NN, Inc. (NNBR) | The Buildout — AI Infrastructure
The Verdict
NN, Inc. is a diversified industrial manufacturer that produces high‑precision metal components and assemblies. Its role in the AI infrastructure buildout is as a supplier of physical parts—liquid‑cooling quick‑disconnect couplings for GPU servers, busbars and power whips for electrical distribution, and transformer components—that are essential to the power and thermal management systems inside AI data centers. The company is repurposing its machining and stamping capabilities away from commodity automotive toward these higher‑margin growth markets, with data‑center/electric‑grid already the second‑largest end market and management's stated aim to make it the largest.
| Market Cap | — |
| Revenue (TTM) | $435M |
| Revenue Growth | −3.1% |
| EBITDA Margin (TTM) | 4.7% |
| Net Debt | $210M |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- New business wins through July reached the top of the prior full‑year range.
- Data‑center/electric‑grid vertical reached $80M LTM, near‑term goal raised to $120M, and liquid‑cooling connectors alone could become a $100M business over time.
- Adj. EBITDA margin reached 13.9% in Q2, already above the prior long‑term target of 13%, with management signaling a new goal of 14–16%.
- Portfolio mix shift driving margin expansion: automotive down from 56% to roughly 40% of revenue in two years, growth markets now over $150M annualized.
- Capital structure transformation: $124M preferred refinancing reduced annual PIK interest by ~$13M, and a $75M PIPE strengthened the balance sheet.
What We’re Watching
- Data‑center capacity expansion is concentrated in Wuxi, China—securing an additional 100,000 sq ft facility within 12 months is critical to the 200‑machine vision.
- With >150 programs in ramp‑up across essentially every plant, execution risk is elevated; start‑up costs could offset margin gains in the near term.
- Medical has been slower than expected—though initial purchase orders have arrived, doubling the $15M LTM business remains unproven.
- Term‑loan refinancing is still in progress.
The thesis is strengthening—management delivered another record quarter and raised full‑year guidance across all metrics, while the preferred‑stock overhang was substantially resolved. The open question is whether the 150‑program ramp‑up and the Wuxi capacity expansion can be executed without operational stumbles, and whether the data‑center pipeline converts to revenue at the scale management projects.
Earnings Beat
NN reported Q1 FY2026 revenue of $118.5 million, up 12% year‑over‑year, with gross margin of 8.6% and EBITDA of $7.2 million (6.1% margin). New business wins for the quarter hit a record $42.9 million, led by Power Solutions.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $118M | $105M | $106M | +12.1% |
| Gross margin | 8.6% | 9.2% | 13.3% | -470bps |
| EBITDA | $7M | −$1M | $4M | +80.0% |
| EPS | $-0.14 | $-0.25 | $-0.14 | +0.3% |
| New business wins | $42.9M | n/a | n/a | — |
The 50 machines to make data center parts will start to hit stride in November. We’ll have all the machines installed in and the sales outlook in November is going to go over $1 million a month and keep building into Q1.— Harold Bevis, CEO, August 6, 2026 call
Management tone: Management’s tone shifted from 'building forward momentum' in Q1 to describing data center as 'the biggest thing happening to our company' in Q2, while maintaining a grounded, metrics‑driven outlook.
Management Guidance
Management raised FY2026 net sales guidance to $460–480 million and adjusted EBITDA to $55–65 million. New business wins guidance was raised, reflecting the strong year-to-date wins through July. The long‑term margin goal was telegraphed at 14–16% adjusted EBITDA, with a formal update expected. Second‑half ramps in data‑center, defense, and medical are expected to drive the revenue acceleration.
Trajectory
NN’s revenue reversed a multi‑year compression in Q1 FY2026, with sales of $118.5 million rising 12% year‑over‑year after a trailing average decline of 2.6%. Gross margin on a GAAP basis was 8.6%, weighed down by precious metals pass‑through and ongoing ramp‑up costs, while EBITDA of $7.2 million (6.1% margin) reflected the early stage of the turnaround. Management’s adjusted figures point to an 11.9% adjusted EBITDA margin in the same quarter, and the pipeline of new business wins suggests revenue growth will accelerate further as data‑center, defense, and medical programs begin to contribute in the second half.
The Model
The model projects FY+1 revenue of $468 million and EBITDA of $54 million (11.6% margin), rising to $525 million revenue and $66 million EBITDA (12.6% margin) in FY+2. The near term is anchored by management’s $460–480 million guidance and the expectation that the second‑half 2026 ramp‑ups will carry into 2027. FY+2 captures the compounding effect of richer mix and operating leverage as growth verticals scale.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $422M | $468M | $525M |
| YoY Growth | — | +10.8% | +12.2% |
| EBITDA | $17M | $54M | $66M |
| EBITDA Margin | 4.1% | 11.6% | 12.6% |
Projections are the median of 5 independent model runs. The model’s revenue sits 7.6% above analyst consensus.
Management raised FY2026 net sales guidance to $460–480 million and adjusted EBITDA to $55–65 million. New business wins guidance was raised, reflecting the strong year-to-date wins through July. The long‑term margin goal was telegraphed at 14–16% adjusted EBITDA, with a formal update expected. Second‑half ramps in data‑center, defense, and medical are expected to drive the revenue acceleration.
What Could Go Right — and Wrong
- Data‑center/grid vertical exceeds $120 million and becomes the largest segment, with liquid‑cooling connectors alone reaching a $100 million run‑rate sooner than expected.
- Defense weapons‑parts agreement delivers the full $12–15 million from the marquee U.S. OEM and additional programs expand the pipeline beyond $90 million.
- Medical robotic‑surgery ramp doubles the segment to $40 million, unlocking China expansion and lifting margins.
- Adjusted EBITDA margin reaches 14–16% ahead of the 2029 target as richer mix and operating leverage accrue.
- Term‑loan refinancing closes at significantly lower rates, freeing cash flow for growth capex and accelerating deleveraging.
- Data‑center order growth moderates from the current supercycle pace, limiting the upside to the revenue and margin trajectory.
- China expansion stalls—inability to secure the 100,000 sq ft facility or geopolitical disruption caps the machine count at 80, restricting growth to the $1 million/month run‑rate.
- Multi‑program ramp‑up execution falters: quality issues or customer‑acceptance delays cause start‑up cost overruns and push revenue out, compressing margins.
- Automotive demand weakens cyclically, eroding the base business and offsetting gains in growth verticals.
- Term‑loan refinancing fails to materialize on better terms, leaving the company with high interest costs that constrain financial flexibility.
Looking Ahead
The second half of 2026 should be the inflection point, with revenue contributions finally arriving from the data‑center machine group (target >$1M/month by November), the defense weapons program, and the medical surgical‑tip ramp. Operational milestones to watch include securing the Wuxi expansion facility, bringing the busbar plating line online, and closing the term‑loan refinancing. Q3 2026 results will be the first test of whether these growth programs are producing at scale.
- Q3 2026 (expected Nov 2026)Q3 earnings report — First quarter where data‑center, defense, and medical ramp‑ups should be visible in segment revenue.
- November 2026Data‑center machines hit milestone — Monthly parts sales expected to surpass $1M, building into Q1 2027.
- Year‑end 2026Busbar plating line online — Enables quoting full bill‑of‑material for large busbar opportunities.
- Year‑end 2026Preferred stub retirement deadline — Remaining $35M stub: retire by Dec 31 to capture $5M discount.
- Within 12 monthsNew Wuxi facility secured — 100k sq ft needed for 200+ data‑center machines; COO evaluating sites.
- 2026Wire harness program launch — Launch expected in 2026; equipment selection was in final stages as of Q1.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $464M | $422M | $435M | -9.1% |
| Gross Margin | 14.8% | 14.1% | 12.8% | 77bps |
| EBITDA | $18M | $17M | $314M | -3.9% |
| EBITDA Margin | 3.8% | 4.1% | 4.7% | +22bps |
| Net Income | −$38M | −$34M | −$34M | +11.2% |
| Free Cash Flow | −$7M | −$4M | −$137M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)12.8%
- EBITDA Margin (TTM)4.7%
- Net Margin (TTM)-7.8%
- ROIC-3.6%
- FCF Conversion-41.9%
- SBC / Revenue0.7%
The Company
NN, Inc. designs and manufactures high‑precision metal components and assemblies for a diverse set of industrial end markets. Its products—ranging from stampings and contacts to machined couplings and busbars—are used in automotive steering, braking, and fuel systems, as well as in electrical connectors, defense components, and medical instruments. The company’s competitive edge lies in deep materials science expertise and advanced engineering, enabling it to produce complex parts with tight tolerances.
The company operates 27 facilities across the United States, Brazil, Poland, France, China, and Mexico, with manufacturing clusters in Attleboro, Massachusetts (Power Solutions), Kentwood, Michigan (machining), and Wuxi, China (machining and the hub for its data‑center ramp). NNBR employs a vertically integrated approach, combining in‑house machining, stamping, plating, and assembly to control quality and cost, and it passes through raw‑material costs to customers via surcharges.
Business Segments
Competitive Landscape
NNBR competes in fragmented industrial component markets. In Mobile Solutions, competitors include Anton Häring, CIE Automotive, and others; in Power Solutions, Checon Corp., Deringer‑Ney, and Eaton Corporation are cited. For liquid‑cooling quick‑disconnect couplings, the competitive set likely includes Dover, Parker‑Hannifin, and Stäubli, though management describes an exclusivity request from a large data‑center customer as evidence of a differentiated capability.
- Anton Häring KGNamed in 10‑K as a Mobile Solutions competitor; not discussed further.
- CIE AutomotiveNamed in 10‑K as a Mobile Solutions competitor; not discussed further.
- Checon Corp.Named in 10‑K as a Power Solutions competitor; not discussed further.
- Deringer‑NeyNamed in 10‑K as a Power Solutions competitor; not discussed further.
- Eaton CorporationNamed in 10‑K as a Power Solutions competitor; not discussed further.
Supply Chain
NNBR occupies a mid‑tier position, transforming raw materials into precision components for large OEMs. It is not widely named by supply‑chain neighbors as a primary supplier, but its components feed into electrical and cooling systems that major data‑center equipment makers incorporate.
More on NNBR: Earnings recap