NN, Inc. Price & Performance (NNBR)

If [indiscernible] [indiscernible] I'd like to give you a few highlights.

NN's first year of transformation produced significant and immediate results. Including a new five year business plan, new top leadership team, which is 80% in place, a new business development program, which has now produced as of last night approximately $150,000,000 in new business awards We enacted fix it or close it program at seven plants that were underperforming and we began a refresh of our capital structure with a new ABL in December of twenty twenty four and a term loan refinancing process, which is underway now. And Chris will give a fulsome update on that later. As we look at to the full year of 2025 NN, we expect advancement on all fronts NN growth [indiscernible] outs and cash generation NN. Barring any significant tariff impacts and we're going to talk about tariffs as they're a timely thing, We have 70 new business NN programs launching this year. Our cash CapEx is expected to be at our normal levels. And we will continue to selectively add a few new people to further help drive our new business development areas particularly in stamped products, medical products, and electrical products. And we will continue to optimize our operational footprint and headcount.

Lastly, a word about tariffs. It's the goal of the Trump administration to encourage re shoring of volumes, profits and jobs for companies like NN But as it's playing out in the papers and all of us NN, just from common sense that U. S. Manufacturing supply chains are global complicated capital intensive and slow moving for important reasons like consumer safety, and project paybacks For instance, it takes several years and several billion dollars to build a car factory and then another year for vehicle testing. So these these changes take some time and the timelines are generally outside the duration of NN administration. And already the big three are getting exemptions Most part suppliers like us believe that this will be short lived with minimal long term impacts, but I am going to give you an update that we've had Turning to the next page on Page five, I'd like to just give you a little bit more details on our five year NN.

And reiterate them, we haven't changed them. First, sales growth. Sales growth is very NN. And in the industries we serve, sales don't fall naturally in your lap, you have to target properly offer innovative solutions, hustle and win. And the components of our top line program are based on winning $65,000,000 a year of new business and ending $25,000,000 a year. It's an assumption. We don't have a firm outlook. People do not give indications that far out of when they intend to end programs. But it back tests to be a number that's NN for us. And we have a matrix of targets underneath that and individual NN. A big goal is to minimize CapEx and to leverage the installed base of equipment buildings and land that we have and we've been doing that. And this program is working. We've been on track now for six quarters in a row and headed into our seventh quarter. We've already won $150,000,000 of business, as I mentioned, which is definitely NN number for us. We've had to get some operational guidelines in place to launch that many programs that wants anyone who's been a plant manager NN been That's a lot of work to do NN and we're launching 50 programs right NN.

In the first quarter. The second major component of our five year plan is aggressive cost reduction. Overall, we want to reduce our cost 3% a year NN our plant footprint, combined our operating teams into a shared team, implement continuous improvement programs at every plant continue our Kaizen and Six Sigma programs which are working very well. And this component of our plan is working well also. Third component is to refresh and correct our balance sheet We expect to generate free cash flow and invest $12,000,000 to $15,000,000 in CapEx per Year Ex China NN. We've kind of sliced China off and have China funding it and sending money back to us each quarter and it's working fine NN I'll give a China update in a bit. Again, we want to leverage our installed base of equipment NN and building that we have NN it's very sufficient to achieve our goals. Our end goal is to have all our plants be free cash flow generative, self sustaining and bear their fair share of our overhead burden. And where we are today and progress we've made we're happy with it. We have a new ABL in place and a term loan process underway that that Chris will give an update on.

And a big deal is to correct our dilutive NN which are being fixed or closed and Tim will give an update on that. All of it is geared to getting our EBITDA margins up and we're tracking to that NN we're going to give NN an update on the fourth quarter of last year and on the full year and our outlook for this year.

We've closed two plants. We're in the process of closing two plants and we have one underway at this point in time. So overall, we're happy with the our first full year and our five year plan and we're recommitting to it. If you turn to Page six, this is a format we've been using to track our transformation plan And this year will be another formative year for us Through the first six quarters of us being here, We think we're around 60% complete. This is judgment NN of where we think we are. And our new leadership team is about 80% complete as I mentioned. We still need a couple of people in a couple of the new areas that we're trying to grow more quickly NN. Primarily non automotive. And the fixing of our unprofitable parts of our business is around 60 complete You can see on the graphic here on Page [indiscernible] what our EBITDA has been doing at those those plants that were underperforming NN all of them are planning on making money this year.

And '25 which is a remarkable turnaround in a short amount of time 'twenty three NN this year's outlook. So we're pleased with it. We had to shed a little bit of NN, which Chris will bridge for you. So the goal is to drive up our gross margins. And we have been doing that. We have a long term goal of 20%, so we have more work to do. On our balance sheet, we started working on that last year we previously reported that we had to part ways with our [indiscernible] and we pretty much Chris and I pretty much took this NN our own on our own NN we did the ABL and now we're underway with And we're also underlook way with putting China on their own. And that's all tracking very well. [indiscernible] the last piece is growing sales. Year over year to win enough business so that we have a natural growing company and we're starting to get tailwinds now. We have some of the business that we've won is now launching and going into our run rate. So overall, we believe that our transformation is is on track.

On the next page, we got a request to kind of go into a little bit more detail about the plants that were underperforming and what have we done and what's in front of us. And I'd like Tim French, our Chief Operating Officer, who's led that initiative start to NN. I'd like Tim to give an update to the group, please.

Thank you, Harold. Good morning, everyone. As Harold said, I'll talk to Slide seven NN. For those of you that have followed our progress, you'll be familiar with the term group of seven NN. These facilities are responsible for $113,000,000 of revenue and negative $11,500,000 of adjusted EBITDA in 2023 Other locations are listed on the slide being shown. Addition to the four financial performance, they were negatively impacting our customer relationships because each of them had significant past due back NN it was giving us unfavorable customer ratings and scorecards, which was impacting our ability to grow commercially. Over the last six quarters, we've intensely focused our efforts on improving their performance in these facilities. After an in-depth analysis, we decided to shed portions of the business that decided were determined were unprofitable as well as close to facilities Dujajiac, Michigan and Juarez, Mexico. Both of these facilities are in the NN Division. NN has been transferred to other locations This required us to gain approval from the customer We had to build and manage inventory banks to service the businesses while we removed NN NN PPAP the equipment in the alternative facility. Production has concluded in Juarez NN we are on track to have the washout closed in Q2 NN.

The remaining five facilities we NN on to leadership and staff, improvements in engineering NN, We implemented functional KPI trackers as well as NN focus on customer pricing, service and interaction. As a result, we now have green scorecards with all our customers and that's a big help when it comes to securing new business wins, it's really benefiting our commercial team. These actions over the last six quarters have been extremely successful. In 2024, the facilities went from losing about $12,000,000 of adjusted dollars of adjusted EBITDA to losing just 900,000 That's inclusive of the closures. Our operational transformation plan is working.

It's worth noting that looking forward to 2025, as Harold previously stated, every remaining facility is expected to be adjusted EBITDA positive with the group having [indiscernible] We're pretty happy with this result, but we still need to focus on improving free cash flow. Specifically in two facilities. Our NN France facility has been awarded new business So once the SOP is completed, the facility will be operating at very close to capacity. Will stabilize the standalone profitability and free cash flow. While we're pleased with our early success in transforming underperforming facilities, we're not stopping or slowing our efforts. We're not done. Each of these facilities is part of a larger continuous improvement program. Harold mentioned earlier that will deliver consistent enhancements to our economic competitiveness.

Additionally, we have identified one more facility for closure, which we NN to give NN the lease expires in 2026 NN. All in all, we're very happy with the improvements we've seen to the group of seven NN we're excited about what we can do going [indiscernible] With that, I'll turn it over to Chris to walk through our financial performance in more detail. Chris? Thank you, Tim. NN morning, everyone. Today, I'll be presenting information on both a GAAP and a pro form a basis.

In the third quarter of twenty twenty four to give a better representation and depiction of our financial and operating results after the sale of our Lubbock facility this past July.

We also have other adjustments that we arrived in what we consider to be our ongoing NN. Detailed the adjustments made that translate our GAAP and non GAAP reporting to our pro form a results in the appendix of the presentation. Today, I'll start on Slide eight NN I'll detail our consolidated results for the fourth quarter Starting with our as reported NN, fourth quarter net sales came in at 106,500,000.0 reflecting about a 5% decline compared to Q4 of last year. While the top line was impacted by the sale of our Lubbock facility, and strategically rationalized sales volumes, we continue to drive strong margin expansion and improved profitability as noted on the slide. Net operating loss of $1,400,000 Adjusted EBITDA grew to $12,100,000 a 21% increase from the $10,000,000 delivered in Q4 of twenty twenty three. This performance underscores our commitment to operational efficiencies and disciplined cost management, allowing us to improve profitability a dynamic macro environment despite the lower sales. Now shifting to our pro form a results on the right hand side. Which adjusts for key items NN the sale of the Lubbock facility, rationalized volume, foreign exchange impacts which we NN in the table at the center of the page, on a pro form a basis, net sales of $106,500,000 reflected a 2% increase compared to Q4 of 'twenty three.

On a pro form a basis, fourth quarter adjusted operating income was $2,400,000 an improvement of $3,900,000 compared to the fourth quarter last year. On a pro form a basis adjusted EBITDA grew to $12,100,000 up 25% year over year. These results highlight the strengthening of our underlying operations and our ability to drive margin expansion through diligent costs and operating efficiency initiatives. Now turning to Slide nine, we detail our consolidated results for the full year. For the full year, we reported net sales of $464,300,000 declining 5% compared to 2023 NN. This year over year decline was driven by the sale of our Lubbock facility the impact of our strategic volume rationalization, a one time customer settlement in the prior year and foreign exchange impacts. Despite this top line compression, our focus on operational improvements allowed us to expand profitability and deliver solid adjusted returns. To 48,300,000.0 marking a 12% increase year over year. And adjusted EBITDA margin expanded by 160 basis points to 10.4% up from 8.8% last year. Moving NN to our pro form a pro form a NN, controlling largely for the same one time items we detailed earlier, net sales of $464,300,000 were largely flat to the full year 2023 NN, declining less than $1,000,000 or 0.2% NN.

Pro form a adjusted operating income was $5,100,000 a 28% compared to the prior year Adjusted EBITDA on a pro form a basis was $48,300,000 up 13% versus 2023 NN. And adjusted EBITDA margin expanded 120 basis points to 10.4% from 9.2% last year. The pro form a results provide a view of our ongoing business and operational momentum which has had a strong positive effect on our profitability. As evidenced by solid adjusted operating income and adjusted EBITDA results on what was essentially flat revenues. Looking ahead, we expect the elimination of profit dilutive sales volumes NN will further enhance Our operating income and adjusted EBITDA grow margins and provide incremental fixed cost leverage. I'll now turn to our segment results starting with our Power Solutions segment on Slide 10 NN. Fourth quarter as reported net sales were $39,200,000 compared to $43,400,000 in the prior year. The decline was primarily driven by the sale of our Lubbock facility, On a pro form a basis, quarterly revenue increased slightly by $900,000 or 2% NN. Power Solutions adjusted EBITDA in the fourth quarter was $5,600,000 down slightly compared to $6,600,000 in last year's fourth quarter again primarily due to the sale of the Lubbock facility.

On a pro form a basis, prior year adjusted EBITDA was $5,900,000 compared to 5,600,000.0 On a full year basis, Power Solutions net sales totaled $180,500,000 down slightly from $185,900,000 in the prior year again due to the sale of Lubbock. On a pro form a basis, full year revenue increased by $8,700,000 or 5% NN. For the full year Power Solutions adjusted EBITDA increased to 29,200,000.0 up from $28,300,000 in the prior year with NN expanding to 16.2% On a pro form a basis, Power Solutions adjusted EBITDA grew from $26,000,000 to $29,000,000 an 11.5% increase year over year. NN turning to Slide 11 NN, I'll highlight some of our financial metrics in the Mobile Solutions segment. Revenue for the fourth quarter was $67,400,000 compared to $69,200,000 in Q4 of the prior year. A decline of just over 2% NN. The slight decline was primarily driven by foreign which nearly offset the volume increases of $1,700,000 Pricing impacts also contributed to the slight reduction in revenue Further, the decline in fourth quarter net sales was impacted by $1,500,000 of unprofitable business that we exited. Adjusted EBITDA for the fourth quarter was $10,000,000 marking a strong increase from the $7,100,000 delivered in the prior year period.

Adjusted EBITDA margin expanded to 14.8%, up three fifty basis points from the 10.3% in the fourth quarter of twenty twenty three NN. The increase in adjusted EBITDA and margin growth reflects the benefits of our sales volume rationalization and our actions to improve our cost structure and product For the full year 2024 NN, Mobile Solutions revenue was 283,900,000.0 down from $303,300,000 in fiscal twenty twenty three. The decrease was primarily due to the strategic exit of unprofitable business which impacted sales by NN as well as a one time customer settlement in 2023 and unfavorable foreign exchange impacts of $3,300,000 However, this was partially offset by $9,600,000 of growth from our China operations, which NN to see increasing demand throughout the year. On a pro form a basis, full year revenue decreased by $6,400,000 or 2.2% NN. Adjusted EBITDA for the full year grew to $35,600,000 up more than 19% from $29,800,000 in full year 2023 NN margins improving by two seventy basis points to 12.5% NN, Similar to the fourth quarter, adjusted EBITDA results reflect the benefit of our cost out actions and the impact of our strategic exit from unprofitable business. As a reminder, our goal was to achieve a minimum 10% adjusted EBITDA margin in the North American Mobile Solutions business NN tracking towards that and beating that in several quarters.

Beyond our initial goals as we execute our transformation. Please turn to Slide 12, where I'll provide an update on our ongoing balance sheet improvements, which Harold mentioned earlier. As previously mentioned, we made progress on improving our balance sheet having executed our refinancing of our ABL year end 2024 NN. Our focus is now on refinancing our term loan, which is well underway First, as we navigate through the process with our lenders, our refinancing goals are centered on enhancing operational flexibility, by securing improved loan terms and a more favorable structure achieving a cost of capital that helps us execute the transformation and deliver our full potential. Lowering our overall cost of capital, we aimed create additional financial capacity that will allow us to potentially pursue strategic M and A opportunities alongside our organic growth opportunities, once the timing is appropriate. Second, we rebooted the term loan process in late twenty twenty four after completing the ABL. And after parting ways with our investment banking NN, relaunching the term loan refinancing effort to take advantage of a solid pool of interested lenders and potential financing options. Since then, we've made significant progress We expect to conclude this process sometime in the first half of this year.

Finally, we view these efforts as part of a broader holistic strategy to position our balance sheet for transformation and optimization. An improved capital structure will allow us to continue deleveraging while also creating value for our equity holders. We remain committed to paying down debt and we'll continue to evaluate potential modifications to our preferred equity structure as we move forward over time. Please turn to Slide 13 NN I'll talk briefly about our outlook for 2025. As a NN, for the full year of 2025 NN, we're projecting net sales in the range of $450,000,000 to $480,000,000 adjusted EBITDA in the range of $53,000,000 to $63,000,000 and new business wins of approximately $65,000,000 at the midpoint. These ranges assume our key markets and currencies remain stable and aligned nearly with 2024 levels. We note that the global markets are experiencing significant volatility as a downstream impact of a fluid and shifting international trade policy current market conditions if they hold similarly would likely drive our results to the lower half of our NN. We note that is a very early in the year and these factors remain very unpredictable and subject to NN. We face the same variable conditions as the rest of the market NN external environment will not cause us to deviate from the central elements of our transformation plan.

Thank you. And with that, I'll turn the call back over to the operator for questions. Operator? Thank you very much.

We will now begin the question and answer session NN. Today's first question comes from Joe Gomes with Noble Capital. Please go ahead. Good morning. Thanks for taking my questions. Good morning, Joe NN. So I wanted to start out with the turnaround of the Group of Seven NN. Just guys have done tremendous job in my view there. NN just kind of looking at the $25,000,000 NN, are you talking about EBITDA of $5,100,000 sales of roughly $75,000,000 which kind of translates into roughly a 7% adjusted EBITDA margin almost 16% of your revenue. So kind of the question is, one, do you think you can get that EBITDA margin at those plants up to the 10% level where you currently are overall. And if you were to do able to do that, how high does that take the adjusted EBITDA margin for the in the entire company?

Yes. It's two part two, Chris, I NN, I'll start, okay. For us, those plants, Joe, have a decent amount of open capacity. And so There's cost and revenue fixes here. We have good NN. In the process of these plant closures, we've upgraded some of the equipment in the other plants by relocating equipment and we've discarded some of the older NN. So we're able to compete [indiscernible] with better equipment out of those locations NN we've built up the business development profiles size of the opportunities that we're tracking for those plants. So a part of the go forward kind of optimization has to do with NN. And getting our revenue up. Our looks are increasing slightly with the reshoring that's been happening with the tariffs and all the activities. One of the facts, Joe, is NN the first quarter here, where we are launching Is it 11 programs Tim that's reshoring from China to The U. S? NN. Yes, it is. So we have 11 discrete programs that we've secured that have moved from China to U. S. Soil and those are going to all help. So part of its revenue And Tim, I'll hand it over to you to give your $0.02 Yes.

I think one of the key things to keep in mind is financial performance of the Group of seven was really what showed through. But if you look at one of the underlying causes of it was the significant past due backlog and NN put us in a very bad position with a lot of our existing customers. And it basically rendered those facilities almost unsellable with our existing customer base. Because we didn't have the favorable scorecard. So now that we've been able to eliminate the significant backlogs and have green scorecards of customers, our commercial teams are now able to effectively sell for that group. So what Harold was saying is exactly where I was going with that is although there's still room for some more operational improvements, The next phase shift for those facilities is additional volume, which now we've we've opened the door to getting us in a favorable position with the customers.

Great. Thanks for that. I wanted to touch base also Harold, maybe give us a little kind of update [indiscernible] Components and how those businesses unfolding here. Yes.

So we have we have sub goals for medical. To win 50 NN grow that to $50,000,000 organically we're at about 20 NN now. We have about a $25,000,000 pipeline is high quality. We've been able to get become an approved supplier the first step is to become an approved supplier for the products that you're selling. And we wanted to really get into machine products and NN products And we still have a couple of big customers that we're going through approval processes with, but we're on track NN so the approval NN looking at the opportunities and then getting securing the NN, it's gradual. We have a goal this year in medical to get another $8,000,000 of NN.

And $8,000,000 a year and then we'll get to $50,000,000 So the medical is on track. We need another person just have some small things to do, but we're on track and we're now shipping medical products out of 11 NN.

That we're making medical products NN? [indiscernible] So we're shipping medical products at 11 of our plants. We've got our first medical one in Europe NN.

NN we're increasing our certifications. On stamped products, [indiscernible] it's a similar story except for where we're largely already an approved supplier. And NN so it's a matter of getting in on the action and we have pipelines for that as well. Stamps products are good for us. [indiscernible] in automotive, some people say, gee, NN Christmas, your automotive business is so capital intensive. It's really not true. The part of our company that's capital intensive is the machine part. Of auto. The stamped part of auto is just as good as the stamped part of electrical or medical. So the stamp business has a good business model. NN that the machines are ubiquitous and the customization is in the dyes and we make our own dyes. And a lot of times the customers take part in financing those dives by letting us amortize the dive back into the piece price. So we're after all things stamped, NN we have a dedicated effort there We've added some high tonnage equipment both in China and in The United States and it's expanding our aperture Couple of big products we're going after, one is Busbar NN, Busbar is a big thing for electrical grid.

And we just needed some longer [indiscernible] on our presses. So it's a gradual buildup Joe, that we're going through NN we're just trying to chop it down by the same amount of wins per year NN so far we're tracking to our goals.

Great. And one more for me, if I may, Harold. Again, kind of just wanted to get your your view, your insight here. So NN NN report came out NN Class eight truck orders down 30 some odd percent month over month, almost 40% year over year. Supposedly, people extremely concerned about tariffs You see the press reports, tariffs go through or they stay through passenger vehicle prices could go up thousands, if not tens of thousands of dollars Just trying to get your view of Your thinking around this whole thing and how any of this could potentially impact the company here? I know it's a very fluid The tariffs seem to go on one day off the next day. But just trying to get kind of what you guys are looking at things and your thoughts on that?

Yes, you're welcome. Yes, We're not tethered very much to Class eight trucks, but I'll answer your question. Our commercial vehicle business is tethered to work trucks. So our biggest engine that we're on is a 7.3 liter diesel engine at Cummins, we were tethered to the 7.2 the Ford Godzilla engine GMs, NN [indiscernible] So we're primarily a participant in Engine Parts work truck NN. But on Class A trucks, the big engines PACCAR, Volvo, Cummins NN, As the industry learned during COVID, you have to be clear to build. The vehicle. And there's something like 100,000 parts that go NN a Class eight truck and you have to have all of them. You can't just say, okay, I'm all right except for I don't have steering wheel or something. So you have to be clear to build NN the big trucks have a lot of parts NN so they're very sensitive to supply chain disruptions that like are happening right now. So NN the people that buy the trucks, the Class eight trucks are primarily NN. And they have to have a payback on the investment into the asset And if the asset goes up in price, The fleets who are the majority buyers of Class eight trucks back off because it's a bad time to buy.

So I think you have some supply and demand, a regularity in the Class eight world. We're not really participating in it. We're into the work truck, we're in delivery trucks. Delivery NN, garbage trucks, Class six and seven, not Class eight.

So our business isn't going to be impacted, Joe, but the Class eight truck NN, they have a different set of of issues to deal with.

You very much.

Welcome. The next question comes from Rob Brown with Lake Street Capital Markets. Good morning. Congratulations on all the progress. Thank you. Good morning. On your 20% long term gross margin goal, what sort of has to happen to get there from this NN? Yes. Good question. Part of it is Tim's group of seven NN group of five, soon to be group of four. So we have Tim's get rid of his problem by NN. If you're putting the math together. But NN, I'm kidding. Part of it is what's next When Joe asked the question on kind of what's next to make that Group of seven not dilutive. And it's getting our revenue up and Tim NN also sharing the overhead structures amongst the plants versus every plant has a dedicated staff to do procurement scheduling and all this. So he's implementing a shared overhead structure amongst common plants, common either because they're close to each other or common because of the type of manufacturing they do. So it's either or or both. And in the case of franchise, which Tim alluded to on his page, there the France plant isn't where we needed to be, but they've secured a very, very, very game changing win and it is already in development and ramping up that will effectively sell out the NN.

And that plant will actually go above average when they're fully onboarding that. Now that then you're down to one plant that's one large plant that's dilutive NN it's Wellington, Ohio.

And that plant we're hoping to benefit from reshoring. We have a big pipeline going into that NN. We're pretty close to having NN out the cost structure to run the plant It does make positive EBITDA, but it is dilutive to your point. NN so and that's the whole intent of our new business award program is to onboard accretive business and leverage the installed cost structure, which Chris was referring to, which we did.

In Q4 and we did in the year of NN So we have a five year plan The first year of it is kind of in the books, if you will. We tracked to what we wanted to do and we're we're on track NN it requires a little bit of patience because we have to win this business and onboard it.

And then we have in that that's France and other plants. And then in the case of Wellington, it's a special case where we're a little bit more impatient with that plant.

So how long how many years will we wait for that to play out? Not many. So that one's kind of the one that's on Tim's radar screen right now to fix. Tim, would you like to add anything to that question? NN, I think you covered it all, Harold. You hit all the key points.

Thank you. Okay.

Great. Yes, very comprehensive. Thank you. NN then on the kind of on some of the mitigation things you can do with tariffs NN as reshoring comes, how much flexibility do you have to move business sort of between your NN your international locations to The U. S. And maybe vice versa adjusting these tariffs or this business around to deal with the tariffs or is that a longer process?

Well, the biggest part of our company this impacted by the tariffs is it's a concern to understand as our automotive parts It doesn't impact our power, it doesn't impact our medical. We don't have any of the issues any cross border issues The automotive part is very, very slow because you have to go through a PPAP and product safety process. We're tied into steering. And braking and those require the OE to go through Any substitutions require the OE to go through crash tests is pretty significant cost for the vehicle makers do it. They avoid it like a plague. So once you're kind of locked into a system, there's a high resistance to change.

So in the short term, It's mainly people that are taking the initiative to move and re short. The awards that we're we are ramping up right now that I referred to earlier, won those in the fall. By a proactive Tier one maker of fuel systems for medium duty sports cars, excuse me, medium volume sports cars and NN they're going through the long term cost of doing it and they just decided to simplify their supply chain because they're customers were on U. S. Soil.

So we really don't see a lot and you have direct and indirect impacts of the tariffs. So the direct impact our direct impacts are minimal on our cost structure and minimal in terms of our pipeline. The indirect costs are what happens to the volumes at the OE if they're clear to build on vehicles or not. That can impact kind of everybody's NN. We won't be a problem for anyone but if NN a problem that causes the OE to be have a problem of being clear to build on their build materials.

So we haven't heard anything yet. NN one's really doing anything quickly right now. It's not a quick and there's a lot of flip flopping in the papers, including last night with the big three. Where President Trump gave them another reprieve. And that's the majority of our exposure. So nothing major happening right now. [indiscernible] are minimal and it can only be minimal because of our supply chain And then the indirect exposure we have is just industry based NN that's also minimal right now as well. It will probably change today, so I should probably date and time stamp my NN, but it's a really fluid topic.

Okay, great. Thanks for that answer. The last NN, I guess, is on the power Yes. So we expect to have an up year in power The Electrical Grid business, there are reporters there the people that speak clearly are Eton and Honeywell NN Itron Group Schneider NN, The electrical grid demand is still strong. With data centers infrastructure NN, the whole AI data center thing is putting a lot of strain on the grid.

And the need to control the grid and also the EVs, even though EVs are kind of plateauing, any EV if a person on a street buys an EV, the transformer for that street has to be upgraded. And so there's the grid wasn't installed with these type of NN. So our business is still very strong We're primarily Grid Edge So we're in the distribution we're in the circuit breaker panels, we're in the meters, we're on the grid edge, NN business is strong NN we've increased our capacity to make those products and we have a decent amount of new wins in that business as well. So the outlook for Power Solutions in 2025 is pretty strong. Thank you.

The next question comes from Mike Crawford with B. Riley. Please go ahead.

Thank you. Can you talk about your deliveries like any metrics regarding on time deliveries now versus in the past NN maybe how much that's been attributable to some of the additional wins you've been securing? Yes. Good morning, Mike. Tim, will you take that one NN?

Sure. We don't track on time and in full in the standard process. Like quoting it as a percentage. But what I can tell you is we track past due backlogs And we have dropped our past due backlog significantly not just in the group of seven, but across the board. So that's what has allowed us to get the green scorecards from the favorable ratings from all of our customers now as we've been able to move that forward And past due backlogs would be an indication of of an on time and in full or a delivery metric. We are in the process of implementing NN on time and in full metric, but at this point, we don't track it in that format. And have you seen a correlation between where you've reduced those past due backlogs and seen an increase in new order wins or is that more? Yes. Oh, definitely. Definitely seen a correlation even in facilities that aren't in part of the group of seven NN. We've seen new business wins because when you're not at when you don't have a green scorecard or a favorable rating from a customer, you're basically on what's called new business hold.

And one of the contributing factors to our new business wins that we've been able to generate over over the last little while has been the fact that we're off new business goals across the board. We're able to generate new business wins with our existing customers as well as new ones.

I can help a little on the stats there. Mike.

And [indiscernible] Tim and I came in the door, we were on new business hold with almost all of our top 30 customers. And NN majority of our wins have been with them. [indiscernible] I could go right down the list. Cummins and Itron and Sensata NN, Denzo NN, all the top Tier one people we serve where we're on new business hold and came off new business hold and now secured wins with. So I think, Tim, at the highest level, the majority of our wins have come from customers where we were on the business hold. Oh, exactly. And that's the point I was attempting to make is that by getting off new business hold, it NN the door. For us to start NN again.

Okay. Great. Thank you. And then just to [indiscernible] NN. Your China JV, I think the vast majority of what is made there goes to customers where their end products stay in China. But I think we're also seeing some of those products now being shipped to other markets that the China Africa or Brazil or Europe, but there a breakdown between what stays in China and what might be exported out of China, but not to The U. S. Yes. So there's there's movement on that topic, Mike. The JV that we have with Wafu, which is $130,000,000 revenue profitable JV, which makes components that go into hybrid and ICE vehicles largest the largest in customer for the output of that JV is BYD. NN instance, And to your point, BYD ships their systems and then does final assembly in many countries around the world. They're the big one doing that. Geely does a little bit of it in Europe NN. And Great Wall.

But if you look at the top 10 China OEs a few of them are the guys that are driving the export market and I would say your comment is true. [indiscernible] our parts are ending up getting exported out of the country now. And as there's rebalancing between Europe and China leaving The U. S. Out of it.

The European Tier 1s are seeing that their China operations are much more competitive than the European plants.

So we see them shifting load to China to make braking systems, steering systems, these NN of things in China versus making them for instance in Germany. And so the loads on automotive part making in China are just going through the roof We are at capacity in the JV. We are at capacity in our wholly owned foreign entity and we're adding capacity in both areas The costs are globally NN. They're the lowest cost at what they do.

So we see demand coming to both operations. They're very profitable for us as well.

Great. Thank you very much. Welcome, Mike. The next question comes from NN Franzreb with Sidoti and Company.

Good morning, everyone. Thanks for taking the questions. I'd like to start with the new business wins. Are they being written at that 20% NN? Are they approaching that 20% threshold? You're talking the gross margins, John NN? Yes, sir. Yes, sir. They're being written above that. We have some floors and caps and we also look at ROI at CapEx is required. We have we look at the actual cost. So if we have an open machine and we're quoting open NN, and the machine's already been expensed into other business and so is the overhead and all that.

We just look at the variable costs that are associated with it. If we have to add a shift or add supervision NN, it varies that cost. And if we have to add equipment, it has to carry that cost. So we have three tiered pricing, three tiered pricing. And in all cases, the bottom is 25% NN. NN then on ROIs, it's also the bottom of 25% NN spending is needed. Most of it is above that. And we price as much as we can get We don't do cost based pricing. We look at what we think the market will bear NN then we look at our cost structure and see what the NN be The new wins that we got, we got $73,000,000 NN new wins last year, but we also walked away from about $340,000,000 of quotes that we made and we primarily walked away from them because of their NN. And probably the biggest opportunity we had It might be the biggest opportunity we had in the fourth quarter. We walked away from it because the ROI wasn't there. So we are cherry picking NN a big part NN question was asked earlier too, a big part of getting our gross margins up is the contribution of the new business.

NN Will, we'll report more clearly on it in the future. John, I can't give you exact ratios because we haven't calculated it. Part of it's cost, Tim getting the cost NN. And part of it is the new business that we're bringing NN. What Chris, what would you guess half and half?

Yes, roughly, Harold, about half and NN. That's good color, Harold.

And just I might have missed this Regarding the timeline of the plant closings, have you kind of disclosed that? And are those facilities owned or leased? Will they be asset sales in the future?

Yes. Tim, you want to take that?

Yes. We've got a leased facility in Juarez. We've stopped production NN Production has ended in that facility, but we still have people prepping the building and packaging machinery for relocation NN. Duodjiak is an owned facility. That currently is listed for sale.

It should be it should cease operation in early Q2.

Is the current estimate.

NN. Thank you, The other plant, John, that we mentioned we're going to close. We haven't said the name of the plant because people in the plant don't know it. As we reported earlier, that was leased.

Yes. Okay, got it. I guess one last question regarding the balance sheet.

NN update on the timing the refinancing of the term loan and any updated thoughts on the preferred Yes, Chris? Yes. NN in the middle of the refinance. As I mentioned, we're we're expecting to get it done in this first half of the year. We had quite a bit of interest once we once Harold and I rebooted everything. And so we got a lot of different options on the refinance, John NN. So we took a look at those options and narrowed it down and we're very pleased where we're heading right now. NN a lot to report on the pref yet, but NN it's on our radar screen and we'll take a look at that as part of the kind of third step in our total CAP structure NN. [indiscernible] we pivoted John to China because the China receivables and China assets are pretty much disallowed to get full value for them with The U. S. Domiciled work that we were doing on the debt. And so we turned our attention to extracting cash out of the balance sheet in China and having them get set up to do their own local banking and local financing First, before we got after the preferred.

So the two big things we're working on right now are the term loan overall for the company and then getting China on their own to do their own funding and just send money back to Chris. We're trying to turn it into an ATM NN.

Fair enough, Harold. Thanks for the color. Good luck. You're welcome.

Thank you.

This concludes our question and answer session. I would now like to turn the call back over to management for closing remarks.

Thank you NN for the good questions.

Appreciate it. NN you gave us some insight NN NN how to report even better in the next time, and we look forward to reporting our progress after Q1 NN. With that, thank you, operator.

Conference has now concluded. Thank you for attending today's presentation. NN You may now disconnect your lines.