NN Inc (NNBR) 2025 Q1 法說會逐字稿

Good day and welcome to the NN Inc first quarter 2025 earnings conference call.

All participants will be in a listening only mode.

Should you need assistance, please signal con specialist by pressing the star key followed by 0.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To which are your question, please press star, then 2.

Please note, this event is being recorded. I would now like to turn the conference call over to Mr. Stephen Poe Investor Relations. Mr. Poe, the floor is yours, sir.

Thank you, operator. Good morning, everyone, and thanks for joining us. I'm Steven Poe with NN Inc.’s investor relations team, and I'd like to thank you for attending today's earnings call and business update. Last evening we issued a press release announcing our financial results for the first quarter ended March 31, 2025, 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 MNR at alpha-dair.com. Our presenters on the call this morning will be Harold Beavis, President and Chief Executive Officer, Christopher Bohnert, senior Vice President and Chief Financial Officer, and Tim French, our senior Vice President and Chief Operating 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 quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2025. 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 and divestitures, synergies, cash and cost savings, future operating results. Performance of our worldwide markets, general economic conditions, and economic conditions in the industrial sector, including the potential impacts and ramifications of tariffs, the impacts of pandemics and other public health crises and military conflicts on the company's financial condition, among 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, which may cause actual results to be materially different from such forward-looking statements. The presentation also includes certain non-gap measures as defined by SEC rules. The reconciliation of such non-gap measures is contained in the tables in the final section of the press release and the supplemental presentation. Please turn to slide 3, and I will now turn the call over to our CEO Harold Bevis.

Thanks, Steven, and good morning everyone I'd like to address a few key points at the beginning of the update today, and the first point is regarding market demand, tariffs, and new business.

Business uncertainty increased during the quarter since and since we last reported and it caused us to have lighter sales than plan in Q1.

At a few customers, especially in Global Automotive, which is now about 40% of our sales and quite a few public companies in our segments are reporting down sales and negative outlooks. We're reporting flat sequential sales and flat year over year sales on a pro forma basis.

We're able to do that due to our successful new business program which keeps delivering results, gaining sharing, gaining new positions.

But during the quarter we did see our base business softening and we shifted our business development focus on the closing and winning immediate ramp up sales and it's working well.

We nicknamed it the Pigs program for profitable immediate growth strategy, and it was a focus on immediate ramp up business and the complexion of 2025 already looks different.

We now have 120 programs that we've won ramping up this year worth $55 million in annualized sales, which is a steep increase since we last reported, and our biggest new win is in industrial products where we will convert certain automotive production assets over to produce these new product and this $55 million new business is ramping up during the remainder of 25 and it adds to whatever our base business will be.

And at this point we're assuming a flat-based business market environment from our legacy customers with this additional layer of business. It bolsters our outlook and it gives us confidence to reconfirm our guidance, which Chris will walk through.

So this has turned out to be a speed bump, not a roadblock, and we're working through it and winning immediate business. And if our base markets improve, then it's all the better and want to add additional to our outlook.

The second point is on operations given the base business uncertainty, we decided to go ahead and increase the amount of cost reduction that we have underway for 2025, and our operations team is well underway with this, and we've already actioned many staff reductions during Q1, which will further bolster our profit rates in Q2, Q3, and Q4. Tim Fre is going to cover that in a few minutes.

We've progressively increased our cost out plans and new product launch plans from 2023 to 2024 and now to 2025, and we're on track for this year's $15 million cost reduction plan as well as the 120 ramp up plans which almost every plant is participating in.

And it gives us confidence for the rest of the year and gives us a good carry in for 2026 as well.

Our third point is that the combination of our commercial performance and operational performance gives us confidence to update our 2025 guidance and 5 year goals.

And we are reiterating our full year guidance for EBITDA and for new business awards, and we're initiating free cash flow guidance at $14million to $16 million and in in the first quarter we cannot be aggressive with our cash management activities as we refinanced our ABL at the very beginning of the quarter and we refinanced our term loan at the very end of the quarter.

So we kept our balances comfortable to fund all activities and go through bank transfers. This was temporary and it's not the case going forward and our fourth point is that our company transformation is on track on the commercial side, a key point to remember is that we have a significant amount of open capacity globally.

We're largely running one shift operations everywhere in the world, and this enables a full blast new business program for existing products. We're set up to pursue a wide spectrum of additional business for legacy products. On the pivoting side, we're selectively adding new assets that are market based for those products.

And this balanced program of both leveraging existing capacity and know-how, as well as adding new capacity in certain areas is working well, and we've now won $160 million of new business.

And we've kept our growth cap spending modest, and we will and we continue to gain momentum in our new targeted areas and we're going to cover that today as well.

On the operational side, this one shift plant situation gives us many opportunities for footprint optimization, and we're progressively squeezing the redundancy and excess cost from our global cost and working capital structures.

We have a full program for 2025, but we also are opportunity rich on a bill forward basis.

I'd like to say that a key summary point is that we're optimistic about both 2025 and our long-term goals, and we look forward to discussing them with you.

Please turn to page 4.

Where our CFO Chris Bohnert will cover some key performance metrics. Chris.

Thank you, Harold. We added this slide to focus on some of our key metrics first. I'll get into our more detailed quarterly results later.

First up is our net sales for the quarter, as Harold mentioned, we were flat on a pro forma basis and roughly flat sequentially from the fourth quarter. Our adjusted gross margins were 16.9%. We feel like we're on track to hit our 5 year goal in the 19% to 20% range as we continue our cost out programs and layer in new business in the coming quarters and years.

Our adjusted operating income was actually positive at $2 million, which was an increase of $2.7 million quarter on quarter. adjusted EBITDA came in at $10.6 million, as Harold mentioned, we're reconfirming our guidance in the range of $53million to $63 million for the full year of 2025.

Just to even our margins came in about 10% for the quarter on track with our five year goals in the 13% to 14% range.

We also spent a lot of time working on working capital. Tim will cover this in more detail, but our working capital through the first quarter was $84.8 million. It's on track for our goals to be down $4.6 million year on year, and our working capital is a percent of our trailing 12 month sales is 19.1%. And that's net down considerably as Tim will talk about here shortly. New business wins came in at $16.4 million. We're again reconfirming our guidance there in the $60 million to $70 million range for the full year. And we also obviously tracked cash CapEx and cash very closely. Cash CapEx for the first quarter was $3.9 million. And we're roughly going to target about $10 million for the full year, keeping it pretty stringent for the year. So those are just a few of our key metrics. I'll talk about the quarter in more detail, but with that I'd like to turn it back over to Harold.

Thank you.

One of our key charts that we've been providing updates around is our transformation plan and our tracker.

And our enterprise transformation is roughly 70% complete after our first seven quarters, and we're on track with our targets for the full year of 2025.

Going down the list, we're about 90% complete with enhancing our leadership to mirror our new forward agenda.

Secondly, we've been isolating and actioning against the underperforming parts of the company. These are customer specific, program specific, and plant specific.

This requires aggressive customer interactions arriving at mutual agreements to either improve economics or professional transitions. We're about 70% complete with this. We nicknamed this the Group of Seven.

Because it was concentrated into seven plants and 2025 will be a turning point for those plants, and they will deliver positive margins for us.

Margin expansion is a is a result of these fixes but also leaning out of our cost structures globally. We call it our one team program and it's a multi-year endeavor with a strong 2025 game plan that's underway and we're about 60% complete with that.

But to make our turnaround a little bit more challenging, we inherited a debt structure that was nearing the end of its life expectancy.

And we were able to extend the duration of our capital structure for another 5 years. And along the way we learned that we have plenty of options to alter the complexion of our China operations, and we are under way with doing this. This will materially help our domestic debt profile. And the last point is regarding organically growing sales.

You need to follow the comparatives here as we sold the Lubbock business in July 2024 and we began rationalizing money losing business in multiple plants in 2024.

We call it price clearing, and if we could get the prices we needed to keep the business, we did, and this is largely done and we're on a pro forma basis as we've reported and Chris will characterize we're flat in a quarter.

And conversely, on a go forward basis we have about $55 million new business that's launching now and we have a likely another $100 million in 2026. So we believe we're at a turning point here. So, we're calling this about 60% complete because it's yet to happen, although we have a tremendous amount of business in hand.

A turning to page 6.

I would like to talk a little more deeply about our new business program due to the importance of it.

And we wanted to be more transparent about exactly what we're doing, and we get a decent amount of questions about this, so we're sharing more specifically today.

And here you can see our overall plan, our specific targets, and our specific status against those targets, and our targets are based on leveraging our significant open capacity, which is largely CapEx free when we when we quote it, as well as our most investment intensive portfolio pivots.

It's almost taut logical that that to increase our positions in new areas we need something new and for us it's generally a few people and some specific investment and we're doing this progressively.

I wanted to point out a few key items for you. First, about half of our prospecting and half of our pipeline is into new areas and if you add up the some of the columns, you'll see that it's almost exactly 5% gaining steam in medical and we're on the verge of a few large foundational wins.

Medical to get back into medical, we've had to do a lot of reapproval and reacquaintances and renewing our approved supplier status and to a large extent we're through that. And in this area we are almost one for one needing additional machines.

As we gain business, of which we are, and we've had a lot of wins in the industrial market this year, as another point, and they're largely immediate ramp up.

And in fact our largest win of the year is an industrial products win. That there has been a global rebalance.

Amongst our automotive business and our customers between I, EV and hybrid. We read a lot about it in the US, but it is indeed global.

And basically the kind of rapid transitions that were underway have all slowed down globally and it's more of a calm business development environment and turning to page 7 here, we wanted to share some summary facts and figures.

And a key point to make is that we're progressively winning a higher amount of programs with a higher amount of revenue if you see the statistics here. We won 118 programs in 2023, 188 programs in 2024, and we're on pace to win over 200 programs this year.

It's a steady increase in performance and we're steadily adding people that have relationships that we don't have or product knowledge that we don't have, and we continue to open new doors with new and existing teammates. Another interesting point is that our new business prospects and activity have not slowed down with global uncertainty and the tariff war, not at all. In fact, our activities increased.

And we are now also getting a decent amount of tariff RFQs on top of our own prospecting and some of the RFQs are quite large and would alter our game plans, and we're participating in those that fit us.

And we're well along with multiple targeted RFQs that are at the contracting stage, so we look forward to continuing to report out on this.

Our prospecting pipeline also continues to increase in size. We're not necessarily chasing that. It is a byproduct of our activity, and it's now almost $750 million and well balanced. This part of our game plan is working quite well, and we can foresee that our pipeline will continue to grow as we get better and better at this game.

Please turn to page 8.

And we wanted to give further insight into a couple of new business win areas by sharing two vignettes with you. We get a decent amount of questions around medical and so we wanted to share about medical, what we're doing.

And we wanted to show exactly where our metal part making know-how is ending up in the medical market. The big area for us is in the extremities and instruments markets which are metal based.

It's funny to say it, but you're obviously not going to find plastic parts going in for these activities. They have to be sterilized. They have to be rigid, they just have to work, and they're metal, and so it fits right into our metal making know-how. Our number one product in the first quarter is the ratcheting handle used in shoulder surgery kits, and you can see the picture here.

And if you look at the picture at the bottom of this page, you'll see that it's the same basic shape as a rack and pinion shaft.

And hence the extrapolation of our know-how to make long, thin, high tolerance parts is transferable to this market It needs a slightly different machine unfortunately.

As it turns out, but it's a close cousin to what we already do and already know how to do, and it's easy for us to get into that game. And that's an example of our top metal part that we've made for the medical business, and we now have a $40 million pipeline, which is a peak pipeline since we re-entered this business and we're quite optimistic about the rest of the year here.

On page 9, it's similar to our other plants.

Our plant in France has been a one shift operation with ample open capacity, and for those of you that follow France plans, it's also a short work week, so it's a lot of open capacity and so we have been very actively prospecting for additional business and we've had 3 recent wins there that financially correct this plant, and the winds are listed here, not listing the customers. But we're now underway with 3 ramp ups in that plan which will financially turn the plant around.

And it will become accretive for us on an EBITDA and a positive free cash flow basis. So that's just a couple examples to share with you.

And we'll take your feedback on whether you want more of this or less of this as we go forward, but we wanted to share the direct impact of the new business and what it's doing for us. With that, I'd like to turn it over to Tim, French, who's going to walk through our operational performance, Tim.

Thank you, Harold, and good morning everyone.

On slide 10, the operations team continues to focus on achieving the cost reduction targets in an efforts to improve our EBITDA and cash flow metrics. Key aspect of this initiative is right sizing our workforce in all the areas of the company, direct, indirect salaried and SG&A.

The data on the slide demonstrates the progress that has been made since Q2 2023, Total headcount has declined 16.1% during that time period, which is equal to about 525 net head reduction. 67 are salaried or SG&A positions, which is 16.5% reduction in this category.

It also should be noted that during this time period, excuse me, some areas such as our [AIPAC] region added employees to handle significant growth they're experiencing. These additions, although unnecessary to effectively run the business and meet customer demand, muted the impact of the overall reduction.

The key metric on this slide is the impact these actions have had on our adjusted even do for salaried headcount. This metric has increased significantly from 115,000 in the first quarter of last year to 142,000 this quarter. This is a 25% improvement over the last 12 months and it's a prime example of our efforts to right size and improve the efficiency of our team.

Our efforts in this area are continuing. Direct labor will always need the flex to reflect demand. However, we are continuing our one team implementation, creating a shared service infrastructure across facilities to support our manufacturing operations. This will allow us to progressively improve the efficiency of our salaries and SG&A workforce and better match our team to the needs of a company the size of NM. In subsequent earnings calls, I'll be excited to talk to you about additional actions planned for 2025.

Now turning to slide 11.

Another area of focus has been reducing our working capital requirements, which has had a favorable impact on our free cash flow.

Overall, working capital has been reduced by 20% or $21.6 million over the last nine quarters, and $4.8 million compared to Q1 of 24.

Working capital as a percent of revenue finished at 19.1%, which is down from 22.4% in 123.

Again, we're not done focusing in this area. Our goal is to further reduce working capital by an additional $5 million over the next two quarters with our ultimate goal of reducing it to 16% to 17% of revenue.

Overall, we are happy with our progress in these two areas, but we're not finished. We know there is more to be done to reduce our cost structure, improve our profitability, and generate additional free cash flow.

Before I turn it over to Chris to review our financial performance, I'd like to give a brief snapshot on the start of Q2. April finished strong with our consolidated volumes exceeding our internal forecasts. Our finishing operation had its best revenue month since June of 2022. Our key North American machining facility had its best shift month since March of 22.

And our mannequin facility had its best ship months in the last within the last 12 months.

We are optimistic that we are initially seeing in April will represent the balance of the year.

With that, I'll turn it over to Chris to review our financial performance, Chris.

Thank you, Tim. Similar to last quarter, I'll be presenting information on both a GAAP and pro forma basis to provide transparency into our operating results due to the recent changes such as the sale of the Lubbock facility back in July of 2024 and the exit of certain unprofitable business which we call rationalized volume. We hope this presentation will be indicative of how we're making changes and decisions to transform and over time.

I'll start on slide 12 where I detail the financial results for the first quarter. This slide shows our as reported GAAP and non-adjusted numbers on the left side. We have again lined out the pro forma adjustments to our quarterly results in the table in the middle with our quarterly pro forma results on the right side of the table. The pro forma adjustments include last year's contribution from the Lubbock plant, which was sold in July 2024, rationalized sales volume, the impacts of foreign currency translation.

Last year's quarter included $5.4 million of net sales and $0.6 million of adjusted EBITDA associated with the Lubbock plant. Strategically rationalized volumes of unprofitable business totaled $5.9 million in the prior year, and a $2.8 million impact from FX rounds out the three pro forma changes that we highlight.

On an as reported basis, net sales for the quarter were $105.7 million, declining $15.5 million versus last year's first quarter. As we note here on a pro forma basis, accounting for the items I noted earlier, net sales modestly declined 1.3% or $1.4 million. Our adjusted operating income for the first quarter was $2 million marking an increase of $2.7 million compared to the loss of $700,000 in the prior year of first quarter.

On an added suggested pro forma basis, operating income increased $2.5 million.

Adjusted EBITDA results for the quarter were $10.6 million compared to $11.3 million for the prior year period. On a pro forma basis inclusive of the impacts I outlined earlier, our adjusted EBITDA was flat with the prior year, first quarter, as we were able to drive profitability through solid operational execution.

I'll now turn over to our segment results starting on slide 13.

In our power solution segment where our business consists largely of stamped products, net sales for the quarter were $43.5 million down $4.7 million compared to $48.2 million in the prior year period due primarily to the impact of the Lubbock facility and the $800,000 of unfavorable impact from foreign exchange translation. These items were partially offset by volume and mix with precious metals passed through driving much of that increase. On a pro forma basis excluding the contribution from Lubbock, first quarter net sales increased $1.5 million or 4% as noted in the charts on the right.

Our solutions adjust the EBITDA results of $6.3 million declined $1.5 million versus last year's first quarter of $7.8 million, driven by the non-recurrence of Lubbock's contribution and unfavorable mix. Adjusted EBITDA margins on a percentage basis tend to compress during periods of rising precious metal costs. However, these costs are passed through to customers.

On a pro forma basis, our power solutions at just our results were down $0.7 million compared to last year's first quarter, with a slight year over year comparison driven by the same volume mix factor I noted with precious metals. It's worth noting that during the quarter we bolstered our power solutions sales team. Strengthening it with additional industry experts and thus far we have seen immediate increases in our new business pipeline for industrial stampings.

Our team has achieved multiple new wins year-to-date through April, a number of which have immediate launches this year. In order to support our continued progress and new business growth, we've been strategically adding physical assets and equipment, and we intend on continuing this pace as we go forward.

Now turning to slide 14, highlighting our mobile solution segment which covers primarily machine products, our machine products business. The net sales for the first quarter were $62.2 million for the period compared to $73.1 million last year in last year's first quarter. Net sales comparisons were impacted by the rationalized business of $5.9 million, lower automotive volumes of $3 million and unfavorable foreign exchange impacts of $1.9 million. On a pro forma basis, net sales of $62.2 million were down $3.1 million or 5% compared to pro forma net sales of $65.3 million in last year's first quarter. The decline was driven largely by lower overall volumes in the automotive business.

Our first quarter at adjusted EBITDA in the mobile solution segment was $8.1 million, down $0.5 million from last year's first quarter on an as reported and pro forma basis. The slight decrease was due to lower volumes and foreign exchange impacts.

While adjusted EBITDA results showed slight compression, our cost out actions and the ongoing re-profiling of our sales mix drove a notable increase in adjusted EBITDA margins to 13%. The margin growth is also supported by the right sizing of our cost structure to more appropriately fit the business where we're headed, which Harold touched on earlier in the call.

As we look ahead, our new business wins for the segment are outpacing our plan in Q1. We installed new machining equipment dedicated specifically to our medical business, and we're utilizing capacity converted from strategically rationalized automotive business. We've also recently won new programs that are set for launch in the first quarter of 2026, which will contribute $5.6 million in peak sales, and we will use this freed up capacity to serve these winds from the industrial market.

Slide 15 presents our updated outlook for 2025, which I noted a few items earlier this morning. Given the uncertainties that have negatively impacted US GDP in the first quarter, we now expect net sales between $430million to $460 million due to current economic uncertainties and a lack of transparency on volumes, primarily in the North American market. This is going to be partially offset by our SOPs during 2025 stemming from new business awards from prior years.

We have no change to our adjusted e better range of $53 million to $63 million. However, as we mentioned previously, we expect future market conditions to push our results to the lower half of the range. Countering this, we're going to step up our cost out program, which we believe will help offset the impact of lower net sales. New business wins remain unchanged between $60million to $70 million. Our Q1 2025 results have on pace to achieve full year guidance, and we anticipate maintaining this pace through 2025.

Finally, we're initiating free cash flow guidance in the range of 14million to 16 million for the year. This reflects the impact of our cost out actions, improved margin capture, and anticipated proceeds from the CARES Act.

With that, I'll turn the call back over to Harold for some final remarks, Harold.

Thanks Chris.

On page 16, I wanted to remind our investors of the pillars of our 5 year plan to drive profitable growth.

And convert that into improved sustainable shareholder value. Our plan still remains intact.

The kind of volume speed bump we had in Q1 here has only costs us to be recommitted and reconvicted to the successful outcomes, and we've listed our near term progress against each of them.

And we're fully committed to it.

So thank you for paying attention here and listening to us, and we'll now turn the call back over to the operator for questions.

Mike.

Hey, thank you, sir. We will now begin the question and answer session. (Operator Instructions)

Robert Brown, Lake Street Capital Markets.

Good morning and congratulations on all the progress.

Thank you, Rob.

First, I just wanted to get a little more detail on some of the tariff related RFQs you talked about seeing some incremental, activity, for quoting, I guess, and interest, just want to get a sense of what's happening there and what you sort of, where your plants have capacity to take on the business.

Yes, so the biggest two material streams of tariff related activity, one is reshoring into the United States.

And one is European supply moving to China.

In the case of our US opportunities, they're from Canada, moving reshoring from Canada to the US and reshoring business from China to the US.

They're fairly fast paced and they're large. So, In some cases we have the equipment and in some cases we don't. They're in the quoting stage and of course like everything, there's multiple people bidding on them.

And it's primarily automotive, Rob. So, our desire to spend a lot of money on US based automotive is lower than other areas. So the numbers are going to have to be terrific for us to be interested at the end of the day, but we have a couple that fit us on Europe to China.

We're seeing a lot of activity from currently sourced metal parts that are in Europe for Europe, and Europeans are looking to dramatically lower their costs to become neutral to the tariffs in the US.

And they're quoting large chunks of business to move to China. Then be shipped to Europe, assemble the tier one system, assemble the vehicle ship it to the US. So again, it's an attempt to lower the price of the vehicle.

And in that case we're underway with certain expansions and we do have certain open capacity and other parts of the programs would require capital. So it's mainly automotive.

And it's working around, it's it's meant to work around the tariffs to cost neutralize them, and it primarily involves 50% new capital, 50% reuse of existing capital.

Okay great thank you that that's a great color, and then on the automotive market in particular you talked a little bit about sort of the activity in the EV and hybrid sort of moderating a little bit and balance more with the ice activity but just a sense of how that's changing your new business opportunities and some of the stuff that's going on there as that rate of change has changed.

Yes, so it's generally helpful for us that that this has slowed down and has become balanced a lot of our legacy assets in Europe and in South America and in North America we're kind of dialed in for fuel systems.

And so a move to straight EV would be a declining market situation for us, but a move into hybrid is balanced because it needs either a generator or an engine in addition to the battery. So the popularity of hybrid rising causes us to have a higher available market to us.

And on the EV side, we initiated the shielding and connector stamped products business which we highlighted on our new wins chart, and that continues to have legs. That was a brand new market entry for us. So at this point we have a balanced portfolio. We're using existing assets almost exclusively, including the stamp products. It's just different dyes on the same machines, so.

For us it gives us a larger available market, Rob, to use our legacy assets of both machining and stamping.

Okay good thank you I'll turn it over.

Thank you.

Hans Baldau, Noble Capital Market.

Hi, thanks for taking my questions and great progress on the transformation.

Thank you. I was hoping, yes, I was hoping you could talk a bit more about the $55 million of new business wins expected to be seen this year, as well as the $740 million in the pipeline.

Can we talk about the timing of those? Are they going to be weighted in the back half of the year, or can we expect them, evenly distributed?

Yeah, it's a good question. So they what we call immediate win programs.

Is a is a program where we have a green light to ramp up and that means that we have to hard tool go through the prototyping, go through the customer testing.

Then lock in what we call a [PA] or a standardized way to certify the product and the process and the materials so that it's repetitive quality.

And generally speaking, an immediate ramp up has about a Six month lag in order for it to hit revenue, so some of them could be done maybe in three months, but it's a three to six month kind of a ramp up as the timing.

Now we mentioned that we had a big one that we won that where the customer was targeting a Q126 start, and that's because generally speaking they're either ramping out of their current supplier and ramping in a new supplier, so there's a stranded inventory to work through, which is a part of the agreement either coming in or going out.

And you work to their date and or their program launch, so I guess it's Three to Nine months overall, but the immediate ramp up that we focus in on with our pigs program.

The profitable immediate growth strategy was to impact this year. So a big portion of it, will impact the second half of this year.

Okay, that's very helpful about half of it.

Okay, about half in the.

Second half. Yeah.

Okay, great. And then, similar question with the $15 million of cost savings you're targeting.

Is that expected to be evenly distributed throughout the year as well?

Yeah, Tim, I'll give that one to you.

Yeah, a lot of it evenly distributed. There's a little bit of back end loading, but for the most part it's evenly distributed throughout the year.

Okay, thank you.

And a couple more questions. So with the remaining plants, are you expecting any more closures with those, or are those 7 plants, the base to go forward.

With?

We have a we have a couple more that we're looking at and aggressively on the payback of the consolidations it's down to two plants. There's 2 left on the list that are on the bubble.

That are dilutive to our overall goals, but we don't have a firm plan in place right now to start or announce anything. We're in the evaluation stage on both of those plans.

Okay, understood. That's everything for me. Thank you.

Thank you.

Again, as a reminder, if you'd like to participate on today's Q&A, the star, then one to ask a question again another star then one.

John Franzreb, Sidoti & Co. LLC

Good morning guys, and thanks for questions. I apologize that this has been addressed. I've been juggling conference calls this morning, but I'm curious about the free cash flow guidance. Does that include the CARES Act refund and what's the?

Yeah, Chris, I'll give you that.

One. Sure, John, you broke up a little bit there. Yes, the free cash flow guidance does include the CARES Act, and the CARES Act is about $12.3million to $12.4 million in that range.

Okay, and is there anything else?

I broke up again, but I think, is there anything else in there? Generally it's operational activities and as we mentioned, we spent about $4 million in cash CapEx on capital so far in the first quarter, and then we've got a target of $10 million for the year so you can kind of build it up from there.

Okay, does it include CapEx or not or is it exclude CapEx?

They, it includes it meaning it's net of it, right? Yeah.

Okay, just wanted to make sure. Okay, and what are you seeing as far as trends in the April early May time frame compared to what you expected say 3 months ago?

Tim and Tim address that a little Tim addressed that a little bit. Tim, you want to go ahead and repeat that?

Sorry about that.

I'm sorry, it's cut out cut out for me. Could I get you to please repeat the question?

April I'm yes.

I can answer it. So Tim covered it that our initial start to the quarter here has been stronger than our forecast, and we have actually had, and it's broad based, and he gave a few examples across several plants.

And it makes us optimistic about our comments today and our recommitting to our guidance.

John. Okay, fair enough. You know what, I'll just reread the transcript and I apologize for asking the questions. Thank you all.

Thank you, John.

Thank you.

(Operator Instructions)

Well, at this time we're showing no further questions. We will go ahead and conclude today's conference call. Again, we thank you all for attending today's presentation, and we thank you for management time today.

At this time we may disconnect your lines.

Thank you. Take care and have a great day everyone.