Description

NN was written up in 2021 by ATM and covers the business as well as issues plaguing the company at the time. Today is a new day at NN and with a new management team and a few strong quarters under their belt, this idea deserves another look, especially at today's valuation. For those familiar with the business, relevant sections include Background / Strategy / Management / Valuation.

NN, Inc. is a plastic and metal components manufacturer currently undergoing a strategic transformation designed to increase profitability and return the business to organic growth. I believe potential upside is greater than 100% within the next 12-24 months. After spending a good portion of the 2010s destroying both shareholder value and their public market reputation, two activist funds, currently the largest shareholders, worked hard to institute significant changes at both the management and Board levels, resulting in a new CEO being hired in May of last year. Despite past transgressions, along with COVID related woes, today is a new day for NN, evidenced by the past three quarters showing tremendous progress both operationally and financially. With an incentivized management team and plenty of low-hanging fruit to address, upside is significant even before NN wins new business and returns to organic growth. At less than 7.0x the mid-point of management’s guide for FY2024 EBITDA, and already in-progress initiatives to boost that number significantly, I believe cash flow is at an inflection point and shares could re-rate sharply within the next 12-24 months on the way to NN returning itself to a respectable industrial business.

Background

NN was founded in the 1980s as a manufacturer of metal balls, rollers and bearings for the auto industry. The company remained cyclical and overly exposed to the automotive market until the 2010s, when prior CEO Richard Holder embarked on a new strategic growth plan in order to diversify the business. Unfortunately, he went about it by acquiring a handful of businesses with limited synergies and integration challenges and levered up to do so.

Between 2014 and 2018, management spent $1.4 billion acquiring five businesses, with Autocam (system critical components for vehicles, 8.6x EBITDA), Precision Engineered Products (‘PEP’) (high precision plastic and metal components, 14.1x EBITDA) and Paragon Medical being the three largest. NN was forced to divest Paragon Medical (within their Life Sciences segment) during COVID in order to pay down debt and stave off bankruptcy. More on that below. Autocam and PEP are basically the remaining pieces of NN, both of which were acquired using absurd amounts of leverage (5.6 turns for Autocam and 8.1(!) turns for PEP) for a total of $920mm. As a result, NN as a whole was levered 6.1x at the end of 2018.

These acquisitions were successful in diversifying the business away from auto, especially with the new medical products segment, and sales, operating income and free cash flow all increased between 2013 and 2017. However, very shortly after these deals, NN whiffed on 2018 financial targets for both EPS ($4.00 target vs. current guide of $1.25-$1.30) and operating margins (14% target vs. current guide of 12-12.5%) which were laid out during a 2016 Investor Day. This was the first of many issues to come.

In addition, excess leverage revealed itself to be a big problem. During the PEP acquisition, shares outstanding increased by about 30%, and total debt more than doubled from $328 million to $800 million. EBITDA peaked in 2015 on its way to declining by around 50% back to current levels. More debt as issued to acquire Paragon Medical in 2018, and EBITDA once again declined the following year. Large acquisitions that require debt and equity to fund, with no changes to business profitability is not a good formula. In addition, the business was poorly run, with inappropriate facility utilization, exorbitant staffing, no centralized procurement function, and poor portfolio management, with 1/5 of the business being operated unprofitably today.

Since these deals, the C-Suite has been a revolving door. Richard Holder was asked to step down, the CFO resigned, and an interim President and CEO, Warren Veltman was named. Veltman didn’t do much to right the ship, and according to Legion contributed to worsening the company culture, even refusing to leave his home office in Michigan despite headquarters for NN being in Charlotte. As things worsened, a cost-cutting plan was announced in late 2019, and NN entered into an agreement with activist and largest shareholder Legion Partners in order to make changes to both the Board and leadership team. In December 2019, Legion along with another large shareholder, Corre Partners, entered into a $100mm private placement to purchase $100mm Series B Convertible Preferred Stock. Corre and Legion also received warrants with a 7-year term to purchase 1,500,000 shares of common stock at $12.00 per share. The preferred stock has a 10.6% dividend payable annually. Despite the bad deal, NN had zero negotiating power at the time, and the cash was used to pay down debt. More on the capital structure below.

As NN was slowly emerging from the Richard Holder era, they were hit with the pandemic, forcing them to close their factories for a period of time, a further hit to cash flow. Despite cutting SG&A and reducing capex, NN had minimal free cash flow during 2020, while still carrying near $800mm in net debt. So as mentioned, in 2020, NN was forced to sell its Life Sciences segment for $825 million to American Securities. Most of this cash was used to pay off debt and NN went from being irresponsibly levered to under 3.0x debt/EBITDA.

The last round of financing came in 2021 when NNBR entered into a $50mm asset backed credit line, a $150mm term loan and a $65mm preferred stock issuance with JP Morgan and Oaktree Capital. The cash was used to repay the current balance of a 2022 term loan, redeem the $100mm in preferred stock and pay off an interest rate swap. Today, with a new management team in place, an improving financial situation and a refinance set to take place in the back half of this year, the current debt load is finally manageable and with an unlikely need to raise capital moving forward.

Finally, before moving on to the business, President and CEO Warren Veltman was set to retire in 2022, so the Board began looking for his replacement, where they found Commercial Vehicle Group (CVGI) CEO Harold Bevis and recruited him to join the company in May of last year. Feel free to skip to the management section given its importance here. Harold is an experienced industrials executive with a tremendous track record of creating shareholder value and was given a pay package that incentivizes him to deliver strong shareholder returns. Harold left CVGI within two weeks to move to NN headquarters and has already accomplished an incredible amount within a short period of time.

Business Overview

As mentioned, NN is a diversified industrial company that designs, manufactures, and sells high-precision metal and plastic components and assemblies. It operates in two segments, Mobile Solutions and Power Solutions, largely based on differing machining production processes.

The Mobile Solutions segment manufactures and sells system critical components for automotive and general industrial end markets for use in power steering, braking, transmissions, gasoline fuel systems, diesel injection and diesel emissions treatment applications, as well as use in HVAC systems. The Power Solutions segment designs, manufactures and sells a range of high-precision metal and plastic components, assemblies and finished devices used in various applications such as power control and transportation electrification. In 2023, Mobile Solutions generated $303 million of revenue, or 62% of consolidated revenue, while the Power Solutions segment generated $186 million of revenue, or 38% of consolidated revenue. The adjusted EBITDA split between the two segments is about 50/50, with Mobile Solutions posting around 10% EBITDA margins and Power around 15%.

NN also owns a 49% investment in Wuxi Weifu Autocam Precision Machinery Company, Ltd., a joint venture located in Wuxi, China. The JV was established in 2005, and offers R&D and manufacturing services for precision automotive parts, components, and engine control systems. In 2023, the JV recorded $109.6 million of revenue, up from $101.6 million in 2022 and had net income of $11.8 million, down from $13.5 million in 2022.

In terms of end markets, NN sells into the commercial and passenger vehicle markets, electrical markets, general industrial markets, along with aerospace and defense industries. Their products help other large machinery spin, turn, rotate, and function properly and can often be considered mission critical according to their customers. Despite the cyclicality associated with some of the automotive exposure within Mobile Solutions, there are some very attractive businesses within each segment, including the electrical market, HVAC systems, aerospace, and large parts of general industrial.

While trough margins and the appearance of some commoditized products make NN look like a traditional contract manufacturer on the surface, the company has a number of competitive strengths including barriers to entry, high switching costs, mission critical products and scale benefits.

First, there are barriers to entry. Growing product platforms for precision machining requires capital, relationships, and technical expertise. Product development cycles are long and require upfront capital prior to manufacturing. It’s very difficult to acquire customers without a strong track record and reputation of reliability given the mission critical components being made. For example, nearly half of Mobile Solutions revenues are made up of general industrial business, where NN manufacturers high precision shafting for HVAC systems and garbage disposals. This business is sticky and recurring given how difficult it is to source material and manufacture the parts. As a result, NN can take margin here as customers are effectively buying the supply chain and engineered solutions. Additionally, NN competes with fragmented, smaller competitors who are less stable and have less scale. End customers aren’t interested in that given the risk it creates for an OEM.

Second, NN has specialized technical expertise within high precision manufacturing, able to deliver single micron tolerance with its machining capabilities. This is important because the business model is design-to-prototype-to-production. Not only does NN provide engineered services, but they act as a design and development partner to their customers from sketch to scale. NN also owns the IP of the tooling, machining, and automation processes, adding proprietary value to the manufacturing process. This IP is not easily transferrable, and because NN remains closely engaged with their customer from start to finish, they create a sticky, recurring relationship with high switching costs. Given NN’s oversight of the entire process, they help simplify the customer supply chain by solving problems that are not core to the customer.

Scale is another differentiating factor. NN has a global footprint with customers and manufacturing facilities all over the world. There are only a handful of competitors, none of which are household names in NN’s markets, and none with the scale that NN possesses. This puts NN close to customer engineering centers, providing a low-cost footprint. The global manufacturing base means NN can serve a diverse base of customers around the world which has led to long standing relationships with blue chip companies. Some customers include Bosch, Denso, Siemens, Raytheon, and Delphi. The strength of these relationships were put to the test during NN’s troubles, and through COVID, and resulted in very limited customer churn. Global procurement efforts which I touch on below will also benefit from scale, with NN taking a new approach to leveraging their purchasing power.

Despite the company losing its way during the past few years, this is a high-quality precision manufacturing business. The go-forward strategy should help reveal that quality along with positive changes in earnings power.

Strategy / Transformation Plan

Since their hiring, management has laid out several key strategic pillars on which they will focus and have already made remarkable progress in a short period of time. These pillars include strengthening the leadership team, addressing unprofitable business, expanding margins, delivering consistent free cash flow, and increasing new business wins. While that sounds like a tall order, most of these initiatives only require adopting common sense operational tactics. Importantly, there is valuation upside even before new business wins take place or before top line growth resumes. In other words, there is plenty of low-hanging fruit to lower costs and expand margins, the bulk of which is being undertaken as I write this letter. Some of these items include addressing unprofitable business, implementing better pricing practices, and instituting a more centralized system to purchase raw materials. If I am correct about the cost improvements for each one of these items, the permanent flow through to EBITDA would be tremendous.

There will always be cyclical aspects of the business investors have to deal with, but NN has become more diversified away from traditional auto exposure and new growth opportunities are in more attractive markets. In addition, electrical, general industrial and aerospace end markets have countercyclical aspects to them as auto markets peak and trough.

Below, I address each element of the business transformation and progress made thus far.

Strengthen Leadership & Accountability. NN is undergoing a cultural transformation in both the C-Suite and from a sales perspective. The C-suite has been overhauled, but the sales culture was also abysmal with a lack of accountability to outcomes, pricing and customer retention.  

First, as mentioned, during the past twelve months, nearly every executive officer has been replaced, with new heads of every division also installed. Two very important hires include Tim French as COO, who has worked with Harold in the past, and David Harrison, the new Chief Procurement Officer, a new position designed to right the ship in terms of raw material purchasing. All key executives have pay packages similar to Harold’s, with performance shares that vest based on the performance of the share price over time.   

Second, prior to Harold’s arrival, there were multiple facilities that were simply not winning new business. Market pricing wasn’t being instituted, salespeople got lazy and as management put it, ‘were waiting to be fired’. Today, management has empowered the sales teams to win new business, given them flexibility on pricing, changed the way they were quoting and are now holding everyone accountable for lack of winning. The progress made in a short period of time has been tremendous, with new programs being launched, margins on new business coming in much higher than before, and positive changes in the culture leading to improved morale.  

Address Unprofitable Business. Today, roughly $100 million of revenue is negative margin to the business. Management is in the process of fixing this as soon as this year and estimate they can add an incremental $10mm to EBITDA just by getting this business to breakeven. Pricing and lowering costs will be key here. One of the biggest issues management faced when they arrived was NN’s weak historical negotiating leverage. Prior management had no growth program in place, so they were forced to accept low margin business because there was nothing else to fall back on. Add in the poor sales culture, and you have a recipe for disaster.

Today, there are strict gross margin and IRR floors for accepting new business, and unproductive salespeople have been let go. Over time, there will be a balance struck between utilizing open capacity and aggressive pricing, but management wants to get to a point where they are ‘winning enough’ before worrying about pricing dynamics. However, gross margins for new business wins thus far have been nearly double what they were for the consolidated business (20% vs. 11%). Once NN reaches breakeven on that $100mm of business, they will push to become profitable to the tune of $5-10mm on that same volume.  

Expand Margins. For this part of the strategic plan, better pricing, more profitable business, and a reduced cost structure are good places to start. Management believes there are multiple facilities with excessive fixed costs that they are addressing immediately. As you might have guessed, there was previously a lack of desire to deal with problems inside the company. This is changing now. During the past year, NN reduced its employee base by 10%, with the aim of right sizing SG&A while filling the plants with capacity. On this front, management thinks they are about halfway through. As I will discuss in the Valuation section below, the target for SG&A as a percentage of revenues is 7.0%, down from 10.5% today. They likely can’t fire their way to reduced SG&A, but over time I think the number will decrease. A good example is one of their Mobile Solutions plants in France is unprofitable, never wins new business, and has $1.5mm SG&A costs. Things like that are simple to fix. Given there are synergies throughout parts of the business, factory consolidation and labor savings can also be achieved over time.

Furthermore, at the time of Bevis’ appointment, there was no global materials sourcing effort, meaning each individual facility had its own sourcing person that was buying materials from suppliers without leveraging NN’s buying power. This should be considered a crime. On a yearly basis, NN purchases between $275-300mm in raw materials. Not taking advantage of scale, buying power and discounts was hurting the company tremendously. I haven’t been able to quantify the negative impact yet, but new Chief Procurement Officer David Harrison is responsible for returning NN to a more favorable negotiating position. The company still has no terms with some suppliers, but as NN continues to execute and show progress on a quarterly basis, new, more favorable deals will start to emerge. In fact, conversations with management and industry experts think that 4-6t quarters of results means NN will get ‘every deal out there’. The near-term cost savings should amount to around $4-5mm per year over the next five years, just on procurement deals alone, which would flow through directly to EBITDA.

Deliver Consistent Free Cash Flow. This part of the strategic plan is self-explanatory, and will be aided by higher operating margins, reduced debt levels, improved working capital turns and flat capital spending. Historically, NN has generated positive operating cash, but working capital and capex have been burdens to free cash flow generation. There is more discipline now than ever before, giving me faith that increased free cash flow conversion is on the horizon.

Increase New Business Wins. While new business is nice to have, I do not think that new wins are necessary for the stock to generate strong returns. With that said, there is an incredible amount of untapped opportunity here. I already spoke about improved capacity utilization. Over time, there is opportunity for increased customer penetration as well. According to management this is very doable given NN’s small market share in very large markets. A small position with stable, blue-chip customers means that there will be opportunities to grow into that base over time.

The pipeline for new business is around $600mm. During the next five years, management is targeting new business wins between $50-70mm annually, or $325mm during this time frame. Notably, in 2023, NN had a record-breaking year for new business wins. The Company recorded $62.6 million of wins and $17.2mm in new wins through Q1 2024 ($70mm run rate). This is important because 18-24 months from now, net revenue growth will start to show up.

Furthermore, now that the non-compete following the sale of Life Sciences has expired, NN recently won its first business in the newly established medical division. This business can be a strong growth driver moving forward, with management stating a goal of $50 million in revenue in five years.

The second new business line is dubbed "Connect & Protect". This involves the manufacture of electrical connectors and electrical shielding. These products are used to prevent electromagnetic interference from high voltage currents within electric vehicles from interfering with vehicle electronics. NN has participated in this market historically, but to a very limited degree. Today there is considerable opportunity in this large market, as seen in the following table. The Connect & Protect program is already generating solid new business wins that will contribute to revenue growth in 2024.

Before we arrive at new business wins, looking out a few years, gross margins will have increased, SG&A will be rightsized, all facility issues will be remediated, customer retention will be higher (penetration should be higher as well), and the company’s debt profile will be lowered substantially. If management is successful in driving new business wins, $325mm in incremental top line growth at more favorable margins on a lower cost structure will boost EBITDA and cash flow considerably.  

Competition and Industry

NN has few public market peers making comps with auto parts suppliers and specialized suppliers that sell large expensive equipment likely obsolete. Given NN sells niche components to specific end markets, operates on high volume, low cost, they would be better compared to other specialized industrial businesses with auto exposure, such as Bel Fuse (BELFB), Littelfuse (LFUS) and or other electronic component suppliers. Notably, margins sit well below these comps indicating room for expansion over time.

Since NNBR sells into a variety of large end markets, I will give a brief overview of each. I’ve talked about some of the specifics of products and selling into each end market above and in other parts of this writeup.

Passenger Vehicle Market

This is NN's largest market and was valued at $651.9 billion in 2023, according to Vantage Market Research. The estimated growth rate through 2030 is 6.8%. Trends such as an increase in demand for parts for electric vehicles, concern over sustainability, and the rise of e-commerce are behind the near 7.0% growth. The passenger car market is estimated to be $960 billion according to Mordor Intelligence and is expected to grow by 9.0% through 2030. 

A trend that copies the auto parts market is the movement towards electric vehicles, as governments have enacted polices to adopt them. Countries such as China, India, France, and the United Kingdom have plans to phase out the gasoline and diesel vehicles industry by 2040. The EV market could represent a multi-billion-dollar addressable market over time. Both markets factor into both NN’s Mobile Solutions and Power Solutions, with the increase of demand for electric vehicles and macro pushes towards them being a potential boon for NN’s components.

Commercial Vehicle Market

The industry is facing the short-term headwinds of lower truck builds, specifically in its Class 8 truck builds which are projected to decline 15-20% in 2024. However, from these levels, a rebound is supposed to occur in 2025 (a 15% increase) and 2026 (19% increase), according to ACT Research. Overall, the industry is expected to increase by 4.5% to roughly $825 billion in 2032.

Power Grid Market

The global power grid market was valued at $241.6 billion in 2023. The market is expected to expand to approximately $415 billion in 2032, representing a CAGR of 5.6%. The increase of industrialization and consumer use of electricity means higher demand thus higher power generation. Growth here equates to more opportunity for NN through a potential increase in demand for its Power Solutions products. Management estimates the total addressable market here to be above $1.0 billion.

Medical Device Market

Within medical devices, NN specifically competes with orthopedic devices, where the market size is around $60 billion, with growth projected to be just below 5.0% through 2030. This will be a small portion of their business on their way to scaling toward $50mm in revenues. The market size is meaningful, nonetheless.

Management

In May 2023, NN hired Harold Bevis as President and CEO. Bevis formerly ran Commercial Vehicle Group (CVGI), were he held the President and CEO positions. CVG is a publicly traded manufacturer of electrical, mechanical, and seating systems for electric and internal combustion engine commercial vehicles, as well as warehouse automation and robotic systems to retailers and ecommerce shippers.

At CVG, Mr. Bevis demonstrated a track record of driving new business wins in the electric vehicle industry and he repositioned CVG towards electrification, automation, and connectivity. While at CVGI, Harold went to work raising margins among other things, and CVGI stock appreciated nearly 500% during his three-year tenure. He viewed NN as a peer at the time, and at one point wanted to buy them because he saw how poorly run, over-levered and under-synergized they were.

Prior to his experience at CVG, Harold was Chairman and CEO of Boxlight, a startup company focused on education technology solutions. Previously, Mr. Bevis led a number of companies in the packaging industry, including as President and CEO of Xerium Technologies, Inc. Xerium stock also appreciated over 100% during his five year tenure and was ultimately sold after he left for more than 2x the price of the stock at his departure.  

Since assuming the reins of NN, Harold has made several key hires, started to right-size the cost structure, won over $100mm in new business and returned the company to free cash flow positivity. Importantly, we are in the 2^nd or 3^rd inning of the strategic plan. More importantly, Harold was given a significant equity package that would allow him to earn up to 30x his base salary if successful and depending on the share price performance. At 64 years old, this is likely his last job, and he is very much aligned with shareholders. His team has similar, albeit smaller pay packages. My conversations with management indicate they are deeply knowledgeable about the business, and there is a considerable amount of low hanging fruit to address in terms of operational efficiency.

Valuation

For the full year 2023, NN generated $43.1mm in adjusted EBITDA and $12mm in free cash flow, putting the current valuation at 7.7x EBITDA and 27x FCF on what I’d call trough margins. Management’s expectations for the business are much higher, and as costs continue to come down, working capital improves, new business is won, and operating leverage kicks in, free cash flow will inflect much higher. Over time, free cash flow conversion is expected to exceed 50% of EBITDA driven by ongoing cost management, reduction in interest expense, and the use of existing NOLs to lower cash taxes.

I am not expecting much top line growth during 2024 or 2025, and importantly don’t believe there has to be much for the investment to work. However, if new business wins keep pace, both top line growth will reveal itself and margins will expand. That is where the real juice on returns could be. However, it takes around 18-24 months for new business wins to translate into peak revenues, and management has said they ‘should have been out soliciting new business wins’ two years ago. This is out of their control as they weren’t part of the business back then. Nevertheless, at a base of $500mm in revenues for the next few years, NN should be able to return to mid-teens EBITDA margins.

Given the initiatives discussed above between facility staffing, procurement and unprofitable business, NN could add an incremental $10-15mm in EBITDA per year, for the next few years, just on cost savings alone. This will come from $10mm incremental EBITDA after the $100mm in unprofitable business moves to breakeven, then $5mm positive EBITDA from that business moving forward, saving $5mm or more per year on procurement efforts for the next 3-5 years, and reducing facility staffing costs by 10%.

Taking the mid-point of management’s EBITDA guide for FY24 of $52.5mm, and looking out 2-3 years, NN could generate in the range of $82-97mm in EBITDA by FY27. Using the low end of that range, the valuation multiple is 4.0x EBITDA based on today’s price. If new business wins continue to materialize, leverage on fixed costs will cause incremental margins to increase allowing for significant flow through to EBITDA should the business return to organic growth. At 7.5x $75mm in EBITDA for FY27, with no change in net debt, NN is worth $7.4/share for greater than 100% upside. This EBITDA figure is conservative and does not give credit for a debt refinance, new business accretion or additional cost savings.

Increased free cash flow conversion will come from lower interest expense and streamlined capex, along with the NOLs in NNBR’s possession. At the end of 2023, NN had $37.9 million of NOLs, along with $16.2mm of state NOLs (which will begin to expire in 2030) and $11.3 million in foreign NOLs. It’s unlikely that the company will pay any meaningful taxes in the near future.

In terms of specific cost savings, gross margins should expand closer to 16-17% in the short term, on their way to 20% over time. Better pricing and more efficient utilization will help with near-term efforts, and with new business wins coming in at twice the margin profile as the current consolidated business (20% GMs vs. 10%), the future margin profile should expand.

SG&A has increased as a percentage of sales in recent years from 9% in 2013 to 12% in 2017 and now back toward 10%. According to management, this is too high, as NN is a simple business that does not justify $50mm in annual SG&A, especially with no patent development or R&D facilities. Management has talked about getting SG&A to 7.5% of revenues, which I’m not confident they can achieve in the near term, but 9% of revenues is not egregious. This compares to industry averages of 22%, industrial peer group averages of 15-20% and an auto peer group average of 7%.

Interest expense will also likely come down as soon as the back half of this year Which brings us to the capital structure, which could use some work.

There was $148.1 million outstanding under the term loan facility at the end of FY23. They are carrying this debt at 14.3% interest (including PIK interest). Despite this, NN’s leverage ratio at the end of 2023 was 3.2x, a modest improvement from 3.4x at the end of 2022. Management anticipates the leverage ratio to decline below 3.0x by the end of 2024.

With improving operations and growing cash flow, for the first time in years, NNBR will have options. By the second half of 2024, management plans to refinance the Term Loan, likely saving them 200-250bps of interest expense, along with taking out at least half of the preferred stock. If successful, I think the stock will re-rate nicely. In addition, management has talked about asking for a delayed draw Term or accordion feature to explore M&A options. Harold and his team have done over 30 deals during his career, and they have a strict focus on ROICs. There are other levers to pull as well demonstrated by a recent sale-leaseback transaction where NN sold three properties for just shy of $17mm, paying down debt with the proceeds.

In the event I’m wrong about any of the above, it’s likely that either business segment could be sold to a strategic or financial buyer. By improving operations within both segments, this would be an easier sell than at any time in the past few years. While at CVGI, Harold wanted to purchase NN (the entire business) and thought he could strip down SG&A to bare bones, and when he arrived, I believe NN was looking at deals for Power Solutions (until he put a stop to that). Industry experts pointed to fair valuation for Power Solutions around 9-10x EBITDA and 4-5x for Mobile.

While there is execution risk, and I could be off on some of my estimates for cost savings, given the A+ management team, depressed share price, trough margins, and continued low hanging fruit to address, this strikes me as a heads I win, tails I don’t lose much scenario.

Risk Factors

• Customer concentration
• Cyclical end markets / auto exposure
• Doing business in China / geopolitical
• Management / key man risk
• Wrong about cost savings / margin expansion opportunities
• New business wins don’t materialize / pricing / customers walk

Catalyst

Continued execution

Debt refinance

Improving FCF

Global procurement savings

Revised upward guidance