NNBR - Earnings call transcript Q1 2018

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Operator

Good day, everyone, and welcome to the NN, Inc.

First Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Paul Taylor, Vice President of Marketing and Investor Relations. Please go ahead, sir.

Paul Taylor

Operator. you, Thank and everyone, joining us. Good thanks morning, for Marketing Paul you and Relations, Vice to of Taylor, President and Call. I'd Conference First XXXX Investor Quarter I'm NN's Earnings like to welcome

send McGregor Vice be and this presenters Officer, a and please Financial you needs If morning presentation, Tom President a happy the Abernathy President Our or Chief copy the Chief and supplemental at of are Rich they'll Executive Holder; Burwell. to XXX-XXX-XXXX, anyone and Officer, Senior copy. press contact release

Before I'd note to contained comments call, well to session that of The for supplemental Risk ask the press today's XX-K on webcast. including year statements the the made Q&A company's the presentation the today's XXXX. we same forward-looking Factors ended like language begin, the XX, as as conference you live section and in applies cautionary take language in of release, regarding December

the are measures release reconciliation measures will flow, presentation used market risks foreign topics. control. statements the and of today includes certain press our and in uncertainties, the worldwide statements regarding rules. and also presentation acquisitions, forward-looking subject contained is the presentation. final to non-GAAP results, which company's of of are of the of as many caution section and SEC outside by non-GAAP margins operating be should rate, supplemental future tax These sales, defined The contain performance Our cash with other rates, A various exchange such in synergies, tables

turn up the that questions. give to Then the and we'll First, said, the open quarter. you. over With an overview of for call update we'll Rich, I'll an line afterwards,

Richard Holder

to morning, everyone, conference and Thanks, QX our Paul. Good welcome call.

wrap go over we'll into business Tom a take some and I'll dive the it deep of to corporate it do numbers. each As some and return to the segments. one I'll to to Then a up. usual, bit turn then little highlights time questions of the through of

Before take Taylor. welcome member just want to team, the moment Paul I newest a our I begin, to of

the he will be comes You us going him and Paul forward. from give to heard preamble. handling Marketing Relations Investor both Rockwell, and

Paul. welcome, So

Additionally, into Paragon family. moment a NN that welcomed team I'd Medical take to on Monday, the the we like to note

Tom little are quarter in will We are The million. have be part look that, all six lost, and With jump entirely and of all, activities forward think weather was Solutions that up them to the in operation incredibly forward. on businesses you We the going will the with into And to had million, at days level. excited organization, of they a some performed we expected X%. combined acquired Northeast. give I production. of the They're note EBITDA made color for growth $XX.X Power as out quarter, we quarter. a coined, $XXX in highlights. It's to organization in been bomb they The were we Sales million the bit great QX. the of the in not multiple cyclones the lost pre-synergy of that. $XX.X by their impacted was lost just as performing that important Adjusted so they've as about derives or business let's

that. on a maybe So color little

As you the at recall, we the level. Bridgemedica, blended pre-synergy purchased those plan DRT, into we and both purchased were

better. paid they $X level. System they than at are We much Operating And so, They are better were in them, them, as pre-synergy they applied have getting still a when down but we bought are in to debt the million functioning they the quarter. NN

color earnings around this. Our was share Maybe $X.XX. little adjusted diluted per a

the the tune as tax tax on Apple -- new of as quarter foreign Most in Tax. impacted a Our result EPS think, to known earnings. negatively the the the of I $X.XX about is better was

plan. Sciences, you capital received walk and segments, added closing with As well it as the a associated into this announced the was accelerate the groups we divestiture know, through Mobile to we forward. laws, the the that's bit PBC. robust the now Bridgemedica, enterprise compete of Life with three a appropriate acquisition And growth, that Solutions completed of Paragon infrastructure organization we've and those from and And constructed the Solutions, to of Power EPS. on the and completed DRT of that new finally, to going we the surprise a candidly, a redeployment negative of in effect we the We the we've way derives our realignment tax the of competitive

we As we growth quarter earnings noted, Sales Page a the the as well up both $X.XX X% prior per already versus is important acquired versus had as we $X.XX share, growth. EPS, to return diluted for It's to ago. turn year. X, in as the note year -- adjusted that core is

that. So we about feel pretty good

X, and and at the Page to XX.X%, given new acquired continue as over levels. new operating the with that again, advised we'd the programs, it that the -- with coming over move the quarter expected, NN drive as we fact as the Bridgemedica, the execution last we of implementation next pre-synergy told appropriate businesses System. begin invest and in expect that you growth we acquired months to of and margin Be at be to we we gross still -- to As the course margin will businesses, the to Operating DRT continue XX perform in levels

XX.X%, again, the adjusted side, margin as On expected.

margins as the the to climb see begin the are programs in investment growth You slowing.

into, the of levels that spending and return We as to a beginning continue you'll margin abates. bit will the possibly, see spend to QX, but QX continue through little

adjusted margin expected. again, EBITDA of XX.X%, as As Page turn we to X,

SG&A to to M&A million over There As million. we at related $X $XX.X some SG&A, expenses. -- came look is of acquisition that in is

many carve the associated business we've when anticipation that Paragon, With see SG&A Recall, the now begin this times transactions carrying we we that absorption did divestiture. of the of divested the discussed additional not been in that the to the SG&A of acquisition these will we we've we've since that completed. out

of the course next And additional take quarters. of absorption over of the so will the place couple the SG&A

As we move it bit do turn dive. a Tom to businesses, I'll deep to out of over a little the to

Thomas Burwell

Rich. you, Thank

Turning new discussed division release, financials, structure growth accelerate by focused business mentioned products enterprise and in our his as to us as served. sold our further balance and portfolio completed allow markets in Rich aligning and this of better better the to business first comments, organic And insight where press provide will realignment our business opening macroeconomic we during the will operating we new the with the quarter, on help our and doing end structure them with into to and generate assets to correlate we're they markets. underlying utilized with income. growing investors also, how markets the our drivers served sales the judge are and and believe end market relative this to We the end reporting

divisions QX out affecting we data as QX and within mentioned these Rich we acquisitions a these changes that lot to, earlier segment two addition 'XX in events program that of 'XX. advise the the divisions program and breaking are limited we time, including, the but for do not startups discussed, new drawing There conclusions comparability, points in leadership comparable of However, wins. these caution have first and and of many too from been

So growth and DRT Sales the by with was acquisitions Bridgemedica. driven Life of primarily that, I will division. start with Sciences the

quarter-over-quarter single-digit the organic Additionally, we division's largest did in see the high growth percentages customers. within

When QX performance, as acquired Rich is consistent the from that as NN them performed comparing and and these as the relative to consistent operated currently. these that are pre-synergy very critical set Life 'XX, is Relative actually levels earlier. with everything levels. Life comparison when acquisition time below we we expected improving plans the these are we operating System margin acquired will expected locations within the top expected acquired by was the Operating impacted of and businesses, margin levels NN businesses planned. be we as hold targets planned with that the to these are however, discussed Sciences 'XX division performing margin the performing as performing the takes it levels models, of note over to XXXX, 'XX, levels at had and operations And line. Sciences NN and So is QX operating as important in at It we QX reach to the mass, also course

Turning over division. Solutions Mobile the to

growth growth within year-over-year. and top see line and from to globally. both the also markets end to markets. segment the net within CAFE adoption continue was growth continue for growth share The We see And we gain markets within those industrial this X%

the these said of to we that markets that new ramping up to important as QX cost program been segment division. that the abatement this mentioned over XXXX. wins short seen focus see times Operating also would have -- this for to QX before, by -- growing that margin key XXX in basis been 'XX, within QX of in has has of our within from and QX many mentioned it QX -- indicated wins. from 'XX. which to is program program to call as continue term industrial within a see continue be levels on that We we QX, Now in wins on we've in experienced and focus 'XX and investments the note, and substantial of any we're continue points continuing end on the -- production it growth we segment of million impacted that the we It margins though, costs improved clearly, the has to $XX

in start XXXX costs of these first up to as QX revenue XXXX. see ramp Now achieving full to in should again half second of we production begin in the half and levels level the reduce

onset, the that impacted we that in Rich Within up six couldn't the And sale as made mentioned due average that million within the was division, $X the Solutions million by of to Northeast an days weather this to division or severe hit be $X quarter. during weather the lost at quarter. just Power

to grow division. are within though, and organically X%, included results. be making Despite it our weather within customers the did with up division of QX impact actual expect their 'XX within sales the the those We the largest

was XXXX. we Now Power lost to abate With continue revenues the conclude And to and quarter will within division. have of during These sales to Solutions first as the the product commentary. that, adjusted of the the line additionally, I'll over by program second the half call the impacted program days production. of our increased of XXXX costs throughout ahead operating cost margin Rich of to half Aerospace 'XX turn summary up back into levels ramp

Richard Holder

Thanks, Tom.

the up continue and So to with business starting look was running, Sales is the the and of expected. being is enterprise to acquisitions, wrap go We're the months. way to the as just the quarter of, realized the completion operating us. we the the as the sort XX we of for over to growth performance next win synergies realignment in highlights. growth The very big accelerate of forward a quarterly of pleased course

putting all almost in for are in three businesses. We infrastructure complete the

top sales have engineers, application to deployed being continue managers customer manage And alignment, drive I those with the We is the bottom, biggest that front the to respect think, able greater and most end, growth. customers full to from importantly, have specific our service to we businesses. the engineers, to

So we're pretty excited about that.

of the proceeds As is complete. redeployment the the I divestiture said from before,

continue continuously We the are XX% ability but the In profile the also balanced Solutions. -- as into the Paragon the and across XX% that only a -- of we run year of and 'XX. well but good to Power of and business that margins. at this at business drive DRT deal, and very have about more synergies, a year business synergies growth will about some today. Sciences, 'XX lesser and to to Paragon drive we balanced least about recognize Life much to margin not We the is extent, as -- a modicum balance Again, feel Mobile the balance a in a increasing Bridgemedica, immediate pre-synergy. We're Solutions have for much going

So forward those we synergies. to look watching of the realization

in spending done But shift a of the little early to those new -- programs Tom a production bit. begin and at We investments the to we'll QX we'll programs abating. 'XX. multi-year programs. talked We into continue programs levels QX, in that invest to on those levels through QX. think The of QX, are see little bit and, maybe, beginning production end be these -- late peak in

looks sustainable and again, very about kind we a and business, are log good order building our, we're So what of, feeling profile like.

So the turn with to me that, let guidance.

legacy with our quarter businesses from this quarter as net For the our incremental from $XXX second sales to growth growth the expected $XXX.X the is acquisition layering $XXX will number. consistent million up in move guidance, growth first top million. well to the The million in of on as

million. million to $XXX $XXX So

the we growth layering the as of million, in incremental well the of of acquisitions. again, $X.XX. The to expansion incremental in million from continue acquisitions see is to was expected due of well expected expansion, to Adjusted $X diluted volume sales to sales. XX.X% the as well to at Adjusted is to inclusion XX% the goes their due adjusted the new lift margins EBITDA operating the -- that and goes margins. the and million layering to from to businesses the million the $XX as productivity pre-synergy The plan million, $XX uplift inclusion XX.X%. You EBITDA on in between as as flex $X $X.XX margin on $X.XX the the in $XX.X increased EPS the QX to as from drive current the

As are taking $XXX we $XXX year, million beginning We the year. the year $XXX together from put million move expected to million perform to will plan to was look over a guidance the as $XXX we and the take markets at the full of with continue up consistent million. full what we at to to think

mostly to the in is acquisitions. this layering due of the So

strategic we are Again, move earnings. -- of $XX the neighborhood goes goes $X.XX performance. flex as $XXX operating because you course plan, up inclusive months I'll up the business, to see in $XX growth this and the through. acquisitions levels be next move beginning. to to cash a expect forward in from million over stack goes to that margin Again, the to the $XX the with new the XX.X% somewhere profile Getting us to earnings is, of range getting to today $XX looking the As to you continues $X.XX. $XX for up of I business as acquired capital layering It's And fixing going the well With and moving million foreign the programs pieces. $XX view million an the to of move performance perspective margins, working the million we of improve. the $X.XX CapEX will closing, tell simply, million so to is we formula $XX enterprise execution. million. In EBITDA XX%. range from have that execution for a the on synergies from simple the of impact million per forward $XXX now execute, the we this million. solely of from more, -- now it as XX% to maybe up and to on on focused the any we the This share of said, have expansion margin lines that of we lot to is to questions. to XX the that XX.X% the flow a execute. operational of of is execute, $X.XX, the to $X.XX million tax open adjusted to portfolio end less a the plan diluted Adjusted and goes million We to want, free all to of enterprise -- will to that the on in way from $XX

Operator

Securities. CJS our We'll Moore Instructions]. take question Daniel from first from [Operator

Daniel Moore

-- was months 'XX? sense there over and I a EBITDA what's for from for much to what's the much to of Just are Tom, 'XX, quick And next synergies that in left us XXXX follow-up. Rich, both for the and tell included a embedded achieve hoping a XX we expect how in Paragon, you assumed revenue how your could perspective? guidance or get

Richard Holder

way the that, any to assumptions put the deck Yes, changed business. probably I announcement. to made the refer you think we when to handle the is Dan, best of we respect to with out those not We've

We have it guidance. the just layered simply within on

Daniel Moore

Got it.

Okay, and gears. from -- shifting

Little quarter. bit little the a JV income bit. in Just the looking statement income. down soft

quarters? mostly should the that Or indicative for couple rate wondering of now? is think we right Just -- is run if that's about next of investments what just

Richard Holder

there And sure to our was the it's Relative of moratorium markets. JV, on in the actually, I'm by not a of all the it will neither. bit back-end, slowed, that And XX% it. Yes, markets behind placed then sort artificially, month. really a -- came February, continues political back in I of, in government. was to about normal the go. details And levels say, the to March and

sort action that was of the this February. an government there pace essentially, the retarded Chinese the month So for -- by business the of, of taken

Daniel Moore

the detail free should yet, guidance like decks, it. get updated -- of into a profile how some XXXX, Got business don't you you we free if is about And but your flow Tom, cash think cash helpful, want does flow prior 'XX know the guide I Helpful. look then, the but in what to gave on basis?

Thomas Burwell

within take see and you probably the the think improvements, we Paragon uplift embed on I and then to operating can income further continue as realize statement we with Yes, system that the operating improvement and annualize and the capital. we'll that, working and guide have both synergies within

Operator

Our next with Rob Markets. Street question comes Capital from Lake Brown

Robert Brown

sort margins? thoughts take step to can in want on Q of, integrate big the this and next the, get I you to guess, get what picture, terms business once your a of I operating back, synergies again

Richard Holder

Yes.

of top transform strategically, flow-effective to, put laid of to somewhere back you we rate, between sort XX%, we the this so operating -- When that, so when be to got XX% the when business, post-synergy right? So said when we We out. we together, cycle. the of, I'll XXXX this this we cycle, the we'd take bottom run all as

is % to XX%. Life Sciences think of we With that the more a XX number business, like addition larger

going. way is top we of are the bottom cycle, the of So the cycle

X.X And about we points, of pure the have, in it's still So certainly, synergy market maybe -- we X -- a synergy have that work have is in north that. we we little work points then, [indiscernible], of there. have

trajectory, get So when the are you at we path well mathematical there. to on look the

Robert Brown

the That potential I But is And in good running? switching That's isn't piece market, a that great. the further And there nicely. How of to business? market. Okay, it's is how contributing? that had back then, a a growth weaker. industrial part come presume the for overview. that historically, been of little

Richard Holder

end right? markets, macro we're equipment heavier robust, Industrial all, so is, at -- fairly that would are there's business of customers. what our in that, tell of Yes, some the a the of first even markets seeing capacity, you tightening I our

And so, think, markets, healthy are very I markets. those

We with to the an on products products. of the awful And some are lot we we launching. we are new growing work volumetrically into of indicative going have, that of way our programs work some and have new that's

We that focused business. are on

get are business that We to more even it maybe place the its where a We it's take We're to to outgrowing trying current capacity constraints the a share. to end -- grow market, opportunity little get in an trying have already are we that think with bit faster. market. it's in

So business. the of well We'd over $XXX that like the of get the up years space mark. beyond see to we're next that to pretty million excited about couple of course

Operator

Charley SunTrust next Brady comes question Robinson Humphrey. And from with

Charles Brady

into stuff, Is slides where guidance a it and, and the growth looks bit going accurate? On gone have they little the relative were. organic up updated Paragon to for that maybe, expectations to your some of, as though, kind back backing

Richard Holder

solutions the we and/or the -- look we at newly portfolio DRT to Yes, have. an Bridgemedica, with products I some and sell statement. didn't with fair have inroad some combined a heretofore When that think, new Paragon, now you with that's

bit us it, -- on a let's be organic. going face the for we're that's more And going forward, yes, is game bullish So little organic. to

Charles Brady

you a a just I'm $X.XX number. why I on be foreign quickly the impact but impact. the was QX wouldn't full in If just And right. full the for earnings Right, $X.XX correctly, it heard year. wondering year bigger

Richard Holder

Yes.

really working we do mitigate we through just like. tax And there with say are I'll what still, not We expected. that it. So mechanisms know looks number this, our -- was advisors, this that are to

just our now, that is best $X.XX really right guess. So

Thomas Burwell

that because And for tax effective differently full rate you have quarter. rate, year the to impact. that really effective that and The the full impact more the the really quarterly would goes year for determine was with why tax. is impact the of it apply be the And

Operator

Our comes next Stephens. question with Justin Long from

Justin Long

segment of expect margin got us you through with help reporting, XXXX was of you year profile be XXXX. could three remainder we of where the if a as So the on we exit and guidance. wondering the basis But the run-rate I over segments progression new the to think for the each the

Richard Holder

in to want those Honestly, of will front of skew And that you Justin, I have I give model. me. your don't a numbers set don't numbers

getting certainly you can we'll strategic SG&A. new we we one of in firmly the some back a and -- that. margin rate be into XX% absorption spend have for roughly the from rate the points in certainly point tell on X.X more think won't you our certainly, of of come a expect positioning a enterprise. of couple of to the take see offline us give slightly -- to of I rate these expectation run color certainly, in I part, back programs. bit because 'XX, We of get We'll that through a north 'XX, for run 'XX, something than little But of XX%, exiting with can a on

area into our to the strategic low we close end rate and be that in 'XX going 'XX. of -- So pretty in certainly expect going to target run

Justin Long

Paragon targeting that detail to made strategic can provide the that own the they organically, Okay. you before their had were you margin believe were improvement That and far And margins pretty helps. I in along Any that process? improve how they significantly, plan around purchase.

Richard Holder

Yes.

synergy work that due say And that, have to tell very that in. was used that same they done So, laid of really you the It's we I and work. And diligence. validated work certainly the plan. will I work. to think, similar during it's our did good have it's part fair we

far along. weren't executing on of In that very work, they terms

work done we part say, as able plan had as let's take, well. the advantage were synergy of our certainly, of So they to

Justin Long

this lastly, update going And today leverage Okay. maybe you stands Paragon. just cadence process for forward. pro about of the on where share your for wondering could delevering Tom. and is I us the one And was that if thoughts forma

Thomas Burwell

Yes. closing we're mentioned after in the mid-five We're focusing and company. his execution and the around comments, right on for deal Rich with forma pro as Paragon clearly, the

So the then we 'XX. to that five will course the 'XX, have the end down we by of 'XX. exiting get just certainly, of within low And south Xs will of to

free pay be cash dramatic So flow utilized from the to new will business that debt. [indiscernible] down

Operator

next We'll with KeyBanc Steve Capital Barger from Markets. take our question

Robert Barger

Not Paragon question so initial businesses vision really sure this but fair with now. new, is have your a since is do line you in the

does in Just more able flexibility the comments segments, this terms and manage as have more portfolio. business do any predictable? manage that the across you forecast of think new across think you total make cycles? Or Just about diversity ability your being you to to on

Richard Holder

question. great a That's

seasonal it's balance portfolio you, we absolutely have, Steve, we the to little been. economic predictable. tell It than the believe much business is appropriate the And less will more the in cyclical have behavior. seasonality business very with ever now forward. going relative is So, we I is There

we XXX, more much it's now. look, we pretty have good days less now So have -- out. better just much company a reasons, become forecasting But where and business. forecasting. moving much better maybe, a we'll for no at We three parts to Yes, we quarters of XX yes, think, -- other predictable the I have

Robert Barger

execution good was good. to And say hear Okay. really all you this point. that at it That's about it's

that confidence part of how or as want and Just about being put better guidance out for in talk about able and to XQ you hit full to ranges of forward. operating the going year, midpoint consistently your predictability that just the think culture consistent you

Richard Holder

the an I right? is that not to only predictable, to so, look, at certainly, right, organization the we provide day, think, be driving Yes, end that focus, the and consistent but discipline, of our results marketplace. will guidance, And are

And one the from to We this of, to tax timers, didn't We series degree, did we have -- some the of, in for us quarter. suffered that thing tax right? we sort a expect thing $X.XX. hit didn't past this see

right? got EPS should arms I a think EPS around surprise, But a -- going have our was -- our so been certainly, have should And It that of beat. a so been we bit forward. little a

I the of moving benefit think we fewer parts. now have

We one now mentioned we've laid lot each to now divisions. business. have have to most of And as leaders, maybe, execute earlier, a be segments, need marketing infrastructure in have the these they independent, have they as leaders, market-focused now three for finance able they in importantly, their their more the so stability all I they

way the to and going that's in so culture. and go And in a driving the long lower discipline lower operating resulting organization the

Robert Barger

forward point, good. state. know XX% segments? us see how you just give you margin general That's kind but for I thank some ask, And for from at want Right. prior for And three-year ranges the XX% to of, you the to question. Can this the guidance don't the range give segment I'll you targets for the year

Richard Holder

margins high-level it as it's to out at I you we use are point, you get points performing as about X term, up long of when a from Life as up take. it through that where I see we say Mobile Mobile don't is think, that is a going a if operating think probably think I there we'll something If long Sciences this, one, about being probably today. year. of look where right? Power the you and kind term better view you is on when Solutions I'm be. going to defer up -- today will can Solutions, X.X to from segment to get I what considerably about And think give want Solutions -- is exiting this

it. the that's way So probably think about right to

Robert Barger

a to or cash. still free could downside? flow in but have, in We just cushion contract come color. potential it's good are And That's free of which any a cash new where and to problem for know that a upside cash takes build from use some the wins last upfront initial And to spending, result me. of guidance year? flow can good this puts is Did you one from? What

Thomas Burwell

mean, I we in as the grow, we for our and to synergies, mentioned going guide, They as CapEx capture free the investment continue the improve. to we've programs we as flow all sales is included Yes, obviously -- within the Steve, sales -- cash spend.

I mean, point. that's the upside see where I this at So really

Operator

Stanley with next comes question from Elliott Stifel. Our

Stanley Elliott

a off quick plus What housekeeping. Start about one as now easy, think should of, kind of, timers this out rate we an from with kind the quarter acquisitions? with, SG&A run

Richard Holder

Yes.

SG&A million. $XX think, and said, number, a like of $XX Paragon. gets you course, put laid As overlaid run of that absorption the That's I a over we've about million everything should somewhere between is probably and, on -- current in, given I probably probably structure rate, of that think hard our between spend

we a kind XX%, to percent as sales, So of into we where need about right be, XX-ish. of, fall

Thomas Burwell

operating before. Yes, around are XX% but that range right we in

Richard Holder

once We M&A additional normalized QX, will some will be SG&A see see cost level. get adjusted, within QX, Stanley, embedded more you the we But that that within number. will the will past be that

Stanley Elliott

term? seeing kind would material or relates mean, discussion, concerned see all margin logistics-wise, along Anything inflation? any -- that the the chain cost, you you're to I as you And over it the -- near that did of about input supply

Richard Holder

Yes.

let So first well, me this. I the answer -- of think, part are obviously, we

by largely a lot perspective, us sort buffered the in So any were, our unaffected had on think increases in that going business of, by when relatively quarter, market. inventory in costs, the about we, of input -- an from gyrations input we this increase that were you in because

of tariff, happened specifically I the steel keeping prices as the of one tariff, a with announcement forward, look up. because the is eye, and said, implementation that irrespective we really about we're everyone's has the nervous have what the gone actually of As is that close

us, specialized Now buy steel. fortunately we very, for very

long-term we contracts those have mill runs. so, on And

able been the have we far, arm cost. So to stiff input

Now take is, we the we'll If of timing. clause timing of the probably for Like do right side quarter, quarter about it the other take the for a that probably get to we agreements That's if it's us, back think after. matter a have it. of as pass-through way most mainly to have issue. it, it our next

going what's risk lot that on the these macro market. in behavior an said, we the of of have don't predict associated of we are to struggling So commodities. some now awful With right

Stanley Elliott

about And then, it took guidance on the at piece, like midpoint, looks back think the of, going I that's EBITDA. up to fair. you kind it XXX-plus XX so

coming if significantly pretty the the think that in Paragon, XX%. Am low that for I as would right? What of, But kind here you're something kind -- be margin. outlook XX% this to about math of, I'm The of my would above you missing kind something of year? margin's a about still -- annualize is which So top a a organic midpoint. coming how terms imply growth of on talking

Richard Holder

You're not.

we think, definitely we've lifted And information. to the today. I think, we sold in it different fair have it's say -- lifted that organic up business. accurate very And I or we've up some on have our portfolio we did Life Sciences -- are based that number on selling a

And good feel organic about really space. so, we this our in growth

Stanley Elliott

well? the corresponding And that as profitability with then

Richard Holder

yes. Yes,

that, that are sort sales the through. say growth, some coming other organic normal versus the the it's of incrementals pre-synergistic of, Sciences to Life will through fair come the On that NN incrementals in,

Stanley Elliott

-- trying me. the that's customers. single-digit some a then about And come the your of those and margins? On did with couple Just to the segments of high the guys obviously, bigger additional too. wallet part share. plan margins, revenues takes last puts about think of for larger with talked Is better to get Perfect. there add-on you Did customers, growth at worse they

Richard Holder

at those coming that capacity think some that year I the Those large some in in Yes. customers expected margin are help either we better historical are, suggest that through at side historical. come at of to In that scenarios windows out know a diving where constraint you especially There margins. middle on bit are better. at in would X any to that margins. laying issues. we or are little worse programs, And are house. the or a bit and our of, sort then, in there are programs are coming in some are part, I Aerospace the I don't Defense margins of are X they of than

Operator

[Operator Instructions]. Daniel CJS next Moore with We'll take our from question Securities.

Daniel Moore

act It your next be to focus balancing very wanted -- comments the there businesses opportunities have about and then, might execution. deleveraging, to the nature over maybe, capital that of said, of possible, deleveraging -- of few themselves, of to watch consider intense echo the would given on given about That And should present the it exciting there quarters. your some that in means Rich, the comments that you up? meantime? I is you are pass alternative is the

Richard Holder

Yes.

But a way. I'll think, complex So, really it you Dan. put this question, I to that's

than our the that intense in it course 'XX of we I say think appropriate walk finer we eye a the last more certainly, is opportunity. it's keen to launching new of a problem million an capacity enterprise. increasing -- of of in and have, on filter this the the One space we keep that time mostly that are away our, add be would is as of right? would we of -- and a think year, say customer the during it in from of space a great skeptical the But out, programs I issues, everywhere business. to our as high-capital, probably delevering we grain not businesses, strategic almost with to $XX to all I of are lot That's pointed was, to the say,

But and to very kind business. eyes these We do cash of and are well. a are the and is our than new plants. our bigger we don't very, in what handling mind, expected problems, three There's want we moving continue is ourselves enterprise to into of, out profitability it different great in pull a are on. going flow lot that is find the And where can't the, place keep stomachs,

that manage appropriately. will we So

Operator

Robinson next Charley We'll take our with from Brady question Humphrey. SunTrust

Charles Brady

what and to talk facility. about you synergies expected sounds or can of, one, you've for revenue just -- first got second It you and, kind out coming a want facility replicating opportunity I -- the forward? Just R&D -- like going opening strategy that from are of your what's the the maybe that seeing, R&D first you're within one have you -- one, and how there customers more many

Richard Holder

Okay.

that you middle and as the literally, tell of It in Houston. will we one, activities. Development It is opened engineers. is Research it second first in XXX% our is to the open our have one. it's customers' I And down So literally

way pod, And these for the may hey, So point what napkin, us touch. the what walk doing it out on codesign works them whatever we they while a often and it I'm here's the putting the printed essentially, water they front than of and really latest doing very with, a What into back back that cycle. customers' end either is, profitable say, walk a And product, and pod, time. be, demand help facilities absolute XD the jetted are they be it's something the our literally, and can it to proving go of that the engineers us, with certainly, that us thinking. facility are not, in on a entities sketch is for well-run, of effectively, working on at more it's

work product on. the through what customer's and manufacturing that early working of know the we we So on can advanced

we an customer's gain in also in design the that no we offer offer customers and perspective increase putting can many either us were property, behalf a cycle. can the cases, we of of the name customer manufacturing we're else one or It codesign on it. because designing So the where on something helps part the intellectual from product

I incremental around you here's our somewhere and make at the agreement to shakes typically decides, when pay customer and two your or, me, solutions to long-term to is you say XX% provided there for make in I margin. that only either a that comes all you've typically Sciences will this it, and margin, I engineering want it, scenarios, myself, to So make want it normal the Life out,

replicate So we come that It's engineering customer nice of people to they like we do can. end we solutions where with to site is our plan But back be that process, the on this that have co-located to always customer. organization. would to and other wherever the can the we

provide don't their it have the anyone, And solutions anywhere, we've of so, the to bought Bridgemedica integral end-to-end part able be to engineering businesses. that especially to that is customers reason smaller services

entire So we the portfolio spectrum the we have cover with today.

Richard Holder

bring you. conference execute. you Okay, call participating. excited like business that, Thank to the forward. looks to with And what about you, for call a With I our execute, as We're said that, bring we'll this really going I Thank think mantra close. is we to can a close. the all execute,

Operator

may today's your And disconnect. you now conclude you presentation. that Thank does and Thank you. for participation,

NN (NNBR) 12 May 182018 Q1 Earnings call transcript