotic surgery equipment. It's turned out to be a good idea in retrospect as customers are running out of capacity and the market is accepting to new suppliers to offer capacity. We have Automotive DNA, and that's very well respected in that world as well. The Medical Business, the pipeline is forming quite nicely for us.
Fourth, the North American Grid Business is steady for us and healthy. The fifth point is really that we've seen no change in labor availability. It's still really hard to get skilled machine operators. To some extent, we're tethered to being able to hire and retain skilled operators. Skilled operators matter a lot to our business. Just quickly on the outlook for this year, no change. Chris, in the last call, said that the current outlooks were moving us towards the lower end of our range, but we're not changing our range. We have some uncertainty in North America Auto, but we have certainty in other areas of our business. As of right now, we basically have no change in our outlook. You can see what our midpoint's here.
No need to change your models on us, and our assumptions are at the bottom of the page. With that, John, we'll turn it over to you and open it up for questions.
All right. Thank you, Harold. If you have a question, please type in the Q&A box, and I will present it to management. Let's start right with the audience here. First question is, what are your North American auto—I'm sorry, where are your North American auto plants located? Did you hear me, Harold?
Okay. I was locked up there for a minute.
Okay. You're live now.
Okay.
I can answer that one, Harold. Our North American auto plants are located in—we have two facilities in Michigan and a third facility in Wellington, Ohio.
Understood. I'd like to pivot over to the China discussion. It seems to be a point of increasing emphasis.
Can you talk a little bit about why is the case beyond being, as you said, tethered to BYD? Is there anything else internally that you're doing to gain share in China?
Oh, we've really had—it has been very natural prospecting. We have a seven-person sales team. We have our same business development process, and we have our same processes. We primarily develop our processes in Kentwood, Michigan, and that's where our Head of R&D is. We institutionalize it in our plants from there. There is a bigger demand for what we do in China. We are an approved indigenous supplier. We are considered to be very competitive, and we are. We make some of the best products possible for steering. It has been a deal, John, where the market—we're in a good market. It has come to us.
We're not trying to enter a market after it got good. We were there all along. Some of the new entrants may not be having the same success as us, but we were serving these customers all along. Now volume has really accelerated. As China OEs have turned to the export markets, we're benefiting from that because they're basically exporting their vehicles with our parts in them.
I like this question. Can you talk a little bit about the Medical Market? Why don't we start with—talk about the reboot of the business and your confidence of hitting revenue targets?
I'll let Tim take that one.
Okay.
We had a non-compete when the sale of life sciences that expired in October of 2023. Since then, we've started to reboot.
We have an FDA facility to fit that market, as well as multiple facilities with the ISO 13485 Medical Certification. We have a Medical Machining Facility in Attleboro, Massachusetts that we are focused on growing, and we are buying and installing state-of-the-art equipment to help facilitate that. It's predominantly in the tool side of things, rasps and related equipment. It's going quite well. We have developed a strong pipeline, and we are starting to generate some pretty significant new wins.
Next question is, can you discuss the demand trends in the Electrical Grid Market and how investments from hyperscalers and government infrastructure initiatives are driving this demand?
We are tied into the distribution part of the Electrical Grid. We find ourselves in breaker panels and in meters. We can make very high-tolerance parts that are silver-plated, can withstand high currents and surges.
We find ourselves being the critical parts in all of these pieces of equipment. Micron Manufacturing matters because air gaps matter and sparks cross air gaps. That is where our technology comes to be important. The whole, if you look at the demands on the grid, EVs are part of it, even though it has slowed down a little. It is still happening. If you put a person on your street that is an Electric Vehicle, generally, the utility has to upgrade the transformer for serving that street. You have the residential part of it with everything going electric, including cars. Then you have the institutional side where AI and data centers are really energy-intense. There is a basic demand to continue to advance the capacity of the grid. In terms of grid management, the sophistication of it leads to retrofitting a meter.
It's a steady business for us. It's not surging. It's not bobbing up and down. It's just steadily growing as people invest into the grid. It's primarily utilities, so they don't change their minds fast. It's a steady business from our perspective, John. If you're tied into building data centers, you'll see surges or something. We're the backbone of electrical distribution.
I guess a follow-up question on the tariff discussion. Given where your plants are located here in North America, are you seeing any benefits from tariffs? Also, combined with another question that's later on here, are you seeing increased demand from North American customers for domestic supply chain solutions? That whole tariff question comes into play here.
Definitely, the tariffs are designed to benefit us.
The whole idea of the tariffs is to encourage indigenous production, in our case, of Automotive Parts as well as Electrical Parts. The Medical Community is not, I think, is shrugging it off a little, John, but it's really hitting some electrical equipment and certainly Automotive. Yes, we have received some onshoring awards from China to the U.S. We have a decent-sized pipeline of people that want to reshore manufacturing. We are an indigenous supplier. We buy metal domestically, convert domestically, and sell it domestically. The tariffs are intended to help people like us. So far, it has. Yep. The pain of it is inflated metal costs, which are tariffed. As we all found out during Trump 1.0 and COVID, the indigenous market for metal tends to go up to tariff levels too. We're used to that.
We passed that through. Net, it's helping us so far. We expect there to be more pressure down the line. We also have the big pipeline of reshoring. I wouldn't say it's not a tidal wave, John. It's really like $15 million kind of opportunities. It's not like $100 million. Net, it's good for us. We support the effort. We support the effort. We would like to benefit from more domestic production.
Chris, right up your alley, can you provide an update on the progress made in the first quarter towards refinancing the balance sheet?
Sure. Sure, John. Yep. As I mentioned, we're deep in the process. We finished the ABL at the end of the year. As many of our longer-term investors know, we ran a process last year with B. Riley, and they had some difficulties in their company.
Our team actually left B. Riley. Harold and I had to pick that up. We quickly got working on that. We got some good term sheets, and we're running down the path with one. We feel pretty comfortable that we're able to get this closed up here very soon. More to come. We'll obviously file an 8-K when we get that done. Hopefully, we have some good terms as well as some ability to potentially do a small tuck-in and have better covenants.
Okay. We have about a minute left. If there's any remaining questions, anybody else want to follow one, feel free. Otherwise, I'm going to give the management team a free extra minute.
Thank you for everyone for listening in today. Thank you for the questions that were right on the money.
We look forward to reporting a quarter, as we've said here. We look forward to a good year as well. Thank you.
Thank you, Harold. Thank you, Tim. Thank you, Chris.
Thank you.
Have a great day.
Thank you.