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Item 2. Management’s Discussion and Analysis

2025-10-29 compared with 2025-08-07 · 69 added, 78 removed, 160 unchanged (48% of the section changed)

1 unchanged sentence

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of NN, Inc.

and its consolidated subsidiaries for the three and six months ended June 30, 2025.

The financial information as of June 30, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our 2024 Annual Report, and the Condensed Consolidated Financial Statements included in this Quarterly Report.

and its consolidated subsidiaries for the three and nine months ended September 30, 2025.

The financial information as of September 30, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our Form 10-K for the year ended December 31, 2024 (“2024 Annual Report”), and the Condensed Consolidated Financial Statements included in this Quarterly Report.

Forward-Looking Statements

47 unchanged sentences

Results of Operations

Three Months Ended June 30, 2025 compared to the Three Months Ended June 30, 2024

Three Months Ended September 30, 2025 compared to the Three Months Ended September 30, 2024

Consolidated Results

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change

6 unchanged sentences

Interest expense 5,666 5,404 262

Loss on extinguishment of debt 3,007 — 3,007

Other income, net (70) (5,315) 5,245

Loss before benefit (provision) for income taxes and share of net income from joint venture (9,509) (4,559) (4,950)

Benefit (provision) for income taxes (774) 215 (989)

Loss before provision for income taxes and share of net income from joint venture (7,843) (3,839) (4,004)

Provision for income taxes (815) (903) 88

Share of net income from joint venture 1,979 2,185 (206)

Net loss $ (6,679) $ (2,557) $ (4,122)

Net sales decreased by $15.1 million, or 12.3%, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $0.7 million.

These decreases were partially offset by contribution of new business launches and higher precious metals pass-through pricing.

Net sales decreased by $9.7 million, or 8.5%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to the rationalization of underperforming business and plants and lower volumes.

These decreases were partially offset by contribution of new business launches, higher precious metals pass-through pricing and favorable foreign exchange effects of $0.8 million.

Cost of Sales.

Cost of sales decreased by $11.6 million, or 11.4%, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to the decrease in sales.

Cost of sales decreased by $10.7 million, or 11.0%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to the decrease in sales.

Selling, General, and Administrative Expense.

Selling, general, and administrative expense decreased by $1.4 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to lower compensation expense related to lower headcount.

Selling, general, and administrative expense increased by $0.8 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to payroll and benefits compensation expense related to increase in expected bonus payments in our Power segment.

Depreciation and amortization .

Depreciation and amortization decreased by $2.8 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.

Depreciation and amortization decreased by $1.8 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.

Interest Expense.

Interest expense decreased by $0.2 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to lower average debt balances, lower interest rates and lower amortization of debt issuance costs.

These reductions were partially offset by the gain recognized on interest rate swap in 2024.

Three Months Ended June 30,

Interest expense increased by $0.3 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to average debt balances, interest rates and amortization of debt issuance costs.

Three Months Ended September 30,

Interest on debt $ 5,724 $ 4,990

4 unchanged sentences

Total interest expense $ 5,666 $ 5,404

Loss on Extinguishment of Debt.

Loss on extinguishment of debt was $3.0 million during the three months ended June 30, 2025 due to the termination of the 2021 Term Loan Facility, see Note 7 to the Condensed Consolidated Financial Statements.

Other Income, Net.

Other income, net decreased by $2.8 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to lower noncash derivative mark-to-market losses recognized during the current quarter compared to the second quarter of 2024.

Benefit (Provision) For Income Taxes .

Our effective tax rate was (8.1)% for the three months ended June 30, 2025, compared to 4.7% for the three months ended June 30, 2024.

The rate for the three months ended June 30, 2025 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation of the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Other income, net decreased by $5.2 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to lower noncash derivative mark-to-market losses recognized during the current quarter compared to the third quarter of 2024.

Provision For Income Taxes .

Our effective tax rate was (10.4)% for the three months ended September 30, 2025, compared to (23.5)% for the three months ended September 30, 2024.

The rate for the three months ended September 30, 2025 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation of the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Share of Net Income from Joint Venture.

Share of net income from the JV was unchanged during the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The JV, in which we own a 49% investment, recognized net sales of $31.6 million and $31.6 million for the three months ended June 30, 2025 and 2024, respectively.

Share of net income from the JV was decreased during the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

The JV, in which we own a 49% investment, recognized net sales of $33.3 million and $32.4 million for the three months ended September 30, 2025 and 2024, respectively.

Results by Segment

MOBILE SOLUTIONS

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change

1 unchanged sentence

Loss from operations $ (2,854) $ (1,441) $ (1,413)

Net sales decreased by $9.5 million, or 13.0%, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to rationalized volume, lower volume and unfavorable foreign exchange effects of $0.3 million.

Loss from operations decreased by $0.5 million during the three months ended June 30, 2025, compared to the same period in the prior year, primarily due to lower depreciation expense partially offset by lower revenue.

Net sales decreased by $11.6 million, or 16.4%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to rationalization of underperforming business and plants, lower volume in North America customers and favorable foreign exchange effects of $0.8 million.

Loss from operations increased by $1.4 million or 98.1% during the three months ended September 30, 2025, compared to the same period in the prior year, primarily related to reduced revenue resulting in lower gross profits and an increase in China related operational costs.

POWER SOLUTIONS

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change

1 unchanged sentence

Income from operations $ 5,432 $ 2,505 $ 2,927

Net sales decreased by $5.5 million, or 11.0%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $0.4 million.

These decreases were partially offset by higher precious metals pass-through pricing.

Income from operations increased by $0.5 million during the three months ended June 30, 2025 compared to the same period in the prior year, primarily due to the lower compensation costs due to headcount reduction, partially offset by lower revenues and the sale of the Lubbock operations in 2024.

Six Months Ended June 30, 2025 compared to the Six Months Ended June 30, 2024

Net sales increased by $2.0 million, or 4.7%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, due to increase in precious metals pass-through pricing offset by lower volumes and favorable foreign exchange effects of $0.1 million.

Income from operations increased by $2.9 million during the three months ended September 30, 2025 compared to the same period in the prior year, primarily due improved margins and lower compensation costs due to headcount reductions.

Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 2024

Consolidated Results

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change

7 unchanged sentences

Loss on extinguishment of debt 3,007 — 3,007

Other expense (income), net (2,788) 692 (3,480)

Other income, net (2,858) (4,623) 1,765

Loss before provision for income taxes and share of net income from joint venture (25,167) (22,700) (2,467)

2 unchanged sentences

Net loss $ (21,466) $ (17,297) $ (4,169)

Net sales decreased by $30.6 million, or 12.5%, during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations, lower volumes and unfavorable foreign exchange effects of $3.5 million.

Net sales decreased by $40.3 million, or 11.3%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations, lower volumes and unfavorable foreign exchange effects of $2.7 million.

These decreases were partially offset by contribution of new business launches and higher precious metals pass-through pricing.

Cost of Sales.

Cost of sales decreased by $21.0 million, or 10.4%, during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to the decrease in sales.

Cost of sales decreased by $31.7 million, or 10.6%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to the decrease in sales.

Selling, General, and Administrative Expense.

Selling, general, and administrative expense decreased by $3.6 million during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to lower compensation expense due to a reduction in headcount.

Selling, general, and administrative expense decreased by $2.8 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to lower compensation expense due to a reduction in headcount.

Depreciation and amortization .

Depreciation and amortization decreased by $6.6 million during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.

Depreciation and amortization decreased by $8.4 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.

Interest Expense.

Interest expense decreased by $0.4 million during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to lower average debt balances and lower interest rates.

Interest expense decreased by $0.1 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to lower average debt balances and lower interest rates.

These reductions were partially offset by the gain recognized on interest rate swap in 2024 and a lower amount of capitalized interest during 2025.

Six Months Ended June 30,

Nine Months Ended September 30,

Interest on debt $ 15,506 $ 16,345

5 unchanged sentences

Loss on Extinguishment of Debt.

Loss on extinguishment of debt was $3.0 million during the six months ended June 30, 2025 due to the termination of the 2021 Term Loan Facility, see Note 7 to the Condensed Consolidated Financial Statements.

Other Expense (Income), Net.

Other expense (income), net changed favorably by $3.5 million during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to noncash derivative mark-to-market gains recognized during 2025 and favorable foreign exchange effects associated with intercompany borrowings.

Benefit (Provision) for Income Taxes.

Our effective tax rate was (12.0)% for the six months ended June 30, 2025, compared to (1.5)% for the six months ended June 30, 2024.

The rate for the six months ended June 30, 2025 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on the

amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Loss on extinguishment of debt was $3.0 million during the nine months ended September 30, 2025 due to the termination of the 2021 Term Loan Facility, see Note 8 to the Condensed Consolidated Financial Statements.

Other Income, Net.

Other income, net changed unfavorably by $1.8 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to noncash derivative mark-to-market gains recognized during 2025 and unfavorable foreign exchange effects associated with intercompany borrowings.

Provision for Income Taxes.

Our effective tax rate was (11.5)% for the nine months ended September 30, 2025, compared to (5.3)% for the nine months ended September 30, 2024.

The rate for the nine months ended September 30, 2025 was

unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Share of Net Income from Joint Venture.

Share of net income from the JV increased by $0.2 million during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to higher sales and increased margin partially offset by higher fixed costs, depreciation and interest expense.

The JV, in which we own a 49% investment, recognized net sales of $64.3 million and $62.7 million for the six months ended June 30, 2025 and 2024, respectively.

Share of net income from the JV remained unchanged during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.

The JV, in which we own a 49% investment, recognized net sales of $97.7 million and $95.1 million for the nine months ended September 30, 2025 and 2024, respectively.

Results by Segment

MOBILE SOLUTIONS

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change

1 unchanged sentence

Loss from operations $ (6,651) $ (5,214) $ (1,437)

Net sales decreased by $20.3 million, or 13.9%, during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to rationalized volume, lower volume and unfavorable foreign exchange effects of $2.2 million.

Loss from operations was unchanged at $3.8 million during the six months ended June 30, 2025 and 2024.

The decrease in depreciation expense was offset by the lower revenues.

Net sales decreased by $31.8 million, or 14.7%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to rationalization of underperforming business and plants, lower volume in North America customers and unfavorable foreign exchange effects of $1.5 million.

Loss from operations increased by $1.4 million or 27.6% during the nine months ended September 30, 2025 and 2024, primarily related to lower gross profits and an increase in China costs.

POWER SOLUTIONS

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change

1 unchanged sentence

Income from operations $ 14,237 $ 11,804 $ 2,433

Net sales decreased by $10.2 million, or 10.4%, during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $1.3 million.

Net sales decreased by $8.2 million, or 5.8%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $1.2 million.

These decreases were partially offset by higher precious metals pass-through pricing.

Income from operations decreased by $0.5 million during the six months ended June 30, 2025 compared to the same period in the prior year, primarily due to the sale of our Lubbock operations and lower sales.

These decreases were partially offset by lower compensation costs and higher precious metals pass-through pricing

Changes in Financial Condition from December 31, 2024 to June 30, 2025

From December 31, 2024 to June 30, 2025, total assets increased by $3.9 million primarily due to increases in accounts receivable, property, plant and equipment and our investment in a joint venture.

These increases were partially offset by decreases in intangible assets due to amortization.

From December 31, 2024 to June 30, 2025, total liabilities increased by $9.8 million, primarily due to increases in accounts payable, other current liabilities and long-term debt.

Income from operations increased by $2.4 million during the nine months ended September 30, 2025 compared to the same period in the prior year, primarily due to lower compensation costs and higher precious metals pass-through pricing.

This increase was partially offset by the sale of our Lubbock operations.

Changes in Financial Condition from December 31, 2024 to September 30, 2025

From December 31, 2024 to September 30, 2025, total assets decreased by $5.9 million, primarily due to decrease in property, plant and equipment, right-of-use assets, intangible assets offset by increases in accounts receivable and inventories.

From December 31, 2024 to September 30, 2025, total liabilities increased by $5.2 million, primarily due to increases in accounts payable, other current liabilities and long-term debt.

These increases were partially offset by a decrease in accrued salaries, wages and benefits due to reduced compensation costs.

Working capital, which consists of current assets less current liabilities, decreased by $0.8 million, from December 31, 2024 to June 30, 2025.

The change was primarily due to an increase in accounts receivable and a decrease in accrued salaries, wages and benefits, partially offset by increases in accounts payable and other current liabilities.

Cash used in operations was $4.0 million for the six months ended June 30, 2025, compared with $0.6 million for the six months ended June 30, 2024.

The unfavorable change is primarily due to lower gross margin contributions due to lower sales, and an increase in working capital.

Cash used in investing activities decreased by $1.6 million during the six months ended June 30, 2025, compared with the same period in 2024, due to lower purchases of property, plant and equipment in 2025.

Cash provided by financing activities was unchanged at $1.6 million during the six months ended June 30, 2025 and 2024.

The increase in proceeds from the new term loan in 2025 was offset by the proceeds from the sale-leaseback transactions in 2024.

Working capital, which consists of current assets less current liabilities, decreased by $4.6 million, from December 31, 2024 to September 30, 2025.

The change was primarily due to a decrease in cash and accrued salaries, wages and benefits offset by an increase in accounts payable and other current portion of debt.

Cash provided by operations was $7.1 million for the nine months ended September 30, 2025, compared with $4.4 million for the nine months ended September 30, 2024.

The favorable change is primarily due to improved management of working capital.

Cash used in investing activities decreased by $11.1 million during the nine months ended September 30, 2025, compared with the same period in 2024, due to sale of business in 2024 and fewer purchases of property, plant and equipment in 2025.

Cash used in financing activities decreased by $10.4 million during the nine months ended September 30, 2025 and 2024.

The increase in proceeds from the new term loan in 2025 resulted in a decrease in net debt payments, which was offset by the proceeds from the sale-leaseback transactions in 2024 that did not occur in 2025.

Liquidity and Capital Resources

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We used the net proceeds from the Closing Date Term Loan to repay all of our outstanding obligations under our previous 2021 Term Loan Facility.

The principal amount outstanding under our Term Loan Facility as of June 30, 2025, was $118.9 million, without regard to unamortized debt issuance costs and discount.

As of June 30, 2025, we had $5.0 million outstanding borrowings under the ABL Facility and $24.2 million available for future borrowings under the ABL Facility.

This amount of borrowing capacity is net of $10.9 million of outstanding letters of credit at June 30, 2025, which are considered as usage of the ABL Facility.

The principal amount outstanding under our Term Loan Facility as of September 30, 2025, was $119.8 million, without regard to unamortized debt issuance costs and discount.

As of September 30, 2025, there were no outstanding borrowings under the ABL Facility and $29.3 million available for future borrowings under the ABL Facility.

This amount of borrowing capacity is net of $10.4 million of outstanding letters of credit at September 30, 2025, which are considered as usage of the ABL Facility.

Outstanding borrowings under the Term Loan Facility currently bear interest at either:

8 unchanged sentences

We pay a commitment fee of 0.25% for unused capacity under the ABL Facility.

We were in compliance with the financial covenants of the Term Loan Facility and ABL Facility as of June 30, 2025.

We were in compliance with the financial covenants of the Term Loan Facility and ABL Facility as of September 30, 2025.

Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.

9 unchanged sentences

Accounts Receivable Sales Programs

We participate in programs established by our customers which allows us to sell certain receivables from that customer on a non-recourse basis to a third-party financial institution.

In exchange, we receive payment on the receivables, less a discount, sooner than under the customary credit terms we have extended to that customer.

We participate in programs established by our customers and financial institutions which allow us to sell certain receivables from customers on a non-recourse basis to a third-party financial institution.

In exchange, we receive payment on the receivables, less a discount, sooner than under the customary credit terms we have extended to customer.

These programs allow us to improve working capital and cash flows at the same or lower interest rates as available on our ABL Facility.

Our access to these programs is dependent on our customers’ ongoing agreements with the third-parties.

Our participation in these programs is based on our specific cash needs throughout the year, the discount charged to receive payment earlier, the length of the payment terms with our customers, as well being subject to limits in our ABL Facility and Term Loan Facility agreements.

Other Receivables

In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act.

Including interest accrued on the initial refund amount, we have a $12.6 million tax refund receivable at June 30, 2025, which is being processed for refund at the IRS service center.

The timing of the receipt of the refund is expected in 2025.

In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

Including interest accrued on the initial refund amount, we have a $12.7 million tax refund receivable at September 30, 2025, which is being processed for refund at the IRS service center.

Seasonality and Fluctuation in Quarterly Results

5 unchanged sentences

Our most critical accounting estimates are discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Annual Report.

There have been no material changes to our significant accounting policies or critical accounting estimates during the six months ended June 30, 2025.

There have been no material changes to our significant accounting policies or critical accounting estimates during the nine months ended September 30, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis