NNBR - NASDAQ

Good morning and welcome to the NN, Inc. Third Quarter 2023 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please also note this event is being recorded. I would now like to turn the conference over to Alec Steinberg. Please go ahead.

Thank you, Chad. Good morning, everyone. Thank you for joining us. I'm Alec Steinberg, Investor Relations contact for NN, Inc. I'd like to thank you for attending today's business update. Last evening, we issued a press release announcing our financial results for the third quarter ended September 30, 2023, as well as a supplemental presentation, which has been posted on the Investor Relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may contact Alpha IR Group at [email protected]. Our presenters on the call this morning will be Harold Bevis, President and Chief Executive Officer and Mike Felcher, Senior Vice President and Chief Financial Officer. Please turn to Slide 2, where you'll find our forward-looking statements and disclosure information. Before we begin, I'd ask that you take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation and in the Risk Factors section in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and when filed, the company's quarterly report on Form 10-Q for the 3 months ended September 30, 2023. The same language applies to comments made on today's conference call, including the Q&A session as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, inflation, supply chain constraints, foreign exchange rates, cash flow, tax rates, acquisitions, synergies, cash and cost savings, future operating results, performance of our worldwide markets, the impact of the coronavirus or COVID-19 pandemic and the Russian-Ukrainian conflict on the company's financial condition and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside of the company's control. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the table in the final section of the press release and the supplemental presentation. Please turn to Slide 3, and I'll turn the call over to our CEO, Harold Bevis.

Thank you, Alec, and good morning, everyone. I'd like to start off by saying that our enhanced management team made excellent progress against our transformation strategy that we presented and spoke with you about last quarter, and the work is clear and strong in our operating results this period. We also added two highly experienced professionals and Tim French, our new COO and David Harrison, our new Chief of Procurement to further strengthen our leadership team. We are happy to have them on board, and I personally had the opportunity to work with both of them in the past, as we successfully executed prior business transformations. I'm very confident in their ability to help support NN's transformation efforts, and I firmly believe that we are well aligned strategically to achieve our goals and deliver improved returns for NN shareholders and stakeholders. Our results in the period are highlighted by our expanded profitability and cash flow performance, with 23% growth in adjusted EBITDA year-over-year and strong free cash flow generation of $11.3 million. Sales for the quarter were $124.4 million, which we translated into $14.5 million of adjusted EBITDA. On the commercial front, we've accelerated our focus on new business and have won $37 million year-to-date of new awards, which marks solid momentum and a significant step-up from where we were just three months ago. We're focused on expanding in both legacy businesses and new markets where it makes sense for us to be participating and competing based on our capabilities and ability to create value. And we have a new focused effort to increase quality and quantity of prospecting and generating leads. We're pleased to report $11.3 million of positive free cash flow in the quarter. We're free cash flow positive across the trailing 12-month period, and we're actually running ahead of our previously stated free cash flow targets, which Mike will discuss later in the call. We're proud of our cash performance in the quarter as this became an immediate focus as we established our transformation plans. This focus on cash flows has become an organizational mantra, and we feel we can continue this growth over the long term as we've been particularly proactive with our global procurement led by David Harrison, and we've been more selective and thoughtful with inventory management. Along with these actions, we've been aggressive with other transformational initiatives for the long-term with an emphasis on value improvement. And globally, we've refocused our growth strategy and recently announced our re-entry into the medical market, which we see as a high-profile near-term opportunity. We've also implemented a total cost productivity program across our operations with the goal of offsetting the company's expected inflation in achieving net cost reduction. All of our global facilities are participating in the program, including more than 100 individual projects with project tracking and monitoring at the plant level. We believe these initiatives will help us win new business globally and will support many of our cost management goals to deliver improved profitability, margin expansion and improve our cost competitiveness. Before turning to the next slide, I would like to briefly touch on the UAW strike. As you know, we've seen a few positive developments with recent bargaining agreements with all three automakers, and now the union is moving forward with ratification processes. To stay ahead of this situation, we've taken proactive actions to reduce our risk, but we see this as a small timing issue. We may see a few million of work slipped from the fourth quarter this year into the first quarter of next year. But again, we believe we're prepared for multiple scenarios. Most importantly, we don't see a situation today where any work is lost. Please turn to Slide 4. On the last call, we highlighted our transformation plan with a focus on increasing our organizational commitment to accelerate sales growth, profit and drive free cash flow. I'm proud to say we have already made early but meaningful progress on all 3 of our commitments and have been steadily progressing along with our five goals. First, the team. We are committed to strengthening our team and have done so with the additions of Tim and David, as I mentioned previously. We have the right people in place within our respective divisions to lead our transformation efforts. We're committed to winning short-term and long-term and will modify our team as we go along and assess our performance. Our second priority is focused on exiting unprofitable work, specifically a few legacy contracts that deliver negative value. This process is underway, and we'll continue to see incremental success as we exit those commitments in a prudent manner. We also have pinpointed seven manufacturing facilities that need improving. Let me be clear that this is about improving performance and improving the quality of the work we take on, and we're taking aggressive actions to improve performance. As previously stated, we see a path to improving our profitability by greater than $10 million on an annual basis following our work, but we have only just begun. Number three. Our third goal is focused on bringing more organizational rigor to costs. Cost reduction and optimization have been a priority for from in the beginning, and we have already seen some early successes with our initiatives, specifically in procurement. We've eliminated numerous other non-value-added costs across the organization, streamlined where appropriate. And as I noted earlier, we recently launched a new total cost productivity program, which we're rolling out across our global footprint. We have a lot more work to do here and a culture we need to continue to shape, but we've made great strides in five short months already. Number four, our cost-cutting efforts are also in line with our fourth goal of generating positive free cash flow. We're currently cash flow positive on the trailing 12 months, and we have a global culture that's now more intently focused on driving a more profitable business for the future. And number five, and most importantly, our fifth goal is focused on accelerating our new business wins. We've been working with our sales team to get more aggressive in their pursuits and we've managed to create more wins by leveraging our existing capabilities, almost doubling our new business win sequentially. We feel there is significant room for improvement as we enter new markets, but we're also focused on utilizing our open capacity in existing markets to expand in areas where we already have a presence and the market understands the value we bring. So to summarize, we've only had a few months to both develop and start to execute our transformation strategy. And as you can see, we've made very solid progress against each objective in the quarter with significant opportunity to continue enhancing the business incrementally as we move forward. As depicted in the graph, we feel we're only partially done with the transformation, and we're looking forward to progressing further along all these initiatives before we talk again in early 2024. For the rest of my prepared remarks, I'd like to focus in on our commercial programs and the work we're doing there to support both near-term and long-term growth. Growth is the lifeblood of any small business like ours and many of our lead times can be protracted. So this is a critical area for us. Please turn to Slide 5, where we have provided a brief snapshot of our new business wins. We have built upon the initial momentum from the previous quarter and drove strong results with year-to-date new business wins of $37 million, up meaningfully from the $19 million in new business wins we achieved through the first half of the year. We have now won over 60 new programs across multiple industries and have a new pipeline with a focus on utilizing existing capacity in places where we have know-how and targeted markets and it's representative of our commitment to move and grow faster. This will help drive immediate wins in new and existing opportunities. We've also expanded the sales team to better leverage our expertise into new targeted markets. Areas where we are pursuing include connector, EMI and EMF shielding, electric power steering system components and braking system components. As announced previously, we're also reentering the medical market as we feel we can immediately utilize our current operations and capabilities and translate those into quick profitable wins. While new business wins are a solid indicator for our early progress, the best parameter for our successful commercial efforts is reflected in the quotes for new business, which have materially increased in overall quantity while also increasing in size. Our expanded pipeline of quotes supported by a realigned sales team is going to help support the trajectory of our new business wins and converting into consistent top line growth. Overall, our team is aligned and we're prioritizing and moving faster. We are seeing early signs of success with our strategy, and we look forward to making more progress with new business. We're also looking hard at our existing open quotes, and we are calling some of the pipeline, as I've mentioned in the chart here. And our goal is to have a more focused set that has a higher probability of winning. To showcase our early successes with new business, I want to highlight one recent win on Slide 6. We have a very strong expertise and complicated multi-station progressive die stamping that's generally hard for competitors to replicate. This often provides us with a distinct competitive advantage in certain key markets. And recently, we've leveraged our know-how with this differentiation to develop a set of new products and produce six unique connector shields and other related components used to prevent electromagnetic interference from high-voltage current onto sensitive vehicle electronics. This product set has been gaining momentum. It's a new product line for us, and we're seeing immediate returns on this initial investment with significant room to expand the business with our current customers and other customers in the harness and connector markets. As a result, we've recently ordered new prototyping, testing and production equipment to further expand our offering here. This will lead NN into other shielding markets for sensitive electronic equipment as well. Before I turn the call over to Mike, please turn to Page 7 where I'll discuss our current active proposal momentum. We've been aggressively quoting our open capacity and have refocused and upsized our new business win program globally. We're doing this by shifting our focus on to highly probable business and towards better and new business. This has shown immediate results over the last five months that is clear on the chart on this slide. Excluding diverse industries, we have grown our active proposals in all market segments and notably, EV hybrid programs, an important space for us to continue expanding our presence globally. And we have seen a growth of 43% sequentially and 60% year-over-year. Notably, this is yet to include medical, where we are boldly reentering the market upon the expiration of our prior non-compete. We are proud of the business we've won to-date, and we're confident in our pipeline and ability to take market share. We see opportunities in the medical market and current segments we serve and our focus on being bigger and moving faster has already shown great results in key target markets. With that, I'll now turn it over to Mike, who will walk us through our financials. Mike?

Thank you, Harold, and good morning, everyone. I'll start on Slide 8. Net sales for the quarter of $124.4 million was slightly down compared to the prior year period. While we captured an additional $6 million of price versus last year, this benefit was more than offset by the impact of lower volume and to a lesser extent by foreign currency. Also, the current year result includes a favorable customer settlement of $1.1 million. From a profitability standpoint, our operating loss of $2.7 million was greater compared to the $2.1 million operating loss in last year's third quarter. That said, adjusted operating income for the third quarter was $3.6 million compared to adjusted operating income of $2.5 million from the prior year, an increase of $1.1 million. As Harold highlighted, adjusted EBITDA of $14.5 million was significantly above last year's $11.8 million. We are seeing the impacts of cost reductions from facility closures and headcount reductions flow through to our adjusted EBITDA, totaling approximately $4 million of benefit in the quarter versus the prior year. As we progress further through the year, we expect to continue to benefit from cost discipline as we aggressively address the underperforming areas of the business, and we continue to expect roughly $10 million in annual adjusted EBITDA improvement once all our actions are completed. Turning to Slide 9. Sales in our Mobile Solutions group increased 3.7% versus the prior year period, improving by $2.8 million. The increase was primarily driven by improved pricing, the aforementioned customer settlement and foreign exchange effects, which were slightly offset by lower volumes. Mobile Solutions adjusted EBITDA of $9.5 million was an increase of $1.5 million from $8 million in the third quarter of 2022. Stronger year-over-year adjusted EBITDA was driven in part by the customer settlement we previously discussed as well as capturing the benefits of rightsizing indirect labor support. Demand for our Mobile Solutions end markets is expected to be steady in the fourth quarter, though we anticipate some weakness with the lingering impact of the UAW strike and the impacts they carry at the OEM level. That said, we are focused globally, and our new business wins performance has remained strong in China, where we are seeing growth as we enter into more non-fuel applications on electric platforms. We also anticipate continued operational improvement. Turning to Slide 10. Power Solutions segment sales decreased 11% year-over-year, primarily driven by decreased auto component sales due to two key customers losing market share. Further, the segment's top line performance was impacted by general industrial component sales being lower due to lower capital spending across the market in response to rising interest rates. Aerospace and defense sales were lower as well following the closures of Irvine, California and Taunton, Massachusetts facilities. Despite lower sales, our facility closures, rightsizing indirect labor support and a retroactive material cost recovery from a supplier drove adjusted EBITDA of $8.3 million, which compared favorably to $7.1 million in the prior year. I'd like to congratulate the team here as delivering a 17% increase in adjusted EBITDA on a top line decline of 11% was quite an accomplishment, and it shows a strong commitment to the initiatives Harold outlined in our transformation strategy. Looking ahead, we expect demand levels in the fourth quarter to remain consistent relative to what we have observed year-to-date, with the UAW strike impacting the fourth quarter slightly, potentially pushing out some demand into the first quarter of next year. Demand signals are strengthening for electrification and grid products, and we have a focused effort to enter the global shielding market. Now please turn to Slide 11. As Harold highlighted, we are encouraged by our free cash flow generation in the period with trailing 12-month free cash flow of $17 million. Working capital turns improved in the third quarter to 5.3 turns from 4.8 turns in the previous quarter, marking the fourth consecutive period that we've improved upon this key efficiency metric. Consistently remaining free cash flow positive has been one of the key goals we have set with the team. And going forward, it will remain an area of ongoing focus as we execute through our transformation. Now turning to Slide 12. You can see a snapshot of our balance sheet and liquidity metrics. Net debt at the end of the third quarter was $137.7 million versus $147.9 million in the second quarter of 2023. Our net debt to adjusted EBITDA ratio stood at 3.37 times at the end of the third quarter, compared to 3.87 times at the end of the second quarter of 2023, cutting a full half turn from our leverage metric sequentially. We expect to continue to bring down our leverage ratio through cash generation, improved profitability and reducing our debt, and we remain on track to reduce our leverage to below 3 times in 2024 while maintaining proactive capital investments to fund our growth. Our focus on free cash flow generation is tailored in part around our CapEx strategy, which has an increased emphasis now on growth opportunities. Our CapEx spend in the third quarter was $4.1 million compared to $4.3 million in the prior year. Please turn to Slide 13 for our full year outlook. Consistent with many of our customers and payers and based on our expectations for the remainder of the year, we are narrowing our range outlook for revenues and adjusted EBITDA, while raising our free cash flow expectation. Our outlook now reflects net sales in the range of $487 million to $497 million, roughly flat to prior year, adjusted EBITDA in the range of $40 million to $44 million, roughly flat to prior year, and free cash flow in the range of $10 million to $14 million, a significant improvement over last year's results. Our guidance reflects overall stable demand with some softness in Q4 due to the UAW strike impact and normal seasonality. We are turning the corner in many aspects of the business, and we are seeing immediate results. We set out clear pathways for meaningful long-term improvements to our results, and those efforts are encouragingly already taking effect. Our cost reduction activities and aggressive actions towards addressing unprofitable business, combined with more diligent inventory and working capital management are reflected in our profitability and free cash flow, and we have seen increased results following our newly improved commercial strategy. We feel our team is aligned operationally and commercially, and we're looking forward to sharing this journey with all of you. I will now turn the call back to the operator for questions.

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] And the first question will be from Rob Brown from Lake Street Capital Markets.

Good morning and congratulations on the early progress.

Thank you.

I guess first question is kind of on the operating kind of improvements. You said you're kind of in the early innings of that. What's sort of the timing of getting through those? Is that a two year period here or just a sense of kind of the view on what's remaining here?

There's a couple of things that are underway. We have the problem plants, if you will, the one the plant -- we have seven plants that are in aggregate together, losing around a little greater than $10 million as we put in the deck here. And then we have the overall program of total cost productivity, which impacts all plants, including the ones that make money. So that's underway. That's over 100 projects. Every plant is participating. And so we have annual goals there in the seven plants that lose money. We have a game plan to cease that in 2024. So we're not ready to say numbers yet combined between those two. But it's something that we're going to do over the next year. We have firm plans in place. We're just not ready to say much about 2024 yet.

Okay. Fair enough. That’s a good on what you have given us. Switching to kind of the market environment, you mentioned EV is fairly active in terms of quoting. Are you still seeing strong kind of demand there? How is that market looking into the next period here?

Yeah. Our markets are growing. So we're definitely in growth markets. And with the whole -- on the power side of our business, which is tied into electricity and grid and electrical products, there's just a general natural low single-digit kind of base demand improvement. And then on the vehicle side, on the mobile side, it's a very flourishing environment for innovation with all the focus upon vehicle control, vehicle automation, emission reduction, greenhouse gas reduction. So whether it's an internal combustion engine platform or a hybrid or electrical, there's a lot of innovation. And so innovation at the carmaker, vehicle maker level flows down to us and that we see more opportunities to quote on. So it's a robust environment for us for the whole company and on both sides of our company. And then of course, in Medical, Medical has been growing all along here. We've just been in the tool part of it. And if you look at the title page of our deck here today, you'll see in the upper right, a tool that we make, this a spinal tool for inserting a rod into spine. So we've been in the tool business all along, but we've had a non-compete with the sale of our Life Sciences business three years ago, almost exactly, and we're re-entering that. So that is a naturally growing market as well. So we have robust opportunity environment that we're participating in.

Okay. Great. And then on the re-entries of the Medical area, how do you sort of see that playing out? I know you're early into it, but what's the sales cycle there? What sort of areas are you looking at first, maybe how long to revenue ramps in that area?

For us, we're going to be able to short circuit some of this because we know the business already, and we still have facility approvals and equipment approvals and people know the business. So I think it would be a very lengthy entry for someone that didn't know the business already or who wasn't already in it. So given that we are in the tool business still through this whole period, we're an approved supplier at a lot of participants in the industry. So generally, it's a little difficult to become an approved supplier. You have to go through a validation process. So Phase 1 for us is to go into account for where we are already approved and expand what we're selling into the stamped pieces, the machine pieces, drill bits, bone plates and other items that we had to exit and stay out of when we sold the Life Sciences business. So for us, Phase 1 is to go in where we're already approved and expand the products that we make. And then number two is to expand into other customers. So we're able to immediately get into it. We're already quoting. We're already quoting business at a very high level. It's not in our pipeline yet because we're not through the cycle. But we immediately hired a Vice President of Sales in North America, and we're looking for a Vice President of Sales in Europe, and we're looking for a leader of sales in China also. So we're entering it globally.

Okay. Thank you for all the color. I will turn it over.

You’re welcome. Thank you.

Thank you. [Operator Instructions] Ladies and gentlemen, this concludes our question-and-answer session. I will now turn the conference back over to Harold Bevis for any closing remarks.

Excuse me, but I'm looking at the details here on our screen, and I see we have one more question.

Yes. Just as I was concluding, it looks like we have Tom Kerr to join us from

Good morning, guys. Sorry about that. My star one wasn’t working. A couple of quick ones. On the transformation plan in terms of the seven plants that are losing $10 million just back to that. Would that be just operational improvement or would that include shutdowns possibly or everything?

We're not going to have to shut down. It's mainly the result of bad contracts. So I saw this movie before at my last company of not correcting customer contracts going through COVID and the disruptions that happened in supply chains. And that's number one. So it's pricing and cost. We don't foresee plant closures right now, not against it, but don't foresee it. So for us, we believe that we can fix all seven plants right where they sit today. Like everything, some are harder than other. We have one plant that really is a hard one. We're still going through. Tim French, our Chief Operating Officer, is very focused on this with the teams. But I think that our footprint is pretty good. I like it. And so we like to fix it where it is and fill it up with new business. So our growth program is tethered to the plants where they sit, and we're quoting the capacity where it is. So we have a base case to fix every plant right where it is.

Okay. It sounds good. And one of the comments in the presentation was in the industrial side where there's lower capital market spending due to increasing interest rates. What does that mean? Does that mean they're financing capital spending through borrowing or are you just saying that interest rates are taken away from free cash flow?

Can you repeat that one more time?

Your one of the comments was that I think it quoted general industrial component sales due to lower capital spending in an increasing rate environment. What does that mean exactly?

Well, I can just tell you what we're doing. You touched on a couple of things there. We are going to spend the same amount of capital that we have been. We're more aggressively using or more aggressively quoting the existing capacity that we have where it sits. But in cases where we're pursuing growth prospects that require capital, we're being careful to balance our portfolio between mobile and power, and we're also being careful to balance our vehicle portfolio across the powertrains of combustion engine, hybrid and electrical. For the specifics there, Mike, I'll turn it over to you.

Yeah. Tom, I think the comment is driven by the same cautious behavior on our customer parts that Harold is talking about on our part in terms of reduced capital investment in new programs, which is translating to some near-term softness for us just given the uncertain interest rate environment and higher interest rate costs that we're seeing.

Right. Okay. A couple of more quick ones. Refresh my memory on free cash flow uses, are you allowed to use it besides anything besides step paydown, share buybacks or dividends?

There are restrictions under our credit agreement that there's an excess cash flow calculation that could come into play depending on our cash generation that could require a pay down of the term loan and then there's also restrictions on things we can do from a capital standpoint based on leverage ratios and other considerations. But as long as we satisfy those requirements, we have the flexibility to spend our free cash flow as we see here.

Okay. Two more quick ones. The UAW strike, you said a few million slip into the first quarter from the fourth quarter. That's sales, not profits, correct?

Well, the volume will take margin with it. So I think this is my third strike I've gone through. In each case, it was primarily a timing issue because there was still demand for the vehicles. And so then the vehicle makers had to get caught up. So put it like a little kink in the supply chain. So we're going to be going through that. So there's nothing formally changed in our supply chain yet in any of our signals, our ADI signals. And the UAW is going through ratification processes, and it varies by OE. But it's possible that we have some volume move from Q4 to Q1, but it's not a big number, but it will take margin with it, of course. Just be whatever that might move. And we don't see that it is yet. We're just stating it's a risk.

Okay. Last quick one. Do you guys have any operations or sales or business in the Middle East region or Israel region?

We do not. It's a terrible thing that's happening there, but we're not impacted -- our company is not impacted by it.

Okay. That’s all I have for today. Thanks.

Thanks, Tom.

Thank you.

And the next question will be from Barry Haimes from Sage Asset Management. Please go ahead.

Thanks so much for taking the question. Can you hear me?

Yes.

Okay. Great. I had one quick question on the unprofitable or very low profitable contracts. Could you talk about how many of those there are and what sort of duration there is. I am harkening back Harold to your previous situation where some of those truck contracts lasted for a while before you could get out of them. So I would love to get some color around what kind of duration we're looking at? Thanks.

And you're correct. The contracts have notification periods. It crosses yes, how many customers does it involve good -- I don't know that, but I'll estimate it that it's between 10 and 20. And we also have a situation where my predecessor did notify a few of the big ones before I got here, so the notification period has begun. And as I stated earlier on one of the questions, I think it was to Rob, we're acting upon all of them. We're actively engaged on all of these matters right now, and our goal is to make significant improvement during 2024. So I don't believe there's a contract that would push us into 2025, but we have to use our judgment because a lot of these situations are with customers that where we make money in one place and lose money in one, and you have to kind of negotiate the whole deal. So they require a negotiated outcome, but we have a base plan underway right now that's within our control and will deliver significant improvement to our current run rate. Said differently, the results we reported have a big loss within them. So we're trying to rectify that. The double win for us, Barry, would be -- it will be when not only do we get rid of the problem, but we refill the capacity with profitable business. So it's good capacity, and we intend to use it in new business pursuits.

Great. Thanks so much and congrats on all progress so far.

Thank you, Barry.

And our next question is from Peter Sidoti from Sidoti & Company. Please go ahead.

Hi, Harold. Two quick questions. What's the economic assumptions you're making for the next 12 to 18 months, just for the general economy.

The vehicle outlook, you probably know them very well. The commercial vehicle outlook is for slightly less heavy-duty trucks, but stable medium-duty kind of work trucks. On the passenger vehicle side, it's going to be heavily dependent on rates, but we adopt third-party outlooks on vehicles, which is a steady outlook for us. Overall, globally, it varies by market in China. Thankfully, we're tethered to the electric vehicle government mandates that are underway. And so we're benefiting from that both in new business and existing business. In Europe, we have a smaller business and it's steady. And in Brazil, we have a nice business there and several big OEs that we're partnered with the product, the vehicle platforms we're on our growth platforms. And in North America is where our support is as a company, where we're going with the market evolution. We're not placing a bet on the type of vehicle powertrain. So we're balancing our portfolio between combustion engine, hybrid and electric, so that no matter the end customer choice, we have an ability to win there. And so that's a big thing that the transformation plan is doing is balancing our forward risk. And so we're being very careful to tether ourselves to growth platforms. Overall, vehicles, as you know, right now, there's not a lot of firm outlook, but we're basically assuming in North America a stable number of vehicles made.

Okay. And my other question, you've played this game before. As it relates to turnarounds, how does this run rate to the ones you've worked in the past and what's the timing in terms of when you think you'll get to? What inning are you in? And what's the timing on finishing where you want to get to?

Yes. Good question, Peter. We're right at the front end, very front end here. And this particular company had a lot of operational opportunity to improve on flat sales. So the results we just turned in, as Mike mentioned, had a -- was it $4 million in the quarter, Mike, versus prior year cost-out?

Correct.

Yeah. So a big number, and we're still going after that number. And on top of it, the company was rolling with money-losing situations. And so the juice, if you will, on the existing business as it is, is bigger than normal. So there's a larger opportunity than normal to grow profit without hitting a home run, if you will, in the sales arena. On the sales side, it's a little harder than than my just prior company, Peter, because we weren't aligned properly. That's very fixable, and we're doing that right now, hiring people, swapping out people. So a degree of difficulty versus the prior company, where I led the turnaround there, what you know of it's, I'd say, slightly easier here, slightly easier. We have a great team. We have great products. We're really good at what we do. We make sub-micron level machine parts and stamp parts. In other words, at the nanometer level, submicron, not very people can do that. We're vertically integrated. We're digging in on this medical thing. So I believe that our -- we have strong profit potential here, stronger than the last company I was at because they were not vertical, mainly an assembler. We are vertical in what we do. And so we control our own destiny as a manufacturer. So I think that our profits can benefit from that. And given that we had so much opportunity, if you will, not optimize when I came into it, it was not optimized operationally, not. And so Tim French has done this before, David Harrison have, I have and the team here, we've rallied together. And you can see 1 quarter we made a big difference. So we're committed to keeping on with that and adding to it new wins. And so I believe it's very doable, Peter, and it's not going to take forever, but we'll have to report results as we go. Q - Peter Sidoti Okay. Thank you very much, sir.

Thank you, Peter.

And ladies and gentlemen, this does conclude our question-and-answer session. I would like to turn the conference back over to Harold Bevis for any closing remarks.

I appreciate it, and thank you to the investors on the phone, and thank you for being patient with NN and investing in our company. We very much believe in the words that we spoke on behalf of the team today, and we look forward to delivering against our plans and exceeding your expectations. And with that, we'll conclude the call for today, Chad.