8-K: NN, Inc. Q2 2025: Adjusted Profit Rises Amid Auto Softness

NN, Inc. reported improved adjusted operating income and EBITDA for the second quarter of 2025, despite a decline in net sales and a larger GAAP net loss, while reiterating its full-year guidance.

Summary

• Net sales for the second quarter of 2025 were $107.9 million, a decrease of 12.3% compared to $123.0 million in Q2 2024, primarily due to rationalized underperforming business, the sale of Lubbock operations, and lower automotive volumes.
• Pro forma net sales, adjusted for rationalized sales, currency changes, and the Lubbock sale, decreased by 2.4% year-over-year.
• GAAP loss from operations improved by 28.6% to $(1.5) million in Q2 2025, compared to $(2.1) million in Q2 2024.
• Adjusted operating income increased to $4.9 million in Q2 2025, up from $2.1 million in Q2 2024.
• Adjusted EBITDA was $13.2 million, with an adjusted EBITDA margin of 12.2%, compared to $13.4 million and 10.9% margin in Q2 2024.
• GAAP net loss for Q2 2025 was $(8.102) million, significantly wider than the $(2.203) million loss in Q2 2024, resulting in a basic and diluted net loss per share of $(0.26) compared to $(0.12).
• Adjusted net income was $0.7 million, or $0.02 per diluted share, a turnaround from an adjusted net loss of $(0.7) million, or $(0.02) per diluted share, in Q2 2024.
• Free cash flow was a use of cash of $(3.2) million in Q2 2025, compared to a use of cash of $(1.3) million in Q2 2024.
• New business wins totaled $32.7 million in the first half of 2025, with over 100 programs expected to launch in 2025, adding over $45 million in future sales at full run-rate.
• The company is maintaining its full-year 2025 outlook, directing expectations towards the lower end of the guided ranges for net sales ($430-$460 million), adjusted EBITDA ($53-$63 million), and free cash flow ($14-$16 million).

Sentiment

Score: 6

Explanation: The sentiment is cautiously positive. While GAAP net loss widened and sales declined, adjusted profitability metrics improved, and the company is actively pursuing strategic growth initiatives and new business wins. However, the reiterated guidance at the lower end and ongoing macroeconomic uncertainties, particularly in the automotive sector and related to tariffs, temper the overall outlook.

Positives

• Adjusted operating income significantly increased to $4.9 million in Q2 2025 from $2.1 million in Q2 2024, demonstrating improved operational efficiency.
• Adjusted EBITDA margin expanded to 12.2% in Q2 2025 from 10.9% in Q2 2024, indicating stronger profitability relative to sales.
• Adjusted net income turned positive at $0.7 million ($0.02 per diluted share) in Q2 2025, compared to an adjusted net loss in the prior year period.
• New business wins reached $32.7 million in the first half of 2025, with over 100 new programs expected to launch in 2025, projected to add over $45 million in future sales at full run-rate.
• The company is actively investing in growth capital expenditures, with plans for $18-$20 million in capital projects in 2025, and has increased its business development team to over 40 people.
• Strategic hires, including a new Chief Commercial Officer and new account managers in targeted growth areas like medical, stampings, and electrical products, are expected to accelerate future growth.
• The Power Solutions segment saw an increase in adjusted income from operations to $8.4 million from $8.1 million, driven by favorable product mix and lower operating costs.
• The Mobile Solutions segment improved its adjusted income from operations to $2.3 million from a loss of $(0.7) million, due to improved margin mix and lower operating costs.

Negatives

• Net sales decreased by 12.3% to $107.9 million in Q2 2025 compared to $123.0 million in Q2 2024, primarily due to lower automotive volumes and prior rationalization efforts.
• GAAP net loss widened significantly to $(8.102) million in Q2 2025 from $(2.203) million in Q2 2024, leading to a higher GAAP net loss per diluted share of $(0.26).
• Free cash flow was a use of cash of $(3.2) million in Q2 2025, worsening from a use of cash of $(1.3) million in Q2 2024.
• The company's top-line performance was impacted by softness from certain automotive customers, which is expected to continue into the second half of 2025.
• Guidance for full-year 2025 net sales and adjusted EBITDA is being directed towards the lower end of the previously provided ranges due to ongoing tariff-driven uncertainties and anticipated downstream effects for customers.
• Working capital balances are being impacted by metal price escalation, and working capital as a percentage of TTM sales is 20.0%, still above the 5-year goal of 16%-17%.

Risks

• General economic conditions and economic conditions in the industrial sector.
• Potential impacts of tariffs on the U.S. economy, other countries, the industry, and supply chains, as well as the ability to mitigate adverse impacts.
• Competitive influences.
• Risks that current customers will commence or increase captive production.
• Risks of capacity underutilization.
• Quality issues.
• Material changes in the costs and availability of raw materials.
• Economic, social, political, and geopolitical instability, military conflict, currency fluctuation, and other risks of doing business outside of the United States.
• Inflationary pressures and changes in the cost or availability of materials, supply chain shortages and disruptions, the availability of labor and labor disruptions along the supply chain.
• Dependence on certain major customers, some of whom are not parties to long-term agreements and/or are terminable on short notice.
• The impact of acquisitions and divestitures, as well as expansion of end markets and product offerings.
• Ability to hire or retain key personnel.
• The level of indebtedness and restrictions contained in debt agreements.
• Ability to obtain financing at favorable rates, if at all, and to refinance existing debt as it matures.
• Ability to secure, maintain or enforce patents or other appropriate protections for intellectual property.
• Uncertainty of government policies and actions after recent U.S. elections in respect to global trade, tariffs and international trade agreements.
• Cyber liability or potential liability for breaches of information technology systems or business operations disruptions.

Future Outlook

NN, Inc. is maintaining its full-year 2025 outlook for net sales, adjusted EBITDA, free cash flow, and new business wins, but is directing expectations towards the lower end of the guided ranges due to ongoing tariff-driven uncertainties and anticipated downstream effects for customers. The company expects some automotive markets to experience similar soft patterns in the second half of 2025. Management remains optimistic about the strong pace of its transformation and growth opportunities, driven by investments in commercial enhancements and continued pursuit of expense mitigation and operational efficiencies.

Management Comments

• Harold Bevis, President and CEO: "NN delivered a solid quarter for gross margins, operating income, adjusted operating income, and adjusted EBITDA. We are pleased with our reported results, new business acquisition, and new business launches."
• Harold Bevis, President and CEO: "We leveraged the soft market environment to upsize our business development activities and investments. Our soft top-line centers around certain automotive customers."
• Harold Bevis, President and CEO: "We expect those launches will add over $45 million in future sales at run-rate. We plan to invest $18 to $20 million on capital projects in 2025."
• Harold Bevis, President and CEO: "Our current expectation is that some of our automotive markets may have similar soft patterns in the second half of 2025. In response, we have activated our own mitigation levers including tight cost controls and working capital actions."
• Harold Bevis, President and CEO: "We are underway with tariff mitigation efforts with our customers and have positioned ourselves as a tariff problem solver."
• Harold Bevis, President and CEO: "Our transformation plan is working and we have increased our efforts during this slow auto market. Lastly, we have fully kicked off an M&A program and are seeking targets that are consistent with our strategy and can help refinance our preferred stock."
• Chris Bohnert, Senior Vice President and CFO: "Our second quarter results were largely in line with expectations. We are maintaining our current guidance and given the ongoing tariff-driven uncertainties and the anticipated downstream effects for our customers, we continue to direct expectations towards the lower end of our guided ranges."
• Chris Bohnert, Senior Vice President and CFO: "We are investing in commercial enhancements to accelerate future growth, and we remain optimistic about the strong pace of our transformation and growth opportunities."

Industry Context

The company's performance is significantly influenced by the global passenger vehicle market, which accounts for 40% of its revenue and is currently experiencing flat production due to tariffs, affordability issues, high interest rates, and fading BEV incentives. The US GDP-linked business (25% of revenue) saw weak first-half growth impacted by trade uncertainty. The electric grid and distribution market (20% of revenue) shows modest growth, while the commercial vehicle market (10% of revenue) is down year-to-date with anticipated weakness into 1H 2026. The medical equipment and surgical tools market (5% of revenue) continues to grow, aligning with the company's strategic focus on expanding in this area.

Comparison to Industry Standards

• The filing states that its non-GAAP financial measures (adjusted gross margin, adjusted income/loss from operations, adjusted EBITDA, adjusted net income/loss, and free cash flow) are commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry, and that the company uses this information for comparative purposes within the industry. However, no specific comparable companies, projects, or results are detailed within the filing for direct comparison.

Management Changes

Stakeholder Impact

• Shareholders: Mixed financial results with improved adjusted profitability but increased GAAP net loss. The reiterated guidance at the lower end suggests caution. Strategic initiatives like new business wins and M&A could drive future value, but risks from automotive softness, tariffs, and debt refinancing remain.
• Employees: Increased investment in personnel for business development and growth areas (electrical, medical, stampings) indicates job creation and strategic focus. Emphasis on 'OneTeam' approach.
• Customers: The company is actively working on tariff mitigation and new program launches, aiming to be a 'tariff problem solver' and provide new solutions, despite softness with some automotive customers.
• Creditors: The company's level of indebtedness and restrictions in debt agreements are noted risks. Efforts to refinance preferred stock could impact the capital structure and creditor relationships.
• Suppliers: Potential impact from supply chain shortages and disruptions, as well as changes in raw material costs, are identified risks that could affect supplier relationships and operations.

Next Steps

• Hold a quarterly investor conference call on August 7, 2025, at 9 a.m. ET.
• Host a Virtual Investor Day in December 2025.
• Continue to invest $18 to $20 million on capital projects in 2025.
• Accelerate transformation activities and invest in growth capex.
• Continue tariff mitigation efforts with customers.
• Evaluate organic entry into the electrical wiring systems market.
• Pursue M&A targets consistent with strategy and to help refinance preferred stock.

Key Dates

Recommendation

NN, Inc. presents a mixed financial picture with improved adjusted profitability and strategic growth initiatives, but also a widening GAAP net loss and declining sales. The company's proactive measures in new business development, market diversification (medical, electrical), and cost controls are positive. However, the persistent softness in the automotive market, ongoing tariff uncertainties, and the need to refinance preferred stock introduce significant headwinds and uncertainties. The reiterated guidance at the lower end reflects management's cautious outlook. Given these offsetting factors, a 'hold' recommendation is appropriate, suggesting investors monitor the execution of the transformation plan and the impact of macroeconomic conditions.

Keywords

Precision components, Industrial manufacturing, Automotive parts, Medical devices, Electrical products, Power solutions, Mobile solutions, SEC filing, Earnings report, Financial results, Adjusted EBITDA, New business wins, Tariffs, Supply chain, Corporate transformation