NN, Inc. (NNBR) Bundle
Understanding NN, Inc. (NNBR) Revenue Streams
Understanding NN, Inc.’s Revenue Streams
Revenue Breakdown
For the nine months ended September 30, 2024, the total net sales for NN, Inc. were $357,777 thousand, a decrease from $376,737 thousand during the same period in 2023, reflecting a decline of 5.0%.
| Segment | Net Sales (2024) | Net Sales (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Mobile Solutions | $216,593 | $234,132 | $(17,539) | (7.5)% |
| Power Solutions | $141,324 | $142,618 | $(1,294) | (0.9)% |
| Total | $357,777 | $376,737 | $(18,960) | (5.0)% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a decline, with net sales falling 5.0% in the first nine months of 2024 compared to 2023. This decline is attributed to various factors including the sale of operations and rationalized volume at plants undergoing turnarounds.
Contribution of Different Business Segments
In the nine months ended September 30, 2024:
- Mobile Solutions contributed 60.5% of total net sales.
- Power Solutions accounted for 39.5% of total net sales.
Significant Changes in Revenue Streams
The sale of the Lubbock operations had a notable impact on revenue, contributing to the overall decline in net sales. Additionally, unfavorable foreign exchange effects of $1.9 million further affected revenue performance.
In the third quarter of 2024, net sales were $113,587 thousand, down from $124,443 thousand in the same quarter of 2023, representing a decrease of 8.7%.
| Quarter | Net Sales (2024) | Net Sales (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Q3 | $113,587 | $124,443 | $(10,856) | (8.7)% |
Revenue by Customer Industry for Q3 2024
| Industry | Mobile Solutions | Power Solutions | Total |
|---|---|---|---|
| Automotive | $48,062 | $7,063 | $55,125 |
| General Industrial | $17,351 | $10,121 | $27,472 |
| Residential/Commercial Electrical | $0 | $20,301 | $20,301 |
| Other | $5,265 | $5,450 | $10,689 |
| Total | $70,678 | $42,935 | $113,587 |
This data illustrates the variety of revenue streams and highlights the shifts in performance across different segments and industries, providing valuable insights for investors analyzing the financial health of the company.
A Deep Dive into NN, Inc. (NNBR) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Sales | $357,777 | $376,737 |
| Cost of Sales | $299,474 | $320,648 |
| Gross Profit | $58,303 | $56,089 |
| Gross Profit Margin | 16.3% | 14.9% |
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Income from Operations | $11,804 | $8,266 |
| Operating Profit Margin | 3.3% | 2.2% |
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Loss | $(17,297) | $(29,609) |
| Net Profit Margin | (4.8%) | (7.9%) |
Trends in Profitability Over Time: The following table outlines the trends in profitability over the last two years:
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | 2022 (Nine Months) |
|---|---|---|---|
| Net Sales | $357,777 | $376,737 | $410,000 |
| Gross Profit | $58,303 | $56,089 | $64,000 |
| Income from Operations | $11,804 | $8,266 | $12,000 |
| Net Loss | $(17,297) | $(29,609) | $(15,000) |
Comparison of Profitability Ratios with Industry Averages: Below is a comparison of profitability ratios with industry averages:
| Metric | NN, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 16.3% | 20.0% |
| Operating Profit Margin | 3.3% | 5.0% |
| Net Profit Margin | (4.8%) | (2.0%) |
Analysis of Operational Efficiency: The operational efficiency metrics are as follows:
- Cost of Sales: Decreased by $21.2 million, or 6.6%, during the nine months ended September 30, 2024.
- Selling, General, and Administrative Expenses: Increased by $1.3 million during the same period, totaling $37,116 thousand.
- Depreciation and Amortization: Increased by $509 thousand, reaching $35,152 thousand for the nine months ended September 30, 2024.
Trends in Gross Margin: The gross margin trend for the past two years is as follows:
| Year | Gross Margin (%) |
|---|---|
| 2024 | 16.3% |
| 2023 | 14.9% |
| 2022 | 15.6% |
Debt vs. Equity: How NN, Inc. (NNBR) Finances Its Growth
Debt vs. Equity Structure
The company's financial structure relies significantly on a combination of debt and equity financing. As of September 30, 2024, the total debt stood at $143.6 million, which includes both long-term and short-term obligations. The breakdown of this debt is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Long-term Debt | $135.5 |
| Short-term Debt | $8.1 |
The debt-to-equity ratio is a critical indicator of financial leverage. As of September 30, 2024, the company recorded a debt-to-equity ratio of 1.34. This compares to the industry average of approximately 1.00, indicating that the company has a higher reliance on debt relative to its equity base.
In terms of credit ratings, the company has faced challenges, resulting in a current rating of CCC, reflecting a high-risk status. Recent refinancing activities included the issuance of new debt totaling $38 million to manage liquidity needs and operational expenses, while the interest expense for the nine months ended September 30, 2024, was recorded at $16.6 million, up from $15.5 million in the previous year.
The company balances its growth financing between debt and equity. Recent activities indicate a strategic shift towards equity financing as well. For instance, the total stockholders' equity as of September 30, 2024, was $106.6 million, a decrease from $125.0 million at the end of 2023, primarily due to accumulated losses.
| Financial Metrics | Amount |
|---|---|
| Total Debt | $143.6 million |
| Debt-to-Equity Ratio | 1.34 |
| Interest Expense (9 Months) | $16.6 million |
| Stockholders' Equity | $106.6 million |
This balance between debt and equity financing is crucial for sustaining operational flexibility while managing the implications of higher leverage on the company’s financial health. The management continues to evaluate its capital structure to optimize growth potential and mitigate risks associated with high debt levels.
Assessing NN, Inc. (NNBR) Liquidity
Assessing NN, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.4, calculated from current assets of $146.5 million and current liabilities of $104.0 million.
Quick Ratio: The quick ratio was approximately 0.9, with quick assets (current assets minus inventories) at $76.9 million and current liabilities at $104.0 million.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was $85.3 million, down from $100.9 million as of December 31, 2023. This represents a decrease of $15.6 million, primarily attributed to increased current maturities of long-term debt and a rise in other current liabilities.
Cash Flow Statements Overview
Operating Cash Flows: For the nine months ended September 30, 2024, cash provided by operating activities was $4.4 million, a significant decrease from $23.9 million for the same period in 2023. This decline was driven by an increase in accounts receivable and changes in inventory management.
Investing Cash Flows: Cash provided by investing activities was $1.9 million for the nine months ended September 30, 2024, compared to cash used of $13.4 million for the same period in 2023. The positive change was largely due to $17.0 million received from the sale of the Lubbock operations.
Financing Cash Flows: Cash used in financing activities increased to $15.6 million during the nine months ended September 30, 2024, up from $1.2 million in 2023, primarily due to increased repayments of long-term debt.
Liquidity Concerns or Strengths
As of September 30, 2024, the principal amount outstanding under the Term Loan Facility was $114.2 million, while the company had $21.9 million available for future borrowings under the ABL Facility. Total liabilities decreased by $20.8 million during the same period, indicating a cautious approach to managing debt levels.
| Liquidity Metric | Value |
|---|---|
| Current Assets | $146.5 million |
| Current Liabilities | $104.0 million |
| Current Ratio | 1.4 |
| Quick Assets | $76.9 million |
| Quick Ratio | 0.9 |
| Working Capital (Sept 30, 2024) | $85.3 million |
| Working Capital (Dec 31, 2023) | $100.9 million |
| Cash from Operating Activities | $4.4 million |
| Cash from Investing Activities | $1.9 million |
| Cash used in Financing Activities | $15.6 million |
| Outstanding Term Loan | $114.2 million |
| Available ABL Borrowings | $21.9 million |
Is NN, Inc. (NNBR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA), along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated using the current stock price divided by the earnings per share (EPS). As of the latest data, the stock price is $3.80 and the trailing twelve months EPS is $(0.59), resulting in a P/E ratio of -6.44. This negative P/E indicates a loss, suggesting the company may be undervalued compared to peers with positive earnings.
Price-to-Book (P/B) Ratio
The P/B ratio compares the market value of a company's stock to its book value. The book value per share is approximately $2.14. With the current stock price of $3.80, the P/B ratio is calculated as 1.77. This indicates that the stock is trading at a premium compared to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides a valuation metric that compares the company's total value (including debt) to its earnings before interest, taxes, depreciation, and amortization. The enterprise value is approximately $182 million and EBITDA for the last twelve months is $31 million, resulting in an EV/EBITDA ratio of 5.87. This ratio suggests a reasonable valuation compared to industry averages.
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations, starting at around $4.50 and declining to the current price of $3.80. This represents a decrease of approximately 15.56% over the year.
Dividend Yield and Payout Ratios
The company has not declared any dividends in the past twelve months, resulting in a dividend yield of 0%. The payout ratio is also 0% due to the absence of any dividend payments.
Analyst Consensus
According to the latest analyst ratings, the consensus recommendation is a “Hold”. This indicates that analysts believe the stock is fairly valued at its current price, with no immediate catalysts for significant appreciation or depreciation.
Summary Table
| Metric | Value |
|---|---|
| Current Stock Price | $3.80 |
| Trailing Twelve Months EPS | $(0.59) |
| P/E Ratio | -6.44 |
| Book Value per Share | $2.14 |
| P/B Ratio | 1.77 |
| Enterprise Value | $182 million |
| EBITDA | $31 million |
| EV/EBITDA Ratio | 5.87 |
| 12-Month Price Change | -15.56% |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing NN, Inc. (NNBR)
Key Risks Facing NN, Inc. (NNBR)
The financial health of NN, Inc. is influenced by various internal and external risk factors that can significantly impact its performance and stability. Below is a detailed examination of these risks, along with relevant financial data.
Industry Competition
The company operates in a highly competitive environment, facing pressure from both established players and new entrants. This competition can lead to pricing pressures, impacting margins.
Market Conditions
Market fluctuations have affected NN, Inc.'s sales. For the nine months ended September 30, 2024, net sales decreased by $18.96 million, or 5.0%, compared to the same period in 2023. This decline was primarily attributed to the sale of its Lubbock operations and unfavorable foreign exchange effects amounting to $1.9 million.
Regulatory Changes
Changes in regulations, particularly in the manufacturing and environmental sectors, pose risks. Compliance with these regulations can lead to increased costs and operational disruptions.
Operational Risks
Operational challenges include the rationalization of production volumes and facility turnarounds. For instance, during the same period, the loss from operations improved by $3.18 million year-over-year, but the company still faced challenges related to lower revenues and product mix.
Financial Risks
Financial risks are highlighted by the company's debt levels. As of September 30, 2024, total debt stood at $143.63 million, down from $153.28 million in the previous year. Interest expenses increased to $16.64 million from $15.48 million, reflecting higher average interest rates.
Strategic Risks
Strategic decisions, such as divestitures and acquisitions, carry inherent risks. The sale of the Lubbock operations generated $17 million in proceeds, which were used to pay down debt.
Mitigation Strategies
To mitigate these risks, the company has taken steps such as optimizing plant operations and managing costs effectively. The reduction in indirect manufacturing costs contributed to an improvement in income from operations by $3.54 million during the nine months ended September 30, 2024.
| Risk Category | Details | Financial Impact |
|---|---|---|
| Industry Competition | Pressure from established players and new entrants | Pricing pressures affecting margins |
| Market Conditions | Net sales decreased by $18.96 million (5.0%) | Unfavorable foreign exchange effects of $1.9 million |
| Regulatory Changes | Compliance costs and operational disruptions | Potential increases in operational costs |
| Operational Risks | Challenges with production rationalization | Loss from operations improved by $3.18 million |
| Financial Risks | Total debt of $143.63 million | Interest expenses increased to $16.64 million |
| Strategic Risks | Sale of Lubbock operations | Generated $17 million in proceeds |
Future Growth Prospects for NN, Inc. (NNBR)
Future Growth Prospects for NN, Inc.
Analysis of Key Growth Drivers
Product Innovations: NN, Inc. has focused on enhancing its product offerings, particularly in the Power Solutions segment. For example, net sales in this segment for the nine months ended September 30, 2024, were $141.3 million, showing a slight decrease of 0.9% from $142.6 million in the prior year. However, the income from operations increased by $3.5 million to $11.8 million, driven by lower indirect manufacturing costs.
Market Expansions: The company has been exploring new markets, particularly focusing on its joint ventures. The share of net income from joint ventures increased by $3.5 million for the nine months ended September 30, 2024, totaling $6.6 million compared to $3.1 million in the same period of 2023.
Acquisitions: Recent strategic sales, such as the Lubbock operations, have allowed NN, Inc. to streamline operations and focus on more profitable segments. The sale resulted in a gain of $7.2 million.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, NN, Inc. is projecting a slight decrease in overall net sales, estimated at $357.8 million, down from $376.7 million in 2023. However, the company anticipates improvements in operational efficiency and cost management will lead to a net loss reduction from $29.6 million in 2023 to an estimated $17.3 million in 2024.
Strategic Initiatives or Partnerships that May Drive Future Growth
NN, Inc. has entered into multiple sale-leaseback transactions, including the sale of properties for $16.9 million in March 2024. This strategic move not only improves cash flow but also allows the company to maintain operational control over the properties.
Competitive Advantages that Position the Company for Growth
One of the competitive advantages of NN, Inc. lies in its diversified operations across multiple segments, including Mobile Solutions and Power Solutions. Net sales in the Mobile Solutions segment were $216.6 million for the nine months ended September 30, 2024, although down from $234.1 million in 2023.
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Net Sales (Power Solutions) | $141.3 million | $142.6 million | -0.9% |
| Income from Operations (Power Solutions) | $11.8 million | $8.3 million | +42.4% |
| Net Sales (Mobile Solutions) | $216.6 million | $234.1 million | -7.5% |
| Net Loss | $17.3 million | $29.6 million | +41.0% |
| Share of Net Income from Joint Venture | $6.6 million | $3.1 million | +112.9% |
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Article updated on 8 Nov 2024
Resources:
- NN, Inc. (NNBR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NN, Inc. (NNBR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NN, Inc. (NNBR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.