NN, Inc. Reports Fourth Quarter and Full Year 2023 Results; 2024 Guidance
- Record new business awards of $62.6 million in 2023.
- Fourth quarter net sales of $112.5 million, down 4.6% from the prior year.
- Adjusted EBITDA of $10.0 million in Q4 2023, up 28% from the previous year.
- Positive free cash flow of $1.3 million in Q4 2023.
- Full-year free cash flow generation of $11.7 million in 2023.
- 2024 outlook includes revenue range of $485 million to $510 million and adjusted EBITDA range of $47 million to $55 million.
- NN's transformation strategy is driving improved profitability and consistent free cash flow generation.
- Conference call scheduled for March 12, 2024, to discuss financial results.
- Fourth quarter net sales decreased by 4.6%.
- Net loss increased to $20.5 million in Q4 2023.
- Adjusted net loss was $4.9 million in Q4 2023.
- Full-year net sales decreased by 1.9% in 2023.
- Adjusted net loss per diluted share was $0.10 in Q4 2023.
Insights
The recent financial results from NN, Inc. show several key takeaways that are significant for investors and market analysts. Firstly, the reported record new business wins totaling $62.6 million in 2023 is a strong indicator of the company's growth trajectory and ability to secure new contracts. This is a positive sign for future revenue streams and could potentially lead to upward revisions in the company's valuation.
Secondly, the focus on free cash flow, with an increase of more than $21 million year-over-year, reflects the company's improved cash management and operational efficiency. Free cash flow is a critical metric as it shows how much cash the company is generating after accounting for capital expenditures, which can be used for paying down debt, dividends, or reinvesting in the business for further growth.
Lastly, the outlook for 2024, with revenue projections between $485 million to $510 million and adjusted EBITDA in the range of $47 million to $55 million, provides a forward-looking perspective on the company's expected performance. This guidance is essential for analysts to project future earnings and assess the company's potential in meeting those targets.
From a market perspective, the reported decline in fourth-quarter net sales by 4.6% and the overall decrease in net sales year-on-year by 1.9% may raise concerns about the company's market position and competitive dynamics. However, the increase in adjusted EBITDA margins from 6.6% to 8.9% suggests that NN, Inc. is becoming more efficient in its operations, which could offset concerns about top-line growth.
The segment performance, with Power Solutions showing improved adjusted income from operations and Mobile Solutions experiencing a reduced adjusted loss, indicates differing trends within the company's portfolio. These insights are crucial for understanding the strengths and weaknesses across the company's product lines and can inform strategic decisions on where to focus investment and improvement efforts.
Considering the broader economic context, NN, Inc.'s performance and outlook must be contextualized within the current industrial manufacturing sector and macroeconomic conditions. The mention of favorable foreign exchange effects suggests that currency movements have had an impact on the company's financials, which is a factor that can vary significantly over time and must be monitored closely.
Moreover, the company's ability to generate positive free cash flow during a period of economic uncertainty speaks to its resilience and operational agility. The management's focus on a capital efficient model and low-risk strategy to improve operations is particularly relevant in an environment where businesses are seeking to navigate inflationary pressures, supply chain disruptions and potential shifts in consumer demand.
Business transformation continues; delivering record-setting new business wins in 2023 and significantly improved free cash flow performance
Company provides sales, adjusted EBITDA, and free cash flow outlook for 2024
CHARLOTTE, N.C., March 11, 2024 (GLOBE NEWSWIRE) -- NN, Inc. (NASDAQ: NNBR), a global diversified industrial company that engineers and manufactures high-precision components and assemblies, today reported its financial results for the fourth quarter ended December 31, 2023.
Financial and Strategic Highlights
- Displayed strong execution against the Company’s multi-year transformation plan, driving positive inflection in financial and operating results in the second half of the year;
- Delivered company record for new business awards of
$62.6 million in 2023; - Launched multiple long-term strategic initiatives to drive increased sales, increased profits, enhanced cash flows, and increased shareholder value;
- Generated positive free cash flow in 2023 with enhanced organization-wide focus driving step change in cash flow performance in the second half of the year;
- Fourth quarter net sales of
$112.5 million , down4.6% versus prior year; - Fourth quarter operating loss of
$7.9 million , improved by$3.1 million versus prior year; - Fourth quarter adjusted EBITDA of
$10.0 million up28% versus prior year; and - Fourth quarter free cash flow of
$1.3 million , down$5.1 million versus prior year.
“Our fourth quarter results capped off a transformative year for NN Inc., a year in which we realigned our commercial and operational strategies to deliver improved returns and to better position the company for both short-term and long-term success,” said Harold Bevis, President and Chief Executive Officer. “In 2023, we launched a multi-year transformation and our revamped leadership team’s aggressive redirected approach is already making a clear impact on our financial and operational results, as evidenced by the strengthening of our margins, improved free cash flow performance, and accelerating sales growth. Additionally, we reset the bar on customer performance and already we are performing better with our customers. This is a tried and true path to future business expansion. We are really proud of our global team and our JV business as we are working as one team to reestablish leadership positions in multiple areas.”
Bevis continued, “For the full year, we delivered approximately
Bevis concluded, “Our organization-wide commitment to our transformation into a profitable, growing company is working and gaining momentum, and we are expecting 2024 to continue to demonstrate progress reflected by improved results on new business wins, profitability, free cash flow, and customer service. Our capital efficient model and low-risk strategy to structurally improve our operations will prove critical in lowering risk for our company. These efforts will ultimately help optimize our balance sheet. While we are encouraged by the early success across our transformation efforts, our improvements are just beginning. We remain committed to advancing and expanding our progress as we move forward. Our decisive actions are taking hold and I would like to thank all our NN team globally, whose dedication and hard work are driving our transformation.”
Fourth Quarter GAAP Results
Net sales were
Loss from operations was
Income from operations for Power Solutions was
Net loss was
Fourth Quarter Adjusted Results
Adjusted loss from operations for the fourth quarter of 2023 was
Free cash flow was a generation of cash of
Power Solutions
Net sales for the fourth quarter of 2023 were
Mobile Solutions
Net sales for the fourth quarter of 2023 were
Full Year Results
Net sales decreased
GAAP operating loss increased to
On an adjusted basis, income from operations for 2023 was
Power Solutions
Net sales for 2023 were
Mobile Solutions
Net sales for 2023 were
2024 Outlook
Assuming a steady end-market demand outlook with the exception of the North America commercial vehicle market, the Company has provided a ranged outlook for the full year 2024 as follows:
- Revenue in the range of
$485 million to$510 million ; - Adjusted EBITDA in the range of
$47 million to$55 million ; - Free cash flow in the range of
$10 million to$15 million ; - New business wins in the range of
$55 million to$70 million ; and - Net leverage below 3.0x.
Michael Felcher, Senior Vice President and Chief Financial Officer, commented, “Our transformation strategy is working, and our 2024 Outlook reflects improved profitability and consistent free cash flow generation in a stable and consistent demand environment. We are also focused on improving our leverage and other actions to position us to be ready to refinance in a favorable market environment.”
Conference Call
NN will discuss its results during its quarterly investor conference call on March 12, 2024, at 9:00 a.m. ET. The call and supplemental presentation may be accessed via NN's website, www.nninc.com. The conference call can also be accessed by dialing 1-877-255-4315 or 1-412-317-6579. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call until March 12, 2025.
NN discloses in this press release the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow. Each of these non-GAAP financial measures provides supplementary information about the impacts of restructuring and integration expense, acquisition and transition expenses, foreign exchange impacts on inter-company loans, amortization of intangibles and deferred financing costs, and other non-operating impacts on our business.
The financial tables found later in this press release include a reconciliation of adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per diluted share, free cash flow to the U.S. GAAP financial measures of income (loss) from operations, net income (loss), net income (loss) per diluted common share, and cash provided (used) by operating activities.
About NN, Inc.
NN, Inc., a global diversified industrial company, combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of markets on a global basis. Headquartered in Charlotte, North Carolina, NN has facilities in North America, Europe, South America, and Asia. For more information about the company and its products, please visit www.nninc.com.
Except for specific historical information, many of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to NN, Inc. (the “Company”) based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. Forward-looking statements involve a number of risks and uncertainties that are outside of management’s control and that may cause actual results to be materially different from such forward-looking statements. Such factors include, among others, general economic conditions and economic conditions in the industrial sector; the impacts of pandemics, epidemics, disease outbreaks and other public health crises, on our financial condition, business operations and liquidity; competitive influences; risks that current customers will commence or increase captive production; risks of capacity underutilization; quality issues; material changes in the costs and availability of raw materials; economic, social, political and geopolitical instability, military conflict, currency fluctuation, and other risks of doing business outside of the United States; inflationary pressures and changes in the cost or availability of materials, supply chain shortages and disruptions, the availability of labor and labor disruptions along the supply chain; our dependence on certain major customers, some of whom are not parties to long-term agreements (and/or are terminable on short notice); the impact of acquisitions and divestitures, as well as expansion of end markets and product offerings; our ability to hire or retain key personnel; the level of our indebtedness; the restrictions contained in our debt agreements; our ability to obtain financing at favorable rates, if at all, and to refinance existing debt as it matures; new laws and governmental regulations; the impact of climate change on our operations; and cyber liability or potential liability for breaches of our or our service providers’ information technology systems or business operations disruptions. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s filings made with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date of this press release, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. The Company qualifies all forward-looking statements by these cautionary statements.
With respect to any non-GAAP financial measures included in the following document, the accompanying information required by SEC Regulation G can be found in the back of this document or in the “Investors” section of the Company’s web site, www.nninc.com, under the heading “News & Events” and subheading “Presentations.”
Investor & Media Contacts:
Joe Caminiti or Stephen Poe, Investors
Tim Peters, Media
NNBR@alpha-ir.com
312-445-2870
Financial Tables Follow
| NN, Inc. | |||||||||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| (in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net sales | $ | 112,533 | $ | 118,012 | $ | 489,270 | $ | 498,738 | |||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 98,527 | 104,605 | 419,175 | 421,105 | |||||||||||
| Selling, general, and administrative expense | 11,603 | 11,182 | 47,436 | 49,635 | |||||||||||
| Depreciation and amortization | 11,477 | 13,269 | 46,120 | 47,231 | |||||||||||
| Other operating expense (income), net | (1,131 | ) | (3 | ) | (1,657 | ) | 1,859 | ||||||||
| Loss from operations | (7,943 | ) | (11,041 | ) | (21,804 | ) | (21,092 | ) | |||||||
| Interest expense | 5,653 | 4,368 | 21,137 | 15,041 | |||||||||||
| Other expense (income), net | 8,760 | (845 | ) | 10,730 | (5,064 | ) | |||||||||
| Loss before provision for income taxes and share of net income from joint venture | (22,356 | ) | (14,564 | ) | (53,671 | ) | (31,069 | ) | |||||||
| Provision for income taxes | (904 | ) | (107 | ) | (2,285 | ) | (1,621 | ) | |||||||
| Share of net income from joint venture | 2,719 | 2,657 | 5,806 | 6,592 | |||||||||||
| Net loss | $ | (20,541 | ) | $ | (12,014 | ) | $ | (50,150 | ) | $ | (26,098 | ) | |||
| Other comprehensive income (loss): | |||||||||||||||
| Foreign currency transaction gain (loss) | 5,016 | 5,387 | 1,410 | (8,156 | ) | ||||||||||
| Interest rate swap: | |||||||||||||||
| Change in fair value, net of tax | — | 894 | (230 | ) | 3,358 | ||||||||||
| Reclassification adjustments included in net loss, net of tax | (449 | ) | (369 | ) | (1,815 | ) | (420 | ) | |||||||
| Other comprehensive income (loss) | $ | 4,567 | $ | 5,912 | $ | (635 | ) | $ | (5,218 | ) | |||||
| Comprehensive loss | $ | (15,974 | ) | $ | (6,102 | ) | $ | (50,785 | ) | $ | (31,316 | ) | |||
| Basic and diluted net loss per share | $ | (0.50 | ) | $ | (0.33 | ) | $ | (1.35 | ) | $ | (0.83 | ) | |||
| Shares used to calculate basic and diluted net loss per share | 47,709 | 44,708 | 46,738 | 44,680 | |||||||||||
| NN, Inc. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (Unaudited) | |||||||
| (in thousands, except per share data) | December 31, 2023 | December 31, 2022 | |||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 21,903 | $ | 12,808 | |||
| Accounts receivable, net | 65,545 | 74,129 | |||||
| Inventories | 71,563 | 80,682 | |||||
| Income tax receivable | 11,885 | 12,164 | |||||
| Prepaid assets | 2,464 | 2,794 | |||||
| Other current assets | 9,194 | 9,123 | |||||
| Total current assets | 182,554 | 191,700 | |||||
| Property, plant and equipment, net | 185,812 | 197,637 | |||||
| Operating lease right-of-use assets | 43,357 | 46,713 | |||||
| Intangible assets, net | 58,724 | 72,891 | |||||
| Investment in joint venture | 32,701 | 31,802 | |||||
| Deferred tax assets | 734 | 102 | |||||
| Other non-current assets | 7,003 | 5,282 | |||||
| Total assets | $ | 510,885 | $ | 546,127 | |||
| Liabilities, Preferred Stock, and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 45,480 | $ | 45,871 | |||
| Accrued salaries, wages and benefits | 15,464 | 11,671 | |||||
| Income tax payable | 524 | 926 | |||||
| Short-term debt and current maturities of long-term debt | 3,910 | 3,321 | |||||
| Current portion of operating lease liabilities | 5,735 | 5,294 | |||||
| Other current liabilities | 10,506 | 11,723 | |||||
| Total current liabilities | 81,619 | 78,806 | |||||
| Deferred tax liabilities | 4,988 | 5,596 | |||||
| Long-term debt, net of current maturities | 149,369 | 149,389 | |||||
| Operating lease liabilities, net of current portion | 47,281 | 51,411 | |||||
| Other non-current liabilities | 24,827 | 9,960 | |||||
| Total liabilities | 308,084 | 295,162 | |||||
| Commitments and contingencies | |||||||
| Series D perpetual preferred stock | 77,799 | 64,701 | |||||
| Stockholders' equity: | |||||||
| Common stock | 473 | 439 | |||||
| Additional paid-in capital | 457,632 | 468,143 | |||||
| Accumulated deficit | (295,348 | ) | (245,198 | ) | |||
| Accumulated other comprehensive loss | (37,755 | ) | (37,120 | ) | |||
| Total stockholders’ equity | 125,002 | 186,264 | |||||
| Total liabilities, preferred stock, and stockholders’ equity | $ | 510,885 | $ | 546,127 | |||
| NN, Inc. | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (Unaudited) | |||||||
| Year Ended December 31, | |||||||
| (in thousands) | 2023 | 2022 | |||||
| Cash flows from operating activities | |||||||
| Net loss | $ | (50,150 | ) | $ | (26,098 | ) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 46,120 | 47,231 | |||||
| Amortization of debt issuance costs and discount | 1,941 | 1,361 | |||||
| Paid-in-kind interest | 2,239 | — | |||||
| Total derivative loss (gain), net of cash settlements | 11,933 | (5,265 | ) | ||||
| Share of net income from joint venture, net of cash dividends received | (1,868 | ) | (347 | ) | |||
| Share-based compensation expense | 2,821 | 4,377 | |||||
| Deferred income taxes | (1,273 | ) | (1,814 | ) | |||
| Other | (785 | ) | (3,207 | ) | |||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 9,087 | (4,920 | ) | ||||
| Inventories | 9,997 | (6,672 | ) | ||||
| Accounts payable | 1,142 | 8,619 | |||||
| Income taxes receivable and payable, net | (89 | ) | (1,457 | ) | |||
| Other | (1,771 | ) | (4,091 | ) | |||
| Net cash provided by operating activities | 29,344 | 7,717 | |||||
| Cash flows from investing activities | |||||||
| Acquisition of property, plant and equipment | (20,496 | ) | (17,952 | ) | |||
| Proceeds from sale of property, plant, and equipment | 2,898 | 460 | |||||
| Net cash used in investing activities | (17,598 | ) | (17,492 | ) | |||
| Cash flows from financing activities | |||||||
| Proceeds from long-term debt | 61,000 | 46,000 | |||||
| Repayments of long-term debt | (65,395 | ) | (47,958 | ) | |||
| Cash paid for debt issuance costs | (169 | ) | (136 | ) | |||
| Proceeds from short-term debt | 3,648 | — | |||||
| Other | (1,967 | ) | (3,092 | ) | |||
| Net cash used in financing activities | (2,883 | ) | (5,186 | ) | |||
| Effect of exchange rate changes on cash flows | 232 | (887 | ) | ||||
| Net change in cash and cash equivalents | 9,095 | (15,848 | ) | ||||
| Cash and cash equivalents at beginning of year | 12,808 | 28,656 | |||||
| Cash and cash equivalents at end of year | $ | 21,903 | $ | 12,808 | |||
| Reconciliation of GAAP Income (Loss) from Operations to Non-GAAP Adjusted Income (Loss) from Operations | |||||||
| (in thousands) | Three Months Ended December 31, | ||||||
| NN, Inc. Consolidated | 2023 | 2022 | |||||
| GAAP loss from operations | $ | (7,943 | ) | $ | (11,041 | ) | |
| Professional fees | 225 | 382 | |||||
| Personnel costs (1) | 1,175 | 902 | |||||
| Facility costs (2) | 1,617 | 1,405 | |||||
| Amortization of intangibles | 3,478 | 5,067 | |||||
| Non-GAAP adjusted loss from operations (a) | $ | (1,448 | ) | $ | (3,285 | ) | |
| Non-GAAP adjusted operating margin (3) | (1.3 | )% | (2.8 | )% | |||
| GAAP net sales | $ | 112,533 | $ | 118,012 | |||
| (in thousands) | Three Months Ended December 31, | ||||||
| Power Solutions | 2023 | 2022 | |||||
| GAAP income (loss) from operations | $ | 2,830 | $ | (840 | ) | ||
| Professional fees | 63 | — | |||||
| Personnel costs (1) | 82 | 590 | |||||
| Facility costs (2) | 141 | 506 | |||||
| Amortization of intangibles | 2,640 | 4,229 | |||||
| Non-GAAP adjusted income from operations (a) | $ | 5,756 | $ | 4,485 | |||
| Non-GAAP adjusted operating margin (3) | 13.3 | % | 9.0 | % | |||
| GAAP net sales | $ | 43,330 | $ | 50,020 | |||
| (in thousands) | Three Months Ended December 31, | ||||||
| Mobile Solutions | 2023 | 2022 | |||||
| GAAP loss from operations | $ | (5,686 | ) | $ | (5,389 | ) | |
| Personnel costs (1) | 1,091 | — | |||||
| Facility costs (2) | 1,476 | 899 | |||||
| Amortization of intangibles | 838 | 838 | |||||
| Non-GAAP adjusted loss from operations (a) | $ | (2,281 | ) | $ | (3,652 | ) | |
| Share of net income from joint venture | 2,719 | 2,657 | |||||
| Non-GAAP adjusted income (loss) from operations with JV (a) | $ | 438 | $ | (995 | ) | ||
| Non-GAAP adjusted operating margin (3) | 0.6 | % | (1.5 | )% | |||
| GAAP net sales | $ | 69,203 | $ | 67,994 | |||
| (in thousands) | Three Months Ended December 31, | |||||
| Elimination | 2023 | 2022 | ||||
| GAAP net sales | $ | — | $ | (2 | ) | |
(1) Personnel costs include recruitment, retention, relocation, and severance costs
(2) Facility costs include costs of opening / closing facilities and relocation / exit of manufacturing operations
(3) Non-GAAP adjusted operating margin = Non-GAAP adjusted income (loss) from operations / GAAP net sales
| Reconciliation of GAAP Income (Loss) from Operations to Non-GAAP Adjusted Income (Loss) from Operations | |||||||
| (in thousands) | Year Ended December 31, | ||||||
| NN, Inc. Consolidated | 2023 | 2022 | |||||
| GAAP loss from operations | (21,804 | ) | (21,092 | ) | |||
| Litigation / settlement costs | — | 1,850 | |||||
| Professional fees | 640 | 1,607 | |||||
| Personnel costs (1) | 2,857 | 945 | |||||
| Facility costs (2) | 7,271 | 2,571 | |||||
| Amortization of intangibles | 14,167 | 15,827 | |||||
| Impairments (Goodwill and fixed assets) | — | 219 | |||||
| Non-GAAP adjusted income from operations (a) | $ | 3,131 | $ | 1,927 | |||
| Non-GAAP adjusted operating margin (3) | 0.6 | % | 0.4 | % | |||
| GAAP net sales | 489,270 | 498,738 | |||||
| (in thousands) | Year Ended December 31, | ||||||
| Power Solutions | 2023 | 2022 | |||||
| GAAP income from operations | 11,096 | 3,536 | |||||
| Litigation / settlement costs | — | 1,850 | |||||
| Professional fees | 63 | 339 | |||||
| Personnel costs (1) | 204 | 590 | |||||
| Facility costs (2) | 1,742 | 1,269 | |||||
| Amortization of intangibles | 10,814 | 12,474 | |||||
| Non-GAAP adjusted income from operations (a) | $ | 23,919 | $ | 20,058 | |||
| Non-GAAP adjusted operating margin (3) | 12.9 | % | 9.8 | % | |||
| GAAP net sales | 185,948 | 205,204 | |||||
| (in thousands) | Year Ended December 31, | ||||||
| Mobile Solutions | 2023 | 2022 | |||||
| GAAP loss from operations | (11,749 | ) | (2,165 | ) | |||
| Personnel costs (1) | 1,593 | — | |||||
| Facility costs (2) | 5,529 | 1,302 | |||||
| Amortization of intangibles | 3,353 | 3,353 | |||||
| Impairments (Goodwill and fixed assets) | — | 219 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | $ | (1,274 | ) | $ | 2,709 | ||
| Share of net income from joint venture | 5,806 | 6,592 | |||||
| Non-GAAP adjusted income from operations with JV (a) | $ | 4,532 | $ | 9,301 | |||
| Non-GAAP adjusted operating margin (3) | 1.5 | % | 3.2 | % | |||
| GAAP net sales | 303,335 | 293,536 | |||||
| (in thousands) | Year Ended December 31, | ||||
| Elimination | 2023 | 2022 | |||
| GAAP net sales | (13 | ) | (2 | ) | |
(1) Personnel costs include recruitment, retention, relocation, and severance costs
(2) Facility costs include costs of opening / closing facilities and relocation / exit of manufacturing operations
(3) Non-GAAP adjusted operating margin = Non-GAAP adjusted income (loss) from operations / GAAP net sales
| Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA | |||||||
| Three Months Ended December 31, | |||||||
| (in thousands) | 2023 | 2022 | |||||
| GAAP net loss | $ | (20,541 | ) | $ | (12,014 | ) | |
| Provision for income taxes | 904 | 107 | |||||
| Interest expense | 5,653 | 4,368 | |||||
| Change in fair value of preferred stock derivatives and warrants | 9,172 | (407 | ) | ||||
| Depreciation and amortization | 11,477 | 13,269 | |||||
| Professional fees | 225 | 382 | |||||
| Personnel costs (1) | 1,175 | 902 | |||||
| Facility costs (2) | 1,617 | 1,405 | |||||
| Non-cash stock compensation | 763 | 515 | |||||
| Non-cash foreign exchange loss on inter-company loans | (422 | ) | (715 | ) | |||
| Non-GAAP adjusted EBITDA (b) | $ | 10,023 | $ | 7,812 | |||
| Non-GAAP adjusted EBITDA margin (3) | 8.9 | % | 6.6 | % | |||
| GAAP net sales | $ | 112,533 | $ | 118,012 | |||
| (1) Personnel costs include recruitment, retention, relocation, and severance costs | |||||||
| (2) Facility costs include costs of opening / closing facilities and relocation / exit of manufacturing operations | |||||||
| (3) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales | |||||||
| Year Ended December 31, | |||||||
| (in thousands) | 2023 | 2022 | |||||
| GAAP net loss | $ | (50,150 | ) | $ | (26,098 | ) | |
| Provision for income taxes | 2,285 | 1,621 | |||||
| Interest expense | 21,137 | 15,041 | |||||
| Change in fair value of preferred stock derivatives and warrants | 10,814 | (5,267 | ) | ||||
| Depreciation and amortization | 46,120 | 47,231 | |||||
| Litigation / settlement costs | — | 1,850 | |||||
| Professional fees | 640 | 1,607 | |||||
| Personnel costs (1) | 2,857 | 945 | |||||
| Facility costs (2) | 7,271 | 2,571 | |||||
| Non-cash stock compensation | 2,823 | 4,378 | |||||
| Non-cash foreign exchange (gain) loss on inter-company loans | (676 | ) | (212 | ) | |||
| Fixed asset and goodwill impairments | — | 219 | |||||
| Non-GAAP adjusted EBITDA (b) | $ | 43,121 | $ | 43,886 | |||
| Non-GAAP adjusted EBITDA margin (3) | 8.8 | % | 8.8 | % | |||
| GAAP net sales | 489,270 | 498,738 | |||||
| (1) Personnel costs include recruitment, retention, relocation, and severance costs | |||||||
| (2) Facility costs include costs of opening / closing facilities and relocation / exit of manufacturing operations | |||||||
| (3) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales | |||||||
| Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Net Income and GAAP Net Income (Loss) per Diluted Common Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Common Share | |||||||
| Three Months Ended December 31, | |||||||
| (in thousands) | 2023 | 2022 | |||||
| GAAP net loss | $ | (20,541 | ) | $ | (12,014 | ) | |
| Pre-tax professional fees | 225 | 382 | |||||
| Pre-tax personnel costs | 1,175 | 902 | |||||
| Pre-tax facility costs | 1,617 | 1,405 | |||||
| Non-cash foreign exchange loss on inter-company loans | (422 | ) | (715 | ) | |||
| Pre-tax change in fair value of preferred stock derivatives and warrants | 9,172 | (407 | ) | ||||
| Pre-tax amortization of intangibles and deferred financing costs | 4,009 | 5,407 | |||||
| Tax effect of adjustments reflected above (c) | (107 | ) | (1,465 | ) | |||
| Non-GAAP discrete tax adjustments | — | 730 | |||||
| Non-GAAP adjusted net income (loss) (d) | $ | (4,872 | ) | $ | (5,775 | ) | |
| Three Months Ended December 31, | |||||||
| (per diluted common share) | 2023 | 2022 | |||||
| GAAP net loss per diluted common share | $ | (0.50 | ) | $ | (0.33 | ) | |
| Pre-tax professional fees | — | 0.01 | |||||
| Pre-tax personnel costs | 0.03 | 0.02 | |||||
| Pre-tax facility costs | 0.03 | 0.03 | |||||
| Pre-tax foreign exchange (gain) loss on inter-company loans | (0.01 | ) | (0.02 | ) | |||
| Pre-tax change in fair value of preferred stock derivatives and warrants | 0.19 | (0.01 | ) | ||||
| Pre-tax amortization of intangibles and deferred financing costs | 0.08 | 0.12 | |||||
| Tax effect of adjustments reflected above (c) | — | (0.03 | ) | ||||
| Non-GAAP discrete tax adjustments | — | 0.02 | |||||
| Preferred stock cumulative dividends and deemed dividends | 0.07 | 0.07 | |||||
| Non-GAAP adjusted net income (loss) per diluted common share (d) | $ | (0.10 | ) | $ | (0.12 | ) | |
| Shares used to calculate net earnings (loss) per share | 47,709 | 44,708 | |||||
| Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Net Income and GAAP Net Income (Loss) per Diluted Common Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Common Share | |||||||
| Year Ended December 31, | |||||||
| (in thousands) | 2023 | 2022 | |||||
| GAAP net income (loss) | $ | (50,150 | ) | $ | (26,098 | ) | |
| Pre-tax foreign exchange (gain) loss on inter-company loans | (676 | ) | (212 | ) | |||
| Pre-tax litigation / settlement costs | — | 1,850 | |||||
| Pre-tax professional fees | 640 | 1,607 | |||||
| Pre-tax personnel costs | 2,857 | 945 | |||||
| Pre-tax facility costs | 7,271 | 2,571 | |||||
| Pre-tax change in fair value of preferred stock derivatives and warrants | 10,814 | (5,267 | ) | ||||
| Pre-tax amortization of intangibles and deferred financing costs | 16,108 | 17,188 | |||||
| Pre-tax impairments of fixed asset costs | — | 219 | |||||
| Tax effect of adjustments reflected above (c) | (592 | ) | (3,978 | ) | |||
| Non-GAAP discrete tax adjustments | — | 3,128 | |||||
| Non-GAAP adjusted net income (loss) (d) | $ | (13,728 | ) | $ | (8,047 | ) | |
| Year Ended December 31, | |||||||
| (per diluted common share) | 2023 | 2022 | |||||
| GAAP net income (loss) per diluted common share | $ | (1.35 | ) | $ | (0.83 | ) | |
| Pre-tax foreign exchange (gain) loss on inter-company loans | (0.01 | ) | — | ||||
| Pre-tax litigation / settlement costs | — | 0.04 | |||||
| Pre-tax professional fees | 0.01 | 0.04 | |||||
| Pre-tax personnel costs | 0.06 | 0.02 | |||||
| Pre-tax facility costs | 0.16 | 0.06 | |||||
| Pre-tax change in fair value of preferred stock derivatives and warrants | 0.23 | (0.12 | ) | ||||
| Pre-tax amortization of intangibles and deferred financing costs | 0.34 | 0.38 | |||||
| Tax effect of adjustments reflected above (c) | (0.01 | ) | (0.09 | ) | |||
| Non-GAAP discrete tax adjustments | — | 0.07 | |||||
| Preferred stock cumulative dividends and deemed dividends | 0.28 | 0.24 | |||||
| Non-GAAP adjusted net income (loss) per diluted common share (d) | $ | (0.29 | ) | $ | (0.19 | ) | |
| Weighted average common shares outstanding | 46,738 | 44,680 | |||||
| Reconciliation of Operating Cash Flow to Free Cash Flow | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net cash provided by operating activities | $ | 5,454 | $ | 10,388 | $ | 29,344 | $ | 7,717 | |||||||
| Acquisition of property, plant, and equipment | (4,204 | ) | (3,941 | ) | (20,496 | ) | (17,952 | ) | |||||||
| Proceeds from sale of property, plant, and equipment | 22 | — | 2,898 | 460 | |||||||||||
| Free cash flow | $ | 1,272 | $ | 6,447 | $ | 11,746 | $ | (9,775 | ) | ||||||
The Company discloses in this presentation the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow. Each of these non-GAAP financial measures provides supplementary information about the impacts of acquisition, divestiture and integration related expenses, foreign-exchange impacts on inter-company loans, reorganizational and impairment charges. Over the past five years, we have completed several acquisitions, one of which was transformative for the Company, and sold two of our businesses. The costs we incurred in completing such acquisitions, including the amortization of intangibles and deferred financing costs, and these divestitures have been excluded from these measures because their size and inconsistent frequency are unrelated to our commercial performance during the period, and which we believe are not indicative of our ongoing operating costs. We exclude the impact of currency translation from these measures because foreign exchange rates are not under management’s control and are subject to volatility. Other non-operating charges are excluded as the charges are not indicative of our ongoing operating cost. We believe the presentation of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow provides useful information in assessing our underlying business trends and facilitates comparison of our long-term performance over given periods.
The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company's industry, as other companies may calculate such financial results differently. The Company's non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to actual income growth derived from income amounts presented in accordance with GAAP. The Company does not consider these non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results.
(a) Non-GAAP adjusted income (loss) from operations represents GAAP income (loss) from operations, adjusted to exclude the effects of restructuring and integration expense; non-operational charges related to acquisition and transition expense, intangible amortization costs for fair value step-up in values related to acquisitions, non-cash impairment charges, and when applicable, our share of income from joint venture operations. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted income (loss) from operations is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from operations.
(b) Non-GAAP adjusted EBITDA represents GAAP net income (loss), adjusted to include income taxes, interest expense, write-off of unamortized debt issuance costs, interest rate swap payments and change in fair value that was recognized in earnings, change in fair value of preferred stock derivatives and warrants, depreciation and amortization, charges related to acquisition and transition costs, non-cash stock compensation expense, foreign exchange gain (loss) on inter-company loans, restructuring and integration expense, costs related to divested businesses and litigation settlements, income from discontinued operations, and non-cash impairment charges, to the extent applicable. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from continuing operations.
(c) This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the respective table. NN, Inc. estimates the tax effect of the adjustment items identified in the reconciliation schedule above by applying the applicable statutory rates by tax jurisdiction unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment.
(d) Non-GAAP adjusted net income (loss) represents GAAP net income (loss) adjusted to exclude the tax-affected effects of charges related to acquisition and transition costs, foreign exchange gain (loss) on inter-company loans, restructuring and integration charges, amortization of intangibles costs for fair value step-up in values related to acquisitions and amortization of deferred financing costs, non-cash impairment charges, write-off of unamortized debt issuance costs, interest rate swap payments and change in fair value, change in fair value of preferred stock derivatives and warrants, costs related to divested businesses and litigation settlements, income (loss) from discontinued operations, and preferred stock cumulative dividends and deemed dividends. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry.
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