NNBR - Earnings call transcript Q1 2019

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Operator

Good day and welcome to the NN Incorporated First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Robbie Atkinson.

You may begin, sir.

Robbie Atkinson

operator. you, Thank and everyone, joining us. Good thanks morning for and Robbie quarter welcome to Executive XXXX President Atkinson, Vice I’d you conference like call. I'm earnings to NN's first

Holder. and Our you press the a to XXX-XXX-XXXX, the contact Executive is and this please or needs President copy. presentation, MacGregor presenter Officer, copy morning release Rich send Abernathy If supplemental of they'll anyone a happy Chief at be

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

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

Rich, afterwards, to the walk the through we'll Then update turn line of the will and over first an discuss Then commentary give call that you. questions. overview and With the up QX the business. you and we'll will said, for quarter on I'll First, open provide numbers we outlook. Rich

Rich Holder

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

dive of within which Sales to of a of top sciences results performance usual then that million let's Adjusted all track expanded year will our operating as prior and say Acquisitions over XX.X points synergy line. XX $XXX.X questions. in to majority the EPS face the million. sales our headwinds. operating the will as business of quarter of I quarter driven we free was a the performing and the as QX on also by XX.X%, XX.X XX.X improvements you growth by life business. led and Adjusted minutes, integrations our the Sciences expected. million growth Life With margins the of Adjusted usage plan. capture, over line by that, for the are cash with the by QX for take market of the but expected as by part into highlights. contributed by solutions the than the mobile well in large was -- the basis actually is XX.X was flexing slightly for As cash better open which I'll significant diluted through appropriate of of total Net few million, $X.XX, our next million, EBITDA flow

call. last you, now the cash think of move introduced operating flow definition CapEx. a told we to talk flow We standard remind I cash me cash, minus so this we as about we Let is definition and you our on would free

So the financial face it's of right our off documents.

for again shares comp. of was we million, X, margin can net per $X.XX, an diluted adjusted the XXXX, On XX.X%. prior year. organic the acquired perspective, acquisitions, page the $XX XX use growth gross you net million and up issued From let we appropriate you in of me earnings actual to that sales. over our share sales solutions third in remind in million inclusive were business that versus column, XX million of move at quarter contraction we offsetting XX.X primarily a so As in Total the about within mobile sales sales,

Our SG&A, in activities million. basis added total margin to equate activities. $X continued about points. by XXX Those integration acquisitions was and offset investment

think get performing comp expected I SG&A into the bit But little we further as on business. is as SG&A year. within the the begins a more realistic, to be

operating you manner, move point XX.X%, over expected. page that and over we again, what I And mobile questions as our their we it if around give basis margins fact, EBITDA We had the recall, bottom -- we Adjusted the leverage of flexed of We our would that. the have that As to of view lots to wanted held and relates this and in last slide. business you XX X, move expansion towards have and we into debt margin you to an adjusted margin XX.X%, of page, points. to as credit a increased in an quarter, out to above solutions of expected and introduced position, agreement.

transparent be possible. that So as around as we wanted to

can XXXX So QX leverage. bit as effects compare year in currently see you X.X. you look on our at and this leverage plan over on a basis, chart, quarters better a than the year at and you sits came

around the our a bit to smoother you’re same. but we in than the cash generate the in by, the we normal in the use quarter third remains year, our it of little was cash in cash fourth cash gone a sure quarter. we amount first years begin seasonality I'm our As significant and aware, seasonality is It's generate half of

no there's expect cash profile generation change. to reason So our to

into we page Life group. businesses, the As go on Sciences X,

to moment allow business, very bar a the take represents XXXX. chart. of inside intended put these performance that's organic all this businesses of get on clear the orient the growth just occurring together. businesses the The of to the a X, we we red owned as acquisitions January view had to me you Let It's

comparison QX and look XX acquisition. or you is the business at basis, inorganic million this of $XX So, from from plus a as -- roughly inclusive the actual million XX% comparison up

going operating of. look to and Maybe XX.X. at of the key integration continuing you sciences you comparison see when points on aware that be on this business XX.X, the of capture plans you want adjusted synergy Our couple in a are And the life from section the to up track. effects synergy margin

in to and excess grow sits million. currently continues $XXX backlog Our of

new in is something neighborhood the of Our of million. pipeline north $XXX business

in utilizing we solutions internal million solution sets engineered strategic we’re So move put into we about our these one product to continue which businesses selling all us, business, marketplace, in have together. a expand into sitting and our $XXX for was backlog as facilities total total, could argue go we to significant to make that the

good we sciences life the our business. performance feel So pretty of about

the as chain disruption not the again group, does has As now will appear abated. we shipping move tell that customer the business on underperformed you normal the underperformance of that result quarter. same as this I seeing supply was of been page power May. month we're solutions The volumes X, within of issue resolved, was to it the again

volume normal launches, second in to you So those shipping of its to the fundamentally, because the you the year. at the back in with fundamentally track are we mirror. expected majority Sales flat overhang the margin the production at the operating business May. see on didn't state. we ups The rearview get is second are which to the quarter, occur, in see all of think ramp our and And all of new were program to backs expect may margin the ups, return But this on issue until still should XX.X, normal some largely concert in low ramp begin rate of to and now half volumes. the see largely

of tough all mother a we aware will all record of very sort tell As what's of going automotive mobile was global I is business. the comp, sales the solutions, to headwinds. you, of markets. over QX move our XXXX We're this because on with for is a quarter This

think the about of million that against North makeup is of some year-over-year. million When XX%. Geographically, down we're that, all XX million about in America so us. down FX, you And $XX is working X.X

began we Europe down that turn. So rest the as markets and world’s about X% of the the flat. expected to

China Brazil Certainly, bit. So a leveled has little is up off.

world fell expected rate, it's million XX at what -- of sort is saw about we a into of $XX about -- trough. which million the unit so So,

appropriately, the begin we of is to many launches, in which business continue occur to we year. Our our product the of half as flexing and finish second

significant a sales in business. in a abatement of have this spending we uptick We have and this business amount

go of flex terms expect in normalize business, to margins we in half this this second we the of performances business. so through as from And Nonetheless, noteworthy year. the

sciences we EPS solutions business. the EBITDA margin by of business across offset As X%, life X, growth of and summary. XX.X growth the of contraction million, adjust Adjusted to go page Again, XX.X, of of in organic improvement adjusted operating course of and the sales mobile by the the $X.XX. XX% in organic corporation $XX.X driven entire

not for guidance our guidance, the over go the changed. has we year As

We'll just chart. time So for I really second to spend won't the quarter. on this any go guidance

EBITDA top quarter, XX line look we the come XXX XXX. up to million. we we will between our be XX expect in million to and and As between second think And

I that, lines questions. open can think with for we the

Operator

[Operator Rob from will Markets. Instructions] come Our Brown, Street Lake question first Capital

Rob Brown

there. Nice job environment on mixed good execution in and a the quarter

the and sciences, of there? that the integration, maybe at thinking Just on you're the strength sort to that some life operating touch see where clarity on What’s wanted good to you're seeing you're margin starting synergies further can there. and become

Rich Holder

Yes.

DRT recognize in before together, as got business year recognize, time there three you a point integration we we plan the So that. Bridgemedica of we we before kind was this told Paragon, that, have put from that

the On this this to sort side spillover course, of there's all XX% of should effect all we year. we of this the think captures, get see entire a year, synergy business. into other this the next XX%, We about a within of the XX% year, then then overall, after And full of year synergy. rise synergy and is integration we think the sort capture there's to business we as and had some

you of cycle to in the XX rate it of think XX, cycle. business, normal about So top bottom environment, when to a run call this the

Rob Brown

And a that's to mobile. business. Okay, then shifting great, good

but new product kind got you structure of headwinds now ramping just are products that? or managing you seeing the down, kind demand you how following continuing Are your case introduce is you environment? market to you're this You're and do handle against set, and it flex sort of of cost and -- you've of the a

Rich Holder

about investing is of candidly, themselves, both, in half been right? new in this Yeah, of little biggest as balance that programs. that, towards mobile, you we a second it the a basically we those it's of would look lot bit new year programs said significant movement The mid year. last see a year. talked you have of of the recognize We so And amount to ‘XX manifest

things are move and so, that and And the seeing is out move into expectation those of production. programs that like we SLP full

we production clear full it's anticipated that that full somewhat production is had volumes the volume. Now, nonetheless, but originally muted, it's

we as forward. headwinds And market go some so it's offsetting of the

terms brand programs. In brand mean, looking new are at programs, I of always new we

We you think, in wise you've are, you XX we some XX investment as capital programs, this of to volume. production place put I of making know, to got months businesses, in to know, the decisions newer ahead because, forward look

the may to And of so, may we business. mindful what do or are not that

filter, And so business. is that's a think business a still we And believe grow. this certainly in we still to this great

of grow just think going to an fashion. kind we're the way it. have at I intelligent in we And that's

Operator

next will Baird. from Our Mig question come Dobre,

Mig Dobre

talking I'm slide EBITDA of preview, me. QX or you've that rather XX, revenue start with When specifically. you be and provided want with both ranges slide guidance, questions below looking quarter at to on the it about Couple seems to at for hinted deck, your your I XXXX last from guidance.

were do softer you initially. is, commentary pretty you so reiterating can I QX? And changed? in with And thinking expected QX as much line, we of a what robust you're make kind for the in as not you than So, a what that on at here my if scratching thinking, how line head performance maybe up What level? provide is QX was guess were year, I'm segment was slightly

Rich Holder

Yeah, so I don't changed. think has anything

look think continue to a take I prudent year. the at we

kind XX% see was, our XX% I XX% of of sales. think see XX% QX, what QX, our sales. sort we'd to we business said think about to the to in to of of way you was our we'd

than still suggested we XXXX that as expected. changed. model, Candidly, nothing little think I We the performed QX to preview. has holding we're in a bit in better

so do. continue should a I view we we of think And what quarters. prudent take And to that's all

Mig Dobre

math. is those apply end your what ranges different a the than of currently guidance, we If Rich, you're with And QX to. up guiding midpoint to math we

what but what are understand numbers nobody's looking than the I'm why the mean, plan. is, visibility, I your the the guided, to initial delta So, trying and question sort you are. quarter what now My got different I perfect they originally fact exactly is of versus get that is

Rich Holder

this will we Yeah, quarter discuss some I you the will tell moved offline. a has at you, maybe detail best, point. certainly that around tell I in and can

it So a we've not substantive the numbers come in time view off came that we don't any we change year, off off thought. We've of phasing as not the way. come we

need what substantive be through do And to but game. sit you're the looking to in I'm versus change the what looking and is, at you seem what we maybe so seeing work not that together we're at,

Mig Dobre

If from question, essentially this compression I'm comes in XXX presuming me baking there you life compression, well. Can guidance I well. But helpful guidance QX us margin good implied as a about the second expansion. segments, how some quarter ask some your looking sense sizable of basis looks the that? may as seen of to sciences. chunk you're We've for EBITDA like points. give it margin The it deliver to other margin a be perspective margin in would half significant is your pretty fairly back implying for is

Rich Holder

so of so right. those you Yeah, things, think I one on think hit on -- certainly I

so of to do in So more year. robust and the just latter of part folks meeting has the is and lot later business. life taking the sciences, simply the in with a part seasonality their certainly procedures a year, more place And deductibles on

So HX into significantly up the business HX. synergy so margins. time, during affect life capture that is and sciences We're over deeper both also certainly

power amount the thing same and -- solutions there mobile programs spending is, abatement in is there's these The mobile solutions the the because business, both significant in as of the amount other into happens thing in solutions that more moves fair power. abatement full spending happens production, a there. of And a

that second of performance the half, margin volume. really So as the is what well predominance as in drives better

Robbie Atkinson

the and one we bottom about imply, for the the quarter-over-quarter. add sure again thing, margin, points range, a not can of end same followed maybe about basis gets margin But QX, that the guidance just I on this EBITDA would offline. would I'm talk I exactly Mig. better comment in the effectively at to XXX

offline. that So, we about talk could more

on I But, margin compression. think don't we're couple hours. see I a talking of

Mig Dobre

or sequential? is year-over-year Robbie, comment your

Robbie Atkinson

We I can Yeah. it Sequential. again, we mean, offline, it. about talked talk think. I about but again

Mig Dobre

can. basis, get second We significant year, there. the on you're back was quarter, That's contraction year-over-year you're in half the a point expansion. on a basis, year-over-year the pretty My margin that expecting you in margin of how expecting

how So but you’re has do sequential everybody with comment is seasonality other and your to items, which right, year-over-year, business. probably that's modeling really

Rich Holder

basis, business year-over-year different. a performance is of ‘XX on ‘XX mobile second so the versus the of second quarter Yeah, the the in solutions of substantially quarter

a is so, in basis. definitely year-over-year that And business on there contraction

seeing. so And that's what probably are we

have have quarter things that quarter as in pre-integrated thing we the have didn't that in Paragon of didn't as in number not that We of is There's now. the weren't we The the other is had ’XX business the there. business second we we that are second ‘XX. in a Right? of we

But take be I may and oranges. your think we're -- point. So, comparing we I apples

Mig Dobre

times, I'll already that Then peak about Where ask give on leverage. call, Can see do expect the to peak? how last to like X.X this Q&A the well. was us for the you above you question a on leverage about through discussion. Very the year? last leverage And the at you sense me in looks it think number We're one that. you

do half a you into do managing risk And you. progresses? the perspective? So of you into the leverage, customers, on year the and year importantly, think that? -- outlook think whatever, about Thank you macro your look XXXX the second from changes volume how as more depending if about as How

Rich Holder

Yeah.

think terms to So of I normal year, our path. we the continue follow in

a As said, expectation. little QX I better came in bit than our

normal is you'll a that's just substantial to slight And in to what normal just as see up we where see That our That's seasonality. then think cash, due is our for and business. you is tick I generate QX, seasonality. in the drop start QX our normal QX.

expect to a end concerns That make move organization certainly into as XXXX. this understand We into the and on we on. focused to get certainly the on is of around continue substantive business. be is it. ‘XX We laser de-levering the focused what We this,

that, Beyond what sure tell. I can else I'm not

Mig Dobre

view to where top ‘XX? willing in provide off think you you your a Are to would as leverage

Rich Holder

last think, today I then and with in don't of sort And so come and chart the tell it down. of and back second year, that half rate and do where number I Yeah, things have go relieved has gets a QX the is in at of to you a other working run front of begin lot the slightly you, will same in generate the me, capital then will it's cash. same, that to I probably but of you look to off if QX year up building top and the to

substantially. So, hasn't the business little hasn't a profile but smoother, substantially. of changed it the It's changed

Operator

will next Steve Our from Capital come Barger, KeyBanc question Markets.

Steve Barger

heard what's which mobile, we North you deeper quarter. program any that or overall on XX%, what on quite specific production if for around the than more right, you declined going heard there? was auto bit in said Are I on a detail you down Rich, America a is

Rich Holder

as else. program Yeah, with timing anything for to much it I us, as think do had

weren't because down the programs up, programs. what prior catch coming of to are essentially If a recall, as won this in North in. the seen market in end, degradation coming of And that those couple you cycle But America an of to programs we level part new are late this this, now We our were sort there is bad quarters right? we was. now hadn't as

a there's about to month delta So or offset. two

at we're why that's XX%. So

Steve Barger

you just it, well. XQ to positive year? should the for negative still you we missed from expect perspective, I maybe confirm, as a and said And and do expect modeling growth Well, in growth this

Rich Holder

think still the But we that roughly at and we're for for X% We're point. year, growth. X%? Yeah, holding not still year positive massive between the somewhere yeah, talking this

Steve Barger

But in XQ? down

Rich Holder

think Yeah, a little we down in bit QX.

Steve Barger

of size you been One focus some view your market how -- of you and the the the of realistic the auto size talk points of about talk offset circle opportunity global exposure. the Can in business progress industrial growing to the has this there competence? about of maybe

Rich Holder

Yeah, we've piece been business. working I that to of diligently pretty that will you in the trying tell grow

significant success, as Mexico redouble a one some and we that think our quickly going new like going It's at of not process facilities. of can of seeing it, space. sort and that be recently I I we won had have into as We as have will the around looking our program we're efforts think in if we'd this

dollar a I around market trying a in we're I’d is sort a little plan ball the what to have. of to size to billion looking put out the that market that share already market Part you and of the to easily, establish tell is of think tough, is billion wallet customers can space $XX that having sort sure we're the growing we running do a $XX of across not this brand we and at our entire the focus maintain trying make on And globe. we relationships. new

best we about industrial relationship the is of segments have customer it. that some our think one program customers, that have today have is way So, we can customers most diversified probably general the to on of that focus industrial large

Steve Barger

in that are sales Is are medical in How and capacitized directions in engineering? and do between process enough right terms limitation Yeah. go Or multiple there you a of -- prospecting balancing you now. to you industrial?

Rich Holder

we're of know, places. segment, sort don't for phrase, into better over of the across a to the it. wall There We So the sciences with industrial life to is, side go of a that respect multiple lack we Chinese in two. between allow capacitized general

So the of no of in for all. at game Life there prospects at Sciences are limitations terms this stage

Steve Barger

half a of Okay, year? the the part free segments, last stores Life have for shouldn't back of portfolio, the bigger the first pattern? cash in me. one When the same it the use the Sciences about characteristics through of it you do generation as in flow Or balance help kind becomes think does half cash

Rich Holder

Yeah.

procedures a they much with, the earlier, mid-year a So do I directly And second bend, it than right. that but of there recognize said half, the has bit, year the have should to are of very first sort the second again second place half taking smooth more generation half still year. to in of half what the

there's the So inventory medical second there people there's half plans. of cycle year. And from are bills, kind the will, related lot positioning, meet their year, a if you inventory when of of directly that in all the the the to it's find spent way of generally, through the dollars, deductibles half in their first

Operator

will Instructions] come Moore, Securities. [Operator next question from CJS Our Daniel

Daniel Moore

in Rich, rearview on you're customer issues supply confidence solutions, that? terms in any in and what we're impact Maybe can detail segment, revenue and of quantify income the in we gives that power it confident behind QX the you sounds possibly operating that like the mirror, the are chain and progress

Rich Holder

that round $X the But And receive telling say has product The this customer. so numbers [ph] think problem the dunnage that have, they is build we the one, us been this way million. we in Yeah, numbers is importantly, we abated. confidence round the maybe quarter. customer from I more number about

time line. the to it’s just in build a we dunnage, so And

to built customer. the ship we and to the So dunnage

has way or in to what form, inventory the balance customer they is the any they dunnage level they send if to any they So need us. or disruption, do of amount of restrict that shape anything

we much Right. build. can So so there's only

particular this to to. has if product the in sit couldn't we we where even in build the dunnage. inventory Because So case, wanted sits

will, we'll shipping levels the in that this see if look gives we getting did be of confidence the that rest modicum small, is get factor how getting to plays -- a the And beyond month. of in but for April. I’d if you May, fact our there that the of the abated has dunnage And been in month say, dunnage, But May. that not appears that see. that are the you have we month so move we at what of at we We'll a us getting up, is normal or are the catch

Daniel Moore

of And working solutions, little downturns, you work down capital it described free see mobile to past, kind you would you've segments. reverse flow the terms a typical cash within over switching as in In maybe the drill and that just would of down benefit, first that cash year, you're of far you year in wondering flow if as are the recognizing half seeing some free normally a would offsets What the expect as seeing platforms, this you got goes? expand but that as that? you you’ve

Rich Holder

Yeah, so I have improvement in detrimental think quarter. that it in their to the certainly. we've recognize middle of we're seen a the speaks performance, of bit But think programs year. I certainly And we the launching

business. to of a are the Sky in X% X% not mode a that is about Right, flat we're we So growth to that in business is falling largely talking in still sort business.

grow the the lack are business, we mode, still investing been XXXX. like we're we're and looking of in we're not, of business sort business it Right, in in still running sort in a for better of XXXX, still quartile harvest we a to space. business, word, top So the its have in is would still

Daniel Moore

guide may then where embedded we one last update XXXX and beyond? the of synergies XXXX and captured Maybe how us what's much are for one, in terms in is sciences, synergies left the life on expected are And that drilling in to be on be just down overall expected.

Robbie Atkinson

Yeah, so Dan, good question.

bit at together, the And, Paragon synergy you XX business. I -- remember look step to our plan, look think where life have you little entire the in and you relation have a months segment as you If pull at from are it is to sciences back old. we

in that so have integration as have Bridgemedica and you And all there. there, you DRT, of have pulling the Paragon then you integration well, together,

the at is, news And we're on is good so, look right. you when track, it,

to be right are we're of operating expected we're be. at terms we where able plan and dollars to in where had from synergy delivering what the look profit expected So we perspective. an to we that And we

yet still of We're in got performance to we are bingo that in step of through, the first those think think, I way we where have really efficiency. saw from at I the not But, room starting saying QX to all in synergies terms quarter we're margin. you terms there. place the a that operating and we come up in see in go

about and look So part see continuous entire segment, And you margins out to the the pulled to And improvement you'll that. that synergies the XX%. in large toward as driven think to that margin of as expansion expect throughout we we're really continue target excited we within we business, would together. by to in then business certainly, XX% entire continue strategic move as expand we year,

Daniel Moore

possible a Okay. sort terms what rate on to dollars, ‘XX, improvement? run And of just in continued quantify basis, not of beyond remains or

Robbie Atkinson

think didn't it's given I guidance guidance, how that in largest three on laid synergy a second the year the or the $XX We granular lay And we've that, out million and think But specifically get synergies sort they not make we -- then granular synergy you in is so to year XX. to up down a activity should period. give in a And plan. year because synergy to tend ramp not at you year it's of not three. a you curve, many to over year then in two, sequential XX, changes XX, of first. peak like moment they, tend bell probably to it wind want take don't start too

Operator

questions the very have much. in no you we At queue. time, Thank further this

So over turn this closing management remarks. to for I'd to like conference back

Rich Holder

next joining and you you. quarter. you, with Thank all will Thank operator. Thank you call we chat this on us for

Operator

concluded. at conference this and this Ladies now gentlemen, much. has very you time, Thank

and You may rest disconnect of the a your lines great have phone week. Thank you.

NN (NNBR) 10 May 192019 Q1 Earnings call transcript