NN (NNBR) Gabelli Funds 48th Annual Automotive Aftermarket Symposium summary

Industry trends and market context

• Used vehicle values have normalized from 2022 highs, reducing volatility in dealer and retailer earnings.

• Incentives and inventory levels are rising, with incentives at 7.3% of average transaction price, still below pre-pandemic levels.

• The used vehicle market, at 40 million units annually, significantly impacts automakers, rental companies, and financial services.

• Global light vehicle production is flat, but electric and hybrid vehicle growth rates are strong, especially in China.

• U.S. government initiatives and tariffs are influencing EV market dynamics, with OEMs adjusting strategies toward hybrids and EVs.

Company overview and transformation

• The company is a Tier 2 automotive part maker with $500 million in revenue, 10% EBITDA, and over 3,000 employees.

• A joint venture in China with Weifu adds $120 million in sales; the JV is profitable and unconsolidated.

• New management initiated a transformation plan focused on growth, operational discipline, and deleveraging, with 50% of the plan completed.

• Deleveraging efforts have reduced leverage from 3.9x to 3.0x, with about 40-50% of the turnaround plan completed.

• Operating 25 facilities in 6 countries, with a global workforce of ~3,100 plus 700 in a China JV.

Strategic focus and growth initiatives

• Over $113 million in new business wins from Q1'23 to Q3'24, targeting $65 million annually for the next five years.

• The company is vertically integrated, specializing in micron-level precision parts for automotive, electrical grid, and orthopedics.

• China is a key market, with the largest customer BYD expanding globally; new factories are being built to support growth.

• Medical market re-entry is underway, targeting $100 million in sales by 2028 through organic growth and acquisitions.

• Orthopedic implant parts represent a new, high-growth market, with global joint replacement sales expected to grow 6% in 2024.