Industrial components supplier NN (NASDAQ:NNBR) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 12.8% year on year to $105.7 million. The company’s full-year revenue guidance of $445 million at the midpoint came in 2% below analysts’ estimates. Its non-GAAP loss of $0.03 per share was in line with analysts’ consensus estimates.
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NN (NNBR) Q1 CY2025 Highlights:
- Revenue: $105.7 million vs analyst estimates of $109.7 million (12.8% year-on-year decline, 3.7% miss)
- Adjusted EBITDA: $10.58 million vs analyst estimates of $11.73 million (10% margin, 9.8% miss)
- The company dropped its revenue guidance for the full year to $445 million at the midpoint from $465 million, a 4.3% decrease
- EBITDA guidance for the full year is $58 million at the midpoint, above analyst estimates of $53.16 million
- Operating Margin: -4.5%, in line with the same quarter last year
- Market Capitalization: $109 million
StockStory’s Take
NN’s first quarter performance was shaped by ongoing softness in its core automotive markets and broader industrial demand uncertainty. CEO Harold Bevis highlighted that sales lagged internal expectations, particularly among global automotive customers, with management shifting its business development efforts to immediate, profitable ramp-up sales to compensate. The company’s new business program—nicknamed PIGS (Profitable Immediate Growth Strategy)—was a focal point, as management stated it successfully secured $55 million in new program wins ramping up throughout the year. Operational cost reductions, including a 16% workforce reduction since mid-2023, were a key lever to offset market headwinds, with management indicating these actions would support profit improvement in the coming quarters.
Looking forward, NN’s updated full-year guidance centers on a combination of new business launches, ongoing cost reductions, and working capital improvements. Management reiterated its confidence in hitting EBITDA and free cash flow targets, underpinned by what Bevis described as significant open capacity and a large pipeline of new business opportunities—particularly in industrial and medical segments. The company acknowledged persistent economic uncertainty and tariffs as factors influencing its revenue forecast, but expects its immediate ramp-up wins to partially offset base business weakness. CFO Chris Bohnert noted, “Our Q1 results have NN on pace to achieve full-year guidance, and we anticipate maintaining this pace through 2025,” while also warning that market conditions could push results toward the lower end of the expected range.
Key Insights from Management’s Remarks
Management attributed first quarter results to a combination of softening base business demand and successful execution of new business programs, while emphasizing aggressive cost reduction and operational changes.
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Automotive demand remains volatile: Management cited lower volumes from global automotive customers, which make up 40% of sales, as a primary factor behind the quarter’s weaker demand. The company noted a global slowdown in the transition from internal combustion engine (ICE) to electric vehicles (EV), leading to a more balanced market that leverages NN’s existing capabilities.
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PIGS program drives new wins: The Profitable Immediate Growth Strategy (PIGS) was highlighted as a key initiative, with 120 new programs worth $55 million in annualized sales set to ramp up during 2025. Management said these wins are helping offset softness in legacy business lines and are expected to significantly impact results in the second half of the year.
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Cost reduction accelerates: The company completed a 16% reduction in its workforce since Q2 2023, with further headcount alignment and cost-cutting underway. Management stated that these initiatives are already improving EBITDA per salaried employee and will continue to support profit margins.
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Capacity utilization supports growth: NN operated most plants on a single shift, leaving substantial open capacity. This allows the company to pursue new business opportunities without significant capital expenditure, supporting both near- and long-term growth objectives.
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Transformation progress continues: Management reported its multi-year transformation plan is roughly 70% complete, including enhancements to leadership, plant optimization, and the exit of unprofitable business lines. This, paired with improved working capital efficiency, is positioned as a foundation for future margin improvement.
Drivers of Future Performance
NN’s outlook is shaped by new business launches, ongoing cost actions, and uncertain demand trends in core markets.
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New business ramp-up timing: Management expects approximately half of the $55 million in new program wins to begin contributing meaningfully in the second half of 2025, with remaining wins phased in over the next three to nine months. The timing depends on customer-driven ramp schedules and certification processes, especially in medical and industrial segments.
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Cost savings execution: The $15 million cost reduction target for 2025 is expected to be mostly evenly distributed throughout the year, with some actions back-end loaded. These savings are intended to counteract pressure from lower base business volumes and support targeted EBITDA margins.
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Tariff and market uncertainty: Management acknowledged that tariffs and ongoing economic unpredictability continue to affect both quoting activity and customer order patterns, particularly in automotive. While NN is pursuing reshoring and tariff-driven requests for quotes, the company remains selective and cautious about new automotive business requiring significant capital investments.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace and profitability of new business program ramp-ups, particularly in medical and industrial segments; (2) further progress on cost reduction initiatives and their effect on margins; and (3) updates on plant optimization, including potential consolidations. Execution of tariff-driven opportunities and the company’s ability to improve working capital efficiency will also be closely monitored.
NN currently trades at a forward P/E ratio of 324.3×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it’s free).
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