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1. Company Snapshot

1.a. Company Description

NN, Inc., a diversified industrial company, designs, manufactures, and sells high-precision components and assemblies.It operates through two segments, Mobile Solutions and Power Solutions.The Mobile Solutions segment manufactures and sells system critical components for general industrial and automotive end markets.


This segments products are used in power steering, braking, transmissions, gasoline fuel system, diesel injection, and diesel emissions treatment applications, as well as use in heating, ventilation, and air conditioning.The Power Solutions segment designs, manufactures, and sells a range of high-precision metal and plastic components, assemblies, and finished devices used in various applications, such as power control, flight control, and military devices.Its products include electrical contacts, connectors, contact assemblies, and precision stampings for the electrical, general industrial, automotive, aerospace, defense, and medical end markets.


This segment also produces various tools and instruments for the orthopaedics and medical/surgical end markets.NN, Inc.was founded in 1980 and is headquartered in Charlotte, North Carolina.

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1.b. Last Insights on NNBR

NN, Inc.'s recent performance was negatively impacted by a lack of significant earnings surprises, despite a strong new business wins program. The company's Q1 2025 earnings call transcript revealed a cautious tone, with management reaffirming its full-year adjusted EBITDA outlook but failing to provide a clear path for accelerating growth. Additionally, the recent refinancing program, which provided a $128 million term loan facility, may have increased debt levels, potentially constraining the company's financial flexibility.

1.c. Company Highlights

2. NN, Inc. Delivers Mixed Q3 2025 Results Amidst Strategic Growth Initiatives

NN, Inc. reported its third-quarter 2025 earnings, with sales of $103.9 million, a decline of 4.4% year-over-year on a pro forma basis. Despite the revenue decline, the company achieved significant improvements in adjusted operating income, which surged 100% year-over-year to $4 million, and adjusted EBITDA, which rose 6.9% year-over-year to $12.4 million. The adjusted EBITDA margin expanded 170 basis points year-over-year to 11.9%. The company's EPS came in line with estimates at '-0.01'.

Publication Date: Nov -23

📋 Highlights
  • Sales Decline with Strong New Business:: Q3 sales fell 4.4% to $104M, but new business secured over $180M with a $850M sales pipeline.
  • Adjusted Operating Income Doubling:: Rose to $4M, up 100% YoY, driven by margin expansion and cost optimization.
  • EBITDA Growth & Margin Expansion:: Adjusted EBITDA hit $12.4M (+6.9% YoY) with margins expanding 170 bps to 11.9%.
  • Free Cash Flow & Working Capital Improvements:: FCF reached $9M, while working capital improved $21M over two years, reaching under $80M.
  • Strategic M&A & Refinancing Focus:: Evaluating ~40–50 targets to scale growth, alongside plans to deleverage and refinance preferred equity.

Segment Performance and New Business Wins

The company's performance across segments was mixed, with growth observed in aerospace, defense, and electronics, but headwinds in mobile solutions and automotive rationalization. Notably, the mobile solutions segment saw a weaker top line, but new business momentum remains strong with $34.5 million in new awards across various markets. The company secured over $180 million in new business during the quarter, with no cancellations, and a sales pipeline of over $850 million. The company's defense segment is poised for growth, with plans to double its business in the next few years.

Strategic M&A and Refinancing Efforts

NN, Inc.'s strategic M&A program is underway, with the company evaluating multiple acquisition targets to scale and accelerate growth. The company has looked at around 40 or 50 companies, narrowing it down to a small set that fits its goals. Additionally, the company is working on refinancing its preferred equity, aiming to eliminate it through potential refinance or M&A. This is a key area of focus, as the preferred stock accretes each quarter.

Cash Flow and Working Capital Management

The company's free cash flow was $9 million, driven by a strong working capital program that delivered a $21 million improvement over the last two years. The net working capital ended the quarter at under $80 million, down from $101 million in Q2 '23, representing a more than $20 million and almost 21% improvement. As a percent of TTM sales, the company has seen a drop from 21.2% to 18.8%.

Outlook and Valuation

The company revised its revenue forecast, lowering its outlook for automotive but increasing its outlook in defense. The net impact on gross margin dollars is minimal. Analysts estimate next year's revenue growth at 5.3%. With a current EV/EBITDA ratio of 10.39 and a Free Cash Flow Yield of 17.26%, the market appears to be pricing in some level of recovery and growth. However, the company's ROE and ROIC are negative, at -48.42% and -6.67%, respectively, indicating some challenges ahead.

3. NewsRoom

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Bank of Montreal Can Purchases New Stake in NN, Inc. $NNBR

Nov -22

Source: defenseworld.net

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NN, Inc. Provides Mid-Quarter Business Update

Nov -14

Source: globenewswire.com

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NN, Inc. Executive Management to Present at the Gabelli Funds 49th Annual Automotive Symposium

Oct -31

Source: globenewswire.com

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NN, Inc. (NNBR) Q3 2025 Earnings Call Transcript

Oct -30

Source: seekingalpha.com

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NN Inc. (NNBR) Reports Q3 Loss, Lags Revenue Estimates

Oct -29

Source: zacks.com

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NN, Inc. Reports Third Quarter 2025 Results

Oct -29

Source: globenewswire.com

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NN, Inc. Provides Update on Aerospace and Defense Capabilities

Oct -06

Source: globenewswire.com

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NN, Inc. Appoints Gregg Cottage as Chief Information Officer and CISO

Oct -01

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.76%)

6. Segments

Mobile Solutions

Expected Growth: 3%

NN, Inc.'s Mobile Solutions segment growth is driven by increasing demand for 5G-enabled devices, rising adoption of IoT devices, and growing need for miniaturization and precision engineering in mobile devices. Additionally, the company's strategic acquisitions and investments in emerging technologies, such as 5G and artificial intelligence, are expected to fuel growth.

Power Solutions

Expected Growth: 5%

Power Solutions from NN, Inc. is driven by increasing demand for electric vehicles, renewable energy, and energy storage systems. The segment benefits from its diversified customer base, including major automotive and industrial companies. Additionally, NN's focus on innovation, quality, and customer service enables it to capitalize on the growing need for efficient power solutions.

Intersegment Sales Eliminations

Expected Growth: 2%

NN, Inc.'s 2% growth in Intersegment Sales Eliminations is driven by increasing demand for precision bearings and engineered components in the automotive and industrial end-markets, coupled with the company's strategic acquisitions and operational efficiency initiatives.

7. Detailed Products

Precision Engineered Products

Customized precision components and assemblies for the aerospace, defense, industrial, and medical markets

Autocam Precision Components

High-precision, complex components and assemblies for the automotive, industrial, and aerospace markets

Metal Bearing Products

Bearings, bushings, and other metal bearing products for the aerospace, defense, industrial, and automotive markets

Electrical Products

Electrical connectors, contacts, and other electrical components for the aerospace, defense, industrial, and automotive markets

Plastic and Metal Injection Molding

Customized plastic and metal injection molding services for the aerospace, defense, industrial, and automotive markets

8. NN, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for NN, Inc. is medium due to the availability of alternative materials and products in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the concentration of customers in the aerospace and industrial end-markets.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's diversified supplier base and lack of dependence on a single supplier.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the precision bearing and metal processing industries.

Intensity Of Rivalry

The intensity of rivalry is medium due to the presence of several established players in the market, but the company's diversified product portfolio and strong customer relationships mitigate the competitive pressure.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 44.26%
Debt Cost 10.94%
Equity Weight 55.74%
Equity Cost 19.12%
WACC 15.50%
Leverage 79.42%

11. Quality Control: NN, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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A-Score: 2.4/10

Value: 7.7

Growth: 1.6

Quality: 2.1

Yield: 0.0

Momentum: 1.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.22$

Current Price

1.22$

Potential

-0.00%

Expected Cash-Flows