Good morning, and welcome to the NN, Incorporated First Quarter 2022 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the call over to Jeff Tryka. Please go ahead.

Thank you, Operator. Good morning, everyone, and thanks for joining us. I'm Jeff Tryka, Investor Relations contact for NN, Inc., and I'd like to thank you for attending today's business update. Yesterday afternoon, we issued a press release announcing our financial results for the first quarter ended March 31, 2022, as well as a supplemental presentation, which have 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 Lambert & Company at (315)-529-2348. Our presenters on the call this morning will be Warren Veltman, President and Chief Executive Officer; and Mike Felcher, Senior Vice President and Chief Financial Officer. Before we begin, I 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, 2021. 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, input cost inflation, supply chain constraints, the impact of the automotive semiconductor chip shortage, 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 pandemic and the Russian-Ukrainian conflict on the company's financial conditions 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 tables in the final section of the press release and the supplemental presentation. Reviewing the agenda for today's call, Warren will provide a business update from the first quarter then Mike will provide a detailed update for the financial results. Before turning the call back over to Warren to discuss our segment results and markets as well as the outlook for the remainder of the 2022 fiscal year, there will be a Q&A session following the conclusion of the prepared remarks. At this time, I would like to turn the call over to Warren Veltman, President and CEO. Warren?

Thanks, Jeff, and good morning, everyone. If you would turn to Page 5, we will review some of the highlights and accomplishments of our team during the first quarter of 2022. I am pleased with the results for the quarter. Our sales were up 1% over a very strong first quarter last year, and we generated $13.4 million in adjusted EBITDA, which is our best result since the strong first quarter of last year. Additionally, we posted a solid progression from Q4 2021 to Q1 2022. Sales grew by $17.7 million or 16% sequentially, and our adjusted EBITDA and adjusted operating margin improved by 130 basis points. Our results were impressive given several headwinds experienced during the quarter. First, COVID-19 continued to impact our operations. Employee absenteeism in several of our North American facilities reached a peak during Q4 2021 and early Q1 2022 as the Omicron variant spread throughout the United States. This absenteeism and other supply chain interruptions, including those related to semiconductor chips, continue to place pressure on our ability to operate efficiently. Second, our first quarter cost structure was adversely impacted by inflationary cost pressures. Our sales team did a tremendous job concluding numerous customer negotiations to secure additional pricing to mitigate a substantial majority of the inflation impact. Likewise, our operations teams maintained strong delivery and quality metrics in spite of the difficult first quarter environment. The inflationary cost pressures have impacted our materials, labor, manufacturing supplies, and utilities, among other cost drivers. The nature of our customer ordering patterns in Power Solutions, which is typically through discrete POs versus long-term supply agreements, allows us an opportunity to recover nearly all inflationary costs. Mobile Solutions customer relationships are typically governed by long-term agreements, which have required more direct customer negotiation and interaction. We have been successful in securing 100% pass-through on material costs for most mobile customers. As for labor and other cost inflation, we have continued to work with our Mobile Solutions customers on balancing cost recovery with expectations for productivity gains within those relationships. Free cash flow was a use of $9.5 million this quarter, driven by increased accounts receivable as a result of the sequential increase in sales. Our net debt and liquidity remained within our target ranges at the end of the first quarter. On Page 6, we will review our sales pipeline, which grew 149% compared to the prior year. Consistent with our long-term goals, we saw electric vehicle projects in our pipeline increased from 6% of the total pipeline a year ago to 29% of the current pipeline. Likewise, residential and commercial electrical increased from 8% to 13%. Conversely, we have seen automotive gasoline-dependent pipeline decreased from 31% to 14%. These movements are aligned with our strategic focus on electric vehicle and electric grid opportunities with more selective pursuit of gasoline-dependent opportunities with higher return on invested capital expectations. Now I'd like to turn it over to Mike Felcher, so he can provide a more in-depth review of our financial performance for the quarter. Mike?

Thanks, Warren. Turning to Page 7, we have summarized some of the key items for the quarter. Sales for the quarter were $128.1 million, up 1% from the strong performance of a year ago and up $17.7 million or 16% sequentially, inclusive of pricing actions. We saw resilience in our Power Solutions group, resulting in year-over-year revenue growth of 6% for the segment. This growth was offset by a 2.2% decrease in revenues in the Mobile Solutions business due to decreased demand stemming from the continued supply constraints, which affected us most in the automotive sector, including our Tier 1 supplier customers. Throughout the first quarter of 2022, we continued to face inflationary cost pressures on material and labor. Results were also impacted by operational inefficiencies due to supply chain disruption, particularly with automotive supplier customers impacted by the ongoing semiconductor chip shortage and COVID-19 pandemic-related employee absenteeism. Our Power Solutions result also include a $1.8 million charge related to an agreement to settle breach of contract claims brought by a former customer regarding the sale of products by us in 2016. Non-GAAP adjusted EBITDA for the first quarter was $13.4 million or 10.5% of sales, down from $16.9 million or 13.3% of sales a year ago. Our EBITDA margin was adversely impacted by material and labor cost inflation. Although we passed the majority of these costs on to customers through price increases, those increases were often done at zero margin and therefore had a dilutive effect of approximately 60 basis points on our adjusted EBITDA margin. Lower inventory absorption also reduced margins by approximately 50 basis points. GAAP diluted EPS was a loss of $0.13 for the quarter versus a loss of $0.46 per share in the first quarter of 2021. Our current quarter results reflect a $2.9 million increase in other income, primarily due to warrant revaluation and a $0.7 million increase in our share of income from our China joint venture, partially offset by higher interest expense of $1.4 million. The first quarter of 2021 included a loss of $6.1 million in connection with our refinancing for the write-off of debt issuance costs and costs associated with terminating an interest rate swap. Our non-GAAP adjusted diluted EPS was breakeven versus income of $0.05 per share in the prior year. Turning to Slide 8, our working capital turns improved by 0.2 turns in the first quarter from the fourth quarter of 2021. Inventory remains above normal levels due to safety stock needed to address increased lead times due to the ongoing semiconductor shortages as well as other supply chain issues. The carrying amount of our inventory has also increased due to the material inflation we have experienced. We remain focused on managing working capital to ensure our ability to serve our customers while anticipating a return to more normal levels as the current supply chain issues return to historical trends. Turning to Slide 9, we provide a look at our continued disciplined approach that we have taken to capital expenditures over the past year as we fund investments in our long-term growth. You can see on an absolute basis we have decreased CapEx compared to 2021, down to $4.3 million from $5.5 million last year. We are still projecting full year CapEx to come in between $20 million and $22 million. Slide 10 shows our free cash flow for the quarter. Free cash flow was a use of $9.5 million in the first quarter of 2022 compared to free cash generated of $2.4 million in the prior year. Free cash flow in the quarter was primarily driven by an $18 million increase in accounts receivable as a direct result of the sequential revenue growth of $17.7 million from the fourth quarter. In addition, we incurred approximately $1.8 million in cash costs for the final Life Sciences tax payment, severance, and litigation costs during the quarter. These cash outflows were partially offset by $3.6 million received from the China JV dividend, net of tax. Regarding our previously expected receipt of our CARES Act tax refund, the timing of receipt continues to be uncertain as the refund is in the IRS review process. Please turn to Slide 11. Net debt at the end of the first quarter was $141 million versus $123.3 million in the prior year, an increase of $17.7 million. The year-over-year increase was mainly due to the reduction of our cash balances from the prior year, which was driven by higher working capital and tax payments associated with the sale of Life Sciences. Our net debt to adjusted EBITDA ratio stood at 2.9x at the end of the first quarter, up from 2.3x a year ago and still below our 3x target. We had $58.4 million of liquidity, including cash and availability on our ABL as of March 31, 2022, which was a decrease of $6.3 million from Q4 2021, driven by our use of free cash flow in Q1 2022 due to our sequential sales growth and increase in accounts receivable previously noted. With that, I will turn it back to Warren.

Thank you, Mike. On Page 13, we broadly outline our view of current market conditions within each of the main markets. Within automotive, we continue to see supply chain challenges related to the ongoing semiconductor chip shortage as well as new factors relating to the recent COVID outbreak in China and the impact of the Russia-Ukraine war on overall light vehicle production. The semiconductor chip shortage has impacted global auto and light truck production, resulting in continued uncertainty for the industry over the near term. The 2022 base production outlook has been revised down to 81.6 million units or up 6% from 2021 with a lower boundary of 77.1 million or effectively flat over 2021. Volume disruptions related to the semiconductor issue are expected to decrease sequentially from approximately 2 million units per quarter in the first quarter to approximately 500,000 units in the fourth. The transition to EVs continues to gather momentum with significant OEM investment, including additional shifts in their employee compensation plan design to support EV development and commercialization. We are well positioned to support the growth in EVs through both our Mobile and Power Solutions group. Within the electrical space, we see rapid transformation of the energy and electrical equipment markets with a three-pronged focus on decarbonization, decentralization, and digitization. Governments around the world are changing policies and implementing incentives to accelerate the adoption of sustainable energy. The Edison Institute expects that U.S. utilities will invest approximately $140 billion annually over the next two years to meet government-mandated renewable energy goals as well as to improve grid infrastructure to meet increasing demand. We have presented additional information for each of our operating groups, starting with Mobile Solutions on Page 14. Mobile Solutions sales fell 2.2% in the first quarter from one year ago, primarily due to lower sales volumes stemming from supply constraints as well as comparisons to a strong first quarter of 2021, which reflected demand driven by pandemic recovery. This was partially offset by pass-through price increases and favorable FX exchange rates. The lower profitability during the quarter was driven by variable cost inefficiencies associated with supply chain interruptions, uneven customer ordering patterns, and labor constraints caused by COVID-19 pandemic-related interruptions, particularly in January. The prior year also included higher overhead absorptions associated with an inventory build. Finally, our pricing actions on the mobile side primarily reflect material cost recovery at zero margin. Looking forward, customer demand has continued to improve. However, the semiconductor chip shortage, the reemergence of COVID-19 in China, and the Ukrainian-Russian conflict continue to present risks to demand. We continue to negotiate with customers with the expectation of additional inflationary cost recoveries. To protect cash flow, we are actively managing working capital and capital expenditures. On Page 15, our Power Solutions group experienced a healthy year-over-year increase in sales in the first quarter, which was driven by stronger demand for electric components for residential, commercial, and general industrial applications, including inflationary pricing actions. Profitability in Power Solutions was adversely impacted by manufacturing cost inefficiencies associated with mix shifts, continued supply chain interruptions, and labor constraints due to COVID-19-related absenteeism. The closure and consolidation of our Taunton, Massachusetts facility is proceeding on schedule. Similar to Mobile Solutions, we remain protective of cash flow by managing working capital and CapEx needs within Power Solutions. Turning to Page 16, we are reaffirming our guidance for 2022. For the full year, we are anticipating net sales to increase between 8% and 13% from 2021, resulting in net sales in the range of $515 million to $540 million. We anticipate that the semiconductor shortage and supply chain issues will remain a headwind throughout the first half of the year with a gradual recovery in the second half of the year. Our guidance does not anticipate production disruptions due to COVID-19 beyond the first quarter, nor does it reflect any significant disruptions that may arise due to the Russian-Ukrainian conflict. Based on these assumptions, we expect to generate non-GAAP adjusted EBITDA in the range of $57 million to $63 million for the full year, an increase of 9% to 21%. Turning to free cash flow, we expect to generate between $14 million and $20 million for the full year. Our guidance includes approximately $7 million of cash outflows for the final Life Sciences tax payment, FICA deferral repayments, litigation, severance, and facility closure costs. This amount increased by $1 million from our initial outlook as a result of a settlement agreement we executed with a former customer. As noted previously, our guidance does not include the expected CARES Act tax refund of approximately $10 million due to the uncertainty of timing of receipt given it is in the IRS review process. In summary, our team remained diligent throughout the quarter in executing in a challenging environment and negotiating pricing with customers. We continue to build a pipeline of strategic opportunities to drive future sales and maintain the strength of our balance sheet to support our long-term growth. We still have a number of challenges and uncertainties ahead of us, but we will continue to make the measured investments necessary to improve our operations and meet the current and future needs of our customers, which is the key to our future success. Lastly, I'd like to provide an update on our upcoming virtual Investor Day on May 20. We have been working hard on this event and hope that providing the opportunity to meet with our management team and to see videos from a number of our global facilities will provide you with a better sense of our overall strategic direction and the growth we expect to achieve in the coming years. You can register for the event on the Investor Relations section of our website at investors.inninc.com. That concludes our prepared remarks, and I will now turn the call back to the operator for questions.

[Operator Instructions] Our first question comes from Rob Brown with Lake Street Capital. Please go ahead.

Hi, good morning. Thanks for taking the call. On the EV growth pipeline, had good growth there in the quarter. Could you give us just a sense of sort of what's happening, are you just having more opportunities because they're happening in the market? Or have you adjusted your sales effort and developed new products around that market? But just sort of what's driving that growth sort of more specifically?

Sure. Good morning, Rob. Thanks for the question. I think it's really a combination of both. Certainly, our focus has changed over the last 18 months as it relates to the programs that we're pursuing. We've made a concerted effort to expand our sales team to pursue these types of activities. We've refocused them away from some of the applications that might be more dependent on internal combustion engines. We've done that by changing the parameters internally, whereby we would accept that type of business. We've increased the requirements surrounding the return on invested capital goals for that type of business as well as some of the contract parameters surrounding it as it relates to term and other issues. So our focus clearly has been on the electrical grid and the EV, and our teams have reacted accordingly.

Okay, great. That's helpful. And then in terms of the supply chain and some of the chip shortage stuff, have you seen that getting better throughout so far in Q2 here? Or is it still about the same, and you're sort of looking to the customer signals for the back half of the year? I guess, just sort of what's the more real-time update on some of the supply?

Yes. Look, I think if you look at the chart that we had, I think on the mobile update, it shows that there has been some consistency of that at 2 million units. So it has -- I think it's stabilized at the current level. Our understanding, based on analyzing the market, talking to people in the market, including experts is that we still expect some of that disruption. But as I said, we expect it to get better throughout the year and gradually come down to the $500,000 range as it relates to the potential disruption in the fourth quarter. We're still seeing our customers reacting to outages with some inconsistent demand signals where we'll run hard for a period of time, and then we'll have to dial it back because they might not be ready as it relates to needing some more of our parts.

This now concludes our question-and-answer session. I would like to turn the conference back over to Warren Veltman for any closing remarks.

I'd like to just thank everybody for their time today. Thanks for dialing into the call, and we definitely hope to speak to everyone again on our upcoming Investor Day on May 20. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.