Executive Summary / Key Takeaways

• Strategic Pivot and Operational Turnaround: NN, Inc. is undergoing a significant multi-year transformation, pivoting its portfolio away from heavy automotive reliance towards higher-growth, higher-margin opportunities in medical, electrical, and defense. This strategic shift is complemented by aggressive operational efficiency initiatives, including plant consolidations and headcount reductions, which have notably improved profitability.
• Strong New Business Momentum: Despite macroeconomic headwinds and volatility in core markets, NN, Inc. has secured over $180 million in new business awards, with a robust pipeline exceeding $850 million. These wins, particularly in defense weapons components and robotic surgery equipment consumables, are expected to drive top-line growth and enhance margins as they ramp up.
• Improving Financial Health and Liquidity: The company has made substantial progress in optimizing its balance sheet, including refinancing its Term Loan Facility in April 2025 and actively pursuing refinancing of its preferred equity. Enhanced working capital management has also contributed to stronger free cash flow generation.
• Technological Edge in Niche Markets: NN, Inc.'s core competitive advantage lies in its advanced engineering and materials science expertise, enabling high-precision manufacturing of system-critical components. This technological differentiation, coupled with specialized certifications (ITAR, FDA), positions the company strongly in demanding medical and defense applications.
• Cautious but Positive Outlook: While management acknowledges ongoing market uncertainties, particularly in North American automotive, the company has reiterated its full-year 2025 adjusted EBITDA guidance of $53 million to $63 million and initiated free cash flow guidance of $14 million to $16 million, underpinned by new business launches and cost reduction efforts.

A Precision-Engineered Transformation

NN, Inc., a diversified industrial company founded in 1980, is in the midst of a profound transformation, leveraging its advanced engineering and materials science expertise to manufacture high-precision components and assemblies for a global array of end markets. The company's journey has been marked by strategic acquisitions, such as Autocam Corporation in 2014, which brought a significant presence in Brazil and a valuable 49% joint venture in Wuxi, China. This historical foundation, coupled with recent decisive actions, now underpins a strategic pivot designed to unlock sustainable, profitable growth.

The company's overarching strategy is to rebalance its portfolio, reduce costs, and optimize its capital structure. This involves a deliberate shift away from its historical heavy reliance on the automotive sector towards higher-growth, higher-margin opportunities in medical, electrical, and defense markets. This strategic reorientation is not merely a response to market shifts but a proactive effort to "force its own momentum" through targeted new business development and operational excellence.

NN, Inc.'s foundational strength lies in its precision manufacturing capabilities, which are critical for producing system-critical components across its diverse end markets. In its Mobile Solutions segment, this expertise translates into components for power steering, braking, and fuel systems, as well as complex medical instruments. For the Power Solutions segment, it involves high-precision metal and plastic components for power control, circuit protection, and aerospace applications. The company holds specialized certifications, including ITAR (International Traffic in Arms Regulations) and FDA, which are crucial competitive differentiators in the defense and medical sectors, respectively. This allows NN, Inc. to produce highly specialized components, such as gold-plated parts for defense electronics modules and intricate ratcheting handles for shoulder surgery kits, showcasing its ability to transfer its know-how in making "long, thin, high tolerance parts" to demanding medical applications.

The company is actively investing in and developing new technologies to support its strategic pivot. It has installed new machining centers, bringing its total dedicated medical parts machines to approximately 60, and is nearing necessary certifications to manufacture medical technology products at its Kentwood, Michigan plant. Furthermore, NN, Inc. is evaluating an organic entry into the electrical cable assemblies market, leveraging new talent with electrical backgrounds. In its stamping operations, the company has added high-tonnage equipment in China and the United States to expand its capabilities, for example, in producing Busbars for electrical grids. These technological advancements and strategic investments are critical to enhancing NN, Inc.'s competitive moat, enabling entry into higher-margin markets, and supporting its long-term growth strategy.

Competitive Landscape and Market Positioning

NN, Inc. operates in a competitive landscape with larger, more diversified industrial players such as Amphenol Corporation , BorgWarner Inc. , TE Connectivity Ltd. (TEL), and Parker Hannifin Corporation (PH). While these competitors often boast greater scale, broader global reach, and more robust R&D budgets, NN, Inc. carves out its niche through specialized expertise and customized solutions.

NN, Inc.'s focus on high-precision manufacturing and its specialized certifications (ITAR, FDA) provide a distinct advantage in demanding sectors like defense and medical. For instance, in medical, the company's ability to produce complex, sterilized metal components for extremities and instruments differentiates it from competitors who may not possess the same level of specialized manufacturing capabilities or certifications. This allows NN, Inc. to command stronger customer loyalty and potentially higher margins in these niche areas.

However, NN, Inc.'s smaller scale compared to industry giants like Amphenol (APH) or BorgWarner can lead to higher operational costs and potentially slower innovation cycles in broader, high-volume markets. For example, while BorgWarner (BWA) excels in automotive powertrain components with aggressive R&D in electrification, NN, Inc. differentiates by emphasizing high-precision assemblies for a wider range of applications, including aerospace and medical. The company's diversified portfolio, however, offers a degree of resilience, allowing it to adapt to market shifts and mitigate risks associated with over-reliance on any single sector. Its customer dynamics reflect this, with 77% of new wins coming from existing customers, many of whom had previously placed the company on new business hold. This indicates a successful re-engagement strategy driven by improved operational performance.

The broader market environment presents both opportunities and challenges. The automotive market, representing 40% of NN, Inc.'s revenue, is experiencing global turmoil, with flat light vehicle production and uncertainty driven by tariffs, affordability issues, and the rebalancing of EV incentives. However, the resurgence of internal combustion engines (ICE) and hybrid vehicle demand benefits NN, Inc. due to its larger portfolio in these areas. The company believes it is "at the bottom of the bathtub curve" for its served markets, with forecasts suggesting a rebound in automotive production next year.

In contrast, the defense market is experiencing an all-time high, with a focus on modernization and next-generation advancements. This sector is projected to grow significantly, offering substantial opportunities for NN, Inc.'s Power Solutions segment, particularly for gold-plated components in electronics modules. The electrical grid and distribution market also remains strong, driven by surging data center demand and infrastructure investment, where NN, Inc. participates in the "grid edge" with components for circuit breakers and meters. The medical equipment market continues its growth trajectory, with NN, Inc.'s participation significantly outpacing market growth as it rebuilds its presence in metal parts.

Operational Excellence and Financial Performance

NN, Inc.'s transformation plan, approximately 70% complete, has yielded tangible operational improvements and a strengthening financial profile. A key achievement has been the turnaround of seven previously underperforming plants, which collectively moved from a negative adjusted EBITDA of $11.5 million in 2023 to a loss of just $0.9 million in 2024. These facilities are projected to generate over $5 million in adjusted EBITDA on approximately $75 million in revenue in 2025. This turnaround involved shedding unprofitable business, closing two Mobile Solutions plants (Juarez, Mexico, and Dowagiac, Michigan), and implementing organizational and operational improvements, including leadership upgrades and enhanced customer interaction. An additional facility closure is planned for 2026 upon lease expiry.

The company's "One Team" culture has driven significant cost reductions, including a net headcount reduction of 525 employees, with a 16.5% decrease in SG&A positions since Q2 2023. This rightsizing of the cost structure has been instrumental in expanding profitability. On-time delivery performance has also seen a "step change," with the company now boasting "green scorecards" from all customers, a critical factor in securing new business wins.

Financially, NN, Inc. is demonstrating a positive trajectory despite a challenging market. For the three months ended September 30, 2025, net sales were $103.88 million, an 8.5% decrease year-over-year, primarily due to rationalized underperforming business and lower volumes in North American automotive. However, this was partially offset by new business launches and higher precious metals pass-through pricing. Adjusted operating income improved significantly to $4 million, representing a margin of almost 4%. Adjusted EBITDA increased by 7.9% year-over-year to $12.4 million on a lower sales base, with the adjusted EBITDA margin expanding by 170 basis points to 11.9%.

Year-to-date, adjusted gross margins have expanded by 90 basis points to 18.4% since early 2023.

The Mobile Solutions segment experienced a 16.4% decrease in net sales to $59.12 million for the three months ended September 30, 2025, primarily due to rationalization and lower North American volumes. Its adjusted EBITDA margins declined to 11.4%, a 120-basis point decrease year-over-year, driven by the weaker top line. Conversely, the Power Solutions segment saw a 4.7% increase in net sales to $44.95 million, driven by precious metals pass-through and new launches in electrical and defense. Its adjusted EBITDA margins surged by approximately 500 basis points year-over-year to 19.8%.

Working capital management has been a key focus, resulting in an almost $21 million improvement over the last two years, with working capital now under $80 million, or 18.8% of trailing twelve-month sales. The company generated $9 million in free cash flow in Q3 2025, with cash flow from operations exceeding $11 million.

Strategic Initiatives and Outlook

NN, Inc.'s strategic growth initiatives are robust and multifaceted. The company has secured over $180 million in new business awards, with a sales pipeline exceeding $850 million. Over 100 new programs are anticipated to launch in 2025, with more than 70 already scheduled for 2026, collectively forecasted to contribute approximately $26 million to the top line in 2025 and an estimated $40 million at full run rate. Key foundational wins include defense weapons components and robotic surgery equipment consumables, each with the potential to exceed $5 million annually and open doors to further market penetration.

The company's M&A program is actively underway, with management evaluating multiple acquisition targets to scale and accelerate growth, particularly in tandem with refinancing efforts. This is part of a broader strategy to optimize the capital structure, which saw the successful refinancing of the 2021 Term Loan Facility with a new $128 million senior secured Term Loan Facility in April 2025, maturing in 2030. Discussions have also been initiated to refinance the preferred equity, and the company is working to make its China operations self-funding and a source of repatriated cash.

For the full year 2025, NN, Inc. has adjusted its net sales guidance to a range of $430 million to $460 million, leaning towards the lower half, primarily due to a lower outlook for automotive volumes in North America. However, the adjusted EBITDA guidance remains unchanged at $53 million to $63 million, also leaning towards the lower half, with the favorable mix shift towards higher-margin defense business and stepped-up cost-out programs expected to offset the sales impact. New business wins are on track to meet the $60 million to $70 million target. The company has initiated free cash flow guidance of $14 million to $16 million for the year, which includes an anticipated $12.7 million CARES Act tax refund. This guidance is predicated on a flat base business market environment, with growth driven by new program launches and cost efficiencies.

Risks to this outlook include ongoing macroeconomic and geopolitical uncertainties, potential impacts from tariffs, inflationary pressures, elevated interest rates, and supply chain disruptions. The ongoing U.S. federal government shutdown could also delay the receipt of the CARES Act refund. The volatility in precious metal prices, while largely a pass-through, can impact percentage margins.

Conclusion

NN, Inc. is executing a comprehensive transformation, strategically reorienting its business towards higher-value, specialized markets while rigorously optimizing its operational and financial structures. The company's deep expertise in high-precision manufacturing and its commitment to technological differentiation in medical, electrical, and defense sectors are proving to be powerful engines for growth and margin expansion, even amidst a volatile global economic backdrop.

While challenges persist, particularly in the automotive sector and with the inherent complexities of balance sheet optimization, NN, Inc.'s proactive measures—from successful plant turnarounds and aggressive new business development to strategic debt refinancing—underscore a resilient and adaptable management team. The company's ability to "force its own momentum" through new wins and cost efficiencies, as reflected in its improving profitability and free cash flow generation, positions it to emerge as a more focused, efficient, and ultimately, more valuable enterprise for investors. The continued execution of its strategic growth initiatives and the successful refinancing of its preferred equity will be critical indicators of its long-term success.