NN (NNBR) 5 Aug 222022 Q2 Earnings call transcript

Hello, and welcome to the NN, Inc.

Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jeff Tryka from Investor Relations at NN. Please go ahead.

MJ. you, Thank and everyone, joining us. Good thanks morning, for for Jeff Investor contact Tryka, Relations NN, Inc. I'm to like update. I'd you And thank business for attending today's afternoon, Relations ended press for Yesterday which have well a our to presentation, our issued results the website. posted financial Investor as release supplemental the of XX, June announcing quarter been XXXX, section as second we press & If anyone contact supplemental Lambert Co. presentation, the needs a release copy you or of the may at (XXX) XXX-XXXX.

and will presenters Financial Officer; Chief on President the Warren Our Vice Officer. Chief Executive morning Mike and be Senior this Felcher, and Veltman, call President

December take Before statements of we Form begin, release, the I'd ask today's the in section cautionary that supplemental forward-looking on you the company's XXXX, regarding with Factors for webcast. and report in the as note Risk language XX-K applies language the live press as other presentation ended and the Commission. contained today's year of on Q&A including annual made well XX, conference The filings Exchange as call, session to same Securities the as fiscal well comments

call of tables includes in measures which the be outside certain statements also cash non-GAAP flow, future open defined Day provide to with Our topics. Mike back provide and rates, forward-looking and and Warren and our comments the other results our should contained financial our call company's press agenda Veltman, caution on shortage, turning presentation. the of outlined sales, inflation, control. coronavirus been of Investor These quarter. and I be cost current strategic in from discuss COVID-XX release foreign revised Warren Russian-Ukrainian input which a segment the various the priorities, President will semiconductor the building or markets statements update factors for we would session rates, on is Reviewing markets the as A the what update chain presentation Warren SEC with our rules. and pandemic operating as the company's for to then results. external view over the the constraints, supplemental measures today's long-term an The turn the the exchange results, before XXXX, final There of this then cash influencing detailed contain subject performance are as results financial margins, risks on recent section following and on supply the on impact reconciliation to our will will call, by synergies, chip savings, and regarding second acquisitions, conditions used of will outlook business and worldwide today cost well automotive prepared the such tax the time, based uncertainties, and like of our non-GAAP impacts over many a At has of CEO. the presentation remarks. conclusion Warren? conflict of of the Q&A are our to to at

Thank morning, good you everyone. this for us and morning. Jeff, joining Thanks,

teams our results, volumes. on possesses with have constructively NN are we said, supplier very cost to day. That environment constraints an by start challenging been satisfied every characterized labor comments predicated second that customer inflationary better. we fluctuating action-oriented my to me pressures, indicating our and not adapting do improving quarter need Let by a interruptions, and culture

teams presented strong meet current that to have the by our rise faith will this So environment. I challenge

through for discussed future we have our and success positioned May Investor NN As we XXXX initiatives. actions numerous Day, in

If some you cornerstone X to turn review the of of the presentation, Page we will initiatives.

areas. growth key on efforts sales our focused have We

view future on economy focused We from not this and to a energy refresher, a the As of only megatrends markets, the sustainable is carbon-based transition economy. shaping our specifically, strategy a our as strategy the for internal good the is engine triple per but opportunity of expected environment, be for vehicles. of traditional vehicles products our approximately the vehicle that on combustion to for content business electric NN's as good

with these inflationary on customers have and focused mentality has we of are growth targeted as The represent across instead accelerated and XX% with markets, than electrical to the strategy EV by of will these which targeting are customers is organization. deliver NN's confident secure penetration the within chain ability our pleased to consolidated groups. To are focused we as full sales success. and actions innovation critical of of on on are both it. Internally, our better sales to hunter's adjusting and drive and we EV incremental of and customers. more more growth organization individual supply key in XXXX. strength operating Solutions rewards in all long-term our align Mobile material and mobile with segment By performance of environment. including the pass-through almost to so, We markets in position objectives full to new of we relationships doing investing electrical NN more organizing the or and Pricing wins, effectively our larger segments with securing discussions an eliminating are are we around in of as well made relationships arsenal to important we our recent remain our lag, NN's challenges volume the expertise the inflation insight, with and ongoing, historically customers. serve NN's programs our capabilities, ourselves narrower delivery am I we pass-through a business financial elements speed segment power, with program better detrimental call differentiate our commercial compensation success, growth, The accelerate to and our

over months. provide threat the with recessionary to including We our protection. all an We flexibility is and remain open addressing in and to XX inflationary structure. future customers dialogue next This improving XX committed given have additional have securing been to maintained proactive new important continuously contracts cost impacts, especially the inflation

content that by including We from Taunton operating shifting reduction $XX will benefit of lower-cost the have which adjusted footprint, the EBITDA cost a our successful the through million annually. end $X for improve a further we remain it another initiatives the the is We when results the optimization three anticipate at close programs expect million improve of facilities to million compared EBITDA by $XX improve We're this this $X facilities. of additional year, will our XXXX announcement. annually majority be in facility, The facility this improvements. operational we schedule that combination the efficiency in million process certain and in when facility and adjusted vacated. the will closing process EBITDA trailing to of of will high-labor We to earlier to of XX-month time by of was by securing our subtenant adjusted announced closure the of expect to come on

of We closed facilities by the end expect QX XXXX. will be these that

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continue our points since to of SG&A We basis sales and can over these XXX areas. have we XXXX gain believe percentage as efficiency in by a reduced

in labor operational committed rightsizing match whether fostered and our production that costs volumes opportunities team drive real-time. to profitability identifying is excellence, support to to culture, dedicated has our Our or

are and a key manufacturing in development tight locations in taking variety of creative labor to We retain this develop of opportunities talent programs also current our advantage environment. through

our extension needs process as will of with teams, while of to an we unique portfolio and manufacturing to world-class faster leverage their We technologies meet of reducing continue our By base. can capabilities growing customers manufacturability the support cost. actively enhance collaborating comprehensive and customer time-to-market total our

semiconductor negatively FX prior defense. offset sales ongoing sales the of in pricing China. of by other from quarter. in turn by of our from resurgence favorable Compared higher and components, also chip year result as review sales team as were increase supply some pandemic dollar primarily to Power automotive driven the we X.X% offset the the year interruptions pricing impacted factors. due chain Higher volumes the and supply business prior in our by and lower and strengthened versus Russia-Ukraine quarter. partially interruptions continued of Sales in was period, volumes and to Mobile shortage, and lower a decrease the to the the the sales The Now conflict The Solutions period. volumes accomplishments to second during FX if and impact during increased in X, due million volume you aerospace and X.X% primarily $XXX.X prior chain increased in the prior Solutions to will year was Page X.X% decreased the despite electrical year. most the the period. Sales COVID of

and mitigate nonlabor While chain we ongoing and challenges, inflationary impact expectations. inflation other exceed material take of the to continue the continues to actions to supply

pass to to responsible increased through ability cost was Power maintain favorable for solid Solutions our performance sales Our business. in the pricing customers material and

the concluded the our million. of over year will the results negotiations realized second recoveries $X were prior approximately of period quarter to by subsequent our the compared million of the be remainder unrecovered the For Price approximately quarter, year. in of end impacted and second to many fact, million inflation pricing when to quarter $X $X and customers with continue,

health underway. of of We balance our of mitigate continue are support sheet maintaining the leverage to the impact deploy various We strong committed most strategies ratios remain vision. prioritizing strategic to our current to to inflation, and which

capital to inventory leverage focus stock Lower interruptions cash us remained use with in support Page that strong XXXX. challenges, Despite financial We increased safety growth X, current and capital, chain resulted achieve first need position growth sales our including we results, due XXXX. along Xx remain ratio maintain expect the supplier levels capital million. pursue at higher times, of believe strategy. our strategy of to pipeline operations of target committed we by to working the million opportunistically supply to remained on long future current $X.X ability our shaping an and offers liquidity will working ratio lead investments and additional the and the our end with of our markets. total our in it with megatrends longer-term working of to free the $XX.X turns of X.XXx. to flow aligns how consistent the position On operating review leverage with of quarter We as level mitigate Our EBITDA

pipeline sales business electric markets development We Those pursuing have by with the are generated and opportunities electric pleased significant and with space our in and each currently teams delivered market. vehicles, opportunities the we are our a growth strengthen to several grid position expansion target in teams. associated

reductions with Additionally, size million programs prior along to this $X.X million in has decline in we from in This by system in a have our fuel ICE-dependent pipeline increased deal resulted OEMs, quarter pursuits. the $X.X focused quarter. the average of year approach,

We our are also market focused related expand the of XXXX. the Sciences to on our Life of presence the in in further fourth sale business the expires the noncompete to quarter opportunity provision once medical

Year-to-date, have secured new to begun revitalized to through generate we note, the approximately team's new as Turning we alignment electrical the highlighting new space, review quarter achieved sales business wins second million team peak the Of long-term our have business Page our quarter, results. of annualized with $XX in strategy. and business through the of EV XX% X, were our our of our will with second efforts wins. wins

million, capital as to expenditures We incremental existing base. also wins our we our return us ratio of capital a allowing achieved business strong low pleased opportunity financial improve the on equipment the are require $X with just new

quarter. Now of a review in-depth financial he over Mike? provide call performance our the to can so Felcher I'd to like the more turn for Mike

Warren. Thanks,

have some of the to Turning X.X% we of quarter million, were for for Sales the summarized from XXXX. key second X, quarter. $XXX.X Page items the up the quarter

disruption. Warren factors market offset and other $XX.X in shortfalls, a in settlement is received and this Results labor the resulting end material Mobile for cost modern noted operations We as and impact operational unrecovered prior Non-GAAP continued resurgence decrease equipment in sales with to due finalized a use up expenditures equipment down inflationary, our which for by inflation business no delay group, Solutions volume and on at the in ongoing of X.X% of million was quarter for the Power versus year, within venture in well the EBITDA inefficiencies as quarter to China in was second our X.X% of as the positive from weighing settlement the sales we which ago. compensation new segment. our revenue further or or of XX.X% growth impacted us improvement and year already owned a designated as year-over-year, the by residential EBITDA chain growth driven recovery facilities was COVID-XX a at supply see We customer second in negatively Solutions by will year-over-year for were costs. million commercial the partially help X.X% revenues driving This $XX.X avoid in a adjusted results. of quarter. program. XX.X% in also impacted capital sales, future wholly joint of $X.X The electric million The a

Our EBITDA labor and adversely material inflation. impacted was margin by continued cost

was material to impact through customers on of amounted on inflation inflation quarter the EPS of labor a pass through versus loss in $X utilities, a successfully the supplies, to prior majority Although the second XXXX. the of we and total when $X.XX diluted material quarter the approximately GAAP second were increases, to second of of year. to to compared MRO, manufacturing unrecovered $X able per million for share price quarter loss million $X.XX the during

results quarter inflation higher current not recovered fully discussed. Our actions, reflect as just through I material that pricing was cost

Our breakeven the versus diluted in period. $X.XX non-GAAP EPS loss of a net adjusted was prior

have quarter shutdowns our China XX. remains Slide consistent have logistics. to supply we ability due supply to customer outbreaks levels with the ensure inventory to meet prolonged that at government-imposed of to capital to X.X to in turns. Due our higher-than-usual the impact impacted COVID in of needs, first continue Turning chain recent especially resulted that hold adversely Working challenges,

elevated, remain returning the levels when continue on our and ensure serving we customers. as chain are ability more focus levels able While to stabilizes will inventory we normal to our inventory supply to

to Turning Slide XX.

that at taken our We year. look at will disciplined we continued - approach we a expenditures provide capital past over have the

decreased million compared million down from to to $XX CapEx We year. year-to-date XXXX, $X.X last have

that approximately discipline full to on anticipate As from million, CapEx come reduction of we will cash, $XX look a in quarter. year $XX maintain and our million our last outlook between now we million $X

will $X.X We our a partially working as cash cash flow in in part our by sequential quarter million to markets Free to of use have higher-growth illustrates free was quarter. the flow second of by year. the for million a long-term primarily continue XX driven the flow disproportionately a identified lower allocate to use cash Slide expenditures cash capital of operating we was that growth strategy. free Free XXXX prior the compared in results, offset in $X.X reduction quarter capital. of

quarter. second million incurred will its facility In In during impact litigation of quarter to manage addition, that was and $X.X Please we approximately quarter utilizing increase the severance, have tax continue debt and $X.X XXXX, of free in sale cash the a terms. opportunities to first in cash costs risk, costs take a working the related Life including to receivable advantage of low versus better $XXX the flow order million. at the included of an on for Slide improve end year million payback payment million Net cash free we of million Sciences. XX. programs turn short Prior are also closure flow, to and to capital customer $X.X $XXX.X

net at the X.XXx the quarter. EBITDA the of increase X.Xx debt-to-adjusted end first quarter, Our at stood an of end the ratio at from second

end the first had cash from to target as including our revolver above on is level a of this availability target, expect of by liquidity, of was of under decrease which million that quarter. be million $XX.X June We year. our Xx we $X.X the XX, While the and

just back the Warren. by to availability Our will with the million of that, quarter $X million. it second I under $XX drawn undrawn turn With at of ABL was end

broadly On each view XX, our you, within of conditions we Thank current outline of our market main Mike. markets. Page

The infrastructure. space, electric its electrical electrical the growth to markets corporations adopting by the the to Within in world the we rapid energy. the to policies, the of and allocating expected energy is demand of and incentives end implementing sustainable governments resume equipment operating of invest companies as for see continue accelerate and panels ongoing around transformation XXXX adoption control funds with

for additional expected is lithium-ion that growth by Insights a billion OEM XX.X%. transportation in demand significant of continues The the storage, rate the EVs Fortune their for to are recently solutions announced market XXXX yield their rise momentum the global growth broad and encourage of $XX.X electric commercialization. sectors will battery $XX.X saw EV reported planned rising compounded leaders employee The to compensation batteries these to of global to commercial, in significant is while EV We highest is gather Ford developing industrial transition the broader the increase and storage Business in billion market. and with into from electric including size support investment, with a to in to along to infrastructure which in projects, private penetration shift support to battery for estimated plan new designs development sector, investment opportunities. entrants the tap likely growth. XXXX, Expansion the

the inevitable, ultimate uncertain. While for the is we believe EVs transition and frame time to the transition is path

operating conflict chain challenges, IHS is global at light ongoing culminating the near flat South that production XXXX. levels updates with as in conditions sales partially or Mobile the and side, economic well dynamics. industry On as the vehicle a now COVID-XX ongoing Asia by pressures forecast month auto Markit deteriorating the China Solutions influenced recovery July chain for indicate supply forecast is by offset and recessionary with advises Russia-Ukraine already markets, of supply

decreased increased customer by pricing. and have groups, were Solutions increase presented year-over-year more XX.X% Page our primarily X.X% trends positive prior with up chain sales favorable were each by automotive driven the which ordering to defense an customers. and variable period These generated We on COVID-XX sales starting XX. associated Solutions through electrical Power in uneven pandemic-related Power component The customer and sales, of inefficiencies additional Profitability caused information recovered reduced operating year-over-year, for by not of fully year labor by patterns actions, to and supply interruptions. aerospace cost compared costs inflationary offset partially interruptions, with driven pricing constraints

reduce standards advance and decreased impact Solutions year of the the closure operations well as continue to Similar consolidation diesel additional lower production of the was XXXX for optimize unreimbursed negotiations with of Page recovering we as Massachusetts to were XX, Russia-Ukraine the Negotiations The and in conflict are effect period. on within market. our forward, In is ongoing schedule opportunities for Taunton, European pricing increased cost by JV in due products particularly Power our On COVID-related Looking and Mobile customers. in driven the facility within from to net the prior Solutions, in the and income. inflationary with emission mostly decrease successful identify previously demand X.X% by impacted pandemic, customers our inflation. margin primarily China to volume our increases group owned on China, sales versus proceeding China in the XXXX tightening compared primarily of demand established to in negatively entity caused shutdowns wholly reductions a costs. both contribution framework

Looking are of the July. ahead, in seeing trends positive customer month demand through we

present Ukraine outlook. along reemergence the the current the However, chain supply challenges, in of with conflict risks COVID and China, to ongoing

Turning to Page XX.

to May. slide drivers of outlook Included We in at in outline Day reflect our the changes considerable Investor we market conditions on since this for revised the our XXXX outlook. the last updating are update our

breakeven in million, $XX to $XX $XX to range net the flow range $XX million compared the of reflects in $XXX cash previous following: full in million range XXXX to range the of compared to to range the million. to to of million outlook range EBITDA $XXX year million $XX million previous and free Our the the previous the $X adjusted of sales $XXX to million now million to compared of million of million $XX $XXX

assume half no supply balance we all which conflict, production continue of from disclosed to the the chip the of no As in OEM when and Russian-Ukraine disruptions XXXX and expected we of or impacted shortage the significant providing to quarter automotive impact second XXXX have have our outlook, to volumes original XXXX. chains disrupt semiconductor the are in due the and through second significant pandemic us

In from And have we addition, are in more originally inflation inflationary still versus than seeing pricing we we has customers although our expected, the business. have shortfall realized increase a not moderated.

cash due a taken dividend recent Our actions reflects Reserve impacts. by to free expense China the and outlook to flow JV interest from Federal our higher lower the due pandemic-related

an - Additionally, timing we facility expect the cost of facility plant certain to increased due acceleration closures of closure closures. costs

As a uncertain refund timing. our cash due not does tax to outlook million Act reminder, approximately $XX CARES of flow include free

will an we sold have Sciences from information and minimum earnout Additionally, and contingent payment in made business as financial not XXXX be the the was acquirer the a concluded met. received will evaluated threshold that of October be payment Life for not

our Lastly, I quarter. and the pleased with focus am second during commitment team's

As we however, and quarter performance-driven We pipeline of challenges I indicated, ahead are number satisfied NN results The culture still these new of NN. progress success. us, a to are the indicators positioning second the have business continue position long-term our of progress. We wins company do by responding challenges. to overcome we nor financial uncertainties not to and for of make of are and our previously the did, with they exemplify expansion

and sales and automotive our revolution in better teams opportunities business the megatrend development attack to the electric reorganizing are with space. We new the grid associated

consolidating optimizing cost-effective our and are reduce We fixed our manufacturing to better costs locations. service more of customers, footprint and advantage take

expenses on a expenditures additional working to improve free flow SG&A organization capital higher we are to on our throughout minimizing and and return provide evaluating invested staffing And are We levels capital efficiencies. capital. focused drive cash and

remarks, I operator now the the prepared We of shareholder to That turn call concludes will and will back for questions. the expect activities that culmination drive improved value. these our

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

contract you like deal you've that to of on kind of efforts dig little the with we do the how change think a in bit in think a to this the lag in Do the inflationary Good got point inflation, you Or that's Or morning. sort base Want of lag? feel about your with contract pressures. still sort do at base. now? things as there's

part-by-part about some We've with and the customers have issue cost and most that for And doing that So in significant recovery what to - manufacturing supplies is reiterate, well. as that. analysis and now cases, of through are is the the timing that of what costs of material either the just of on There the We have an look are But example recovery - are customers then few in majority was obviously Mobile we're additional been most meetings say we some make in that I and XXX% year-over-year We've forward. certainly at unreimbursed with of MRO a where customer increase of costs. prospectively, financial those very them most a as is Rob, There types has we're when customers each on pricing think the our we quarter in during other how just a of and year nice the created Yes. XXX%. might going have - predicated other an going secured within is as talking okay? quarter done lag. true second the back analyzing for an we negotiate cost recovery. at quarter is where of we impacted costs that's case. us issue teams I or material had being where areas. twice done adjustment will average group, there up cases, ongoing. price of a we the calling that customers the And And job data is the Solutions to that the our what not approaching

at would the would amount movement. go it of threat that push tell less we of had the you as certain the over these us our the I a and certainly there seeing with But least pricing expect we're quarter, that of some seen interestingly, we no. quarter have. if impact increases up. to adjusting actually It an still a the We'll some automatically I said inflation in be some be some should third cost should - for continues still next be will way, actually obviously, So approach to go approach price other customers We've slowing. pricing of business. it's about lag And

that we a it on are think I as team. management

six the customers indicated, at the received year, certainly our has I has the we've the expectation pricing months As but that was beginning inflation exceeded first what from through of the movement. still

But I you're but kind kind overall Great. share of great what the is some do. in that the of it that lot a presume your And and offerings activity seeing Are off further there's color. in to are market. progress That's taking resonance? happening your or to It's efforts - of good you taking share, on those pipeline. sense to your But EV how the wanted sort because a activity, the fits good share of get see with of in Or then business? you of get had just you a contract there new paying there. are it efforts sense just the want markets happening gains how and just

Yes.

it let's down. So break

business EV as think share that - all vehicles. the as is combustion certainly, business I more market, to or new could OEM internal the suppliers you side, On as we're we're secure engine growth or opportunity an characterize right? taking coming from traditional production where it to evolving the there's electric ICE So shifts situation to for it's

that programs. we're that confident that, and well to activity feel do we positioned various on So we're seeing

On States. at concentration for produced in opportunities here some if battery of see us batteries that, we opportunity There's that storage there's opportunity storage being the grid about talked of American there. North when specifically in we - the seeing production little of battery and market and side, the United that's we're growth very for that you energy the energy look

several of pursuing are in involved are there. can that we the we us for players for So that opportunities components manufacture that and

our well. evolves market trying to as that percentage of this So as year grab

Investment Kerr ahead. question Next Zacks from Tom is Research. of Please go

back of are shortages. and up a big it what cost issues is the little supply What some Can those up maybe or is down goods play: you cost in And all do Good morning. They you detail? on is sold inflation, actually there? that of sort shortages? the the show those where chain of triple issues. call cost of Like labor labor Can in related the bit break SG&A? in - in to sort that,

do general the very an within situation. Well, positive just And he building trying need for people managers to in a reallocating have And happens a and work he COVID, employees our us our that that individuals. facility, leave to contract we replace in facility. of then notice, have disruptions situation from need to react obviously, for That's facility we within to have could areas, other situations where resources those have product a people potentially the as have overtime we substantial has to around little you within facility. shortage indication, that our we then can portion issue whatever then have to contacts centers through potential where their tests an leave give evaluate by labor to individual with when whole leave order the the one to have and And if group our well. additional a area had building that tracing, And those product right? we

that receive expecting have that we available in these of a to just have hours we and opportunity chain we constraints instances material okay? electrical we certain the demand, number reason the we to in had where that side, have don't on material for given something supplier company, notify and interruptions be So whatever to of satisfy facility, and would order get in to have and where an backlog have the some situation going their three weeks within were supply couple you that pushed that out. happened now with as is us, we'll example, two Another

operations. within huge a creates it So our gap manufacturing

have the again, reshuffle So we deck. to

up, that some type to to were that I okay? material try are customer then are NN, find up So we if suppliers source those this in have working we and to work the environment. another of hours our inventory within think possible. And And deleted, shows extra some having when deck and have most We to that the with the end of facility. to reshuffle but not, examples try just resources replenish any reallocate material of if queues order that in not of struggles

Yes. been in I'd And operating is relative terms and inflation of for several disruption environment for supply in say unrecovered magnitude, in Tom, We've I'd quarter. the say the predominant labor the a quarters shortage of chain driver row. an

the inflation sequentially, particularly is main So impact the driver.

chips actual But or input terms everything? are in materials, we talking of costs,

pretty unreimbursed where parts, supplies, standpoint, seen we've tell have - business types the where where areas things cost cost like repair for a - I utilities, today majority of would manufacturing inflationary machine in our of pressure. From severe the is inflationary of exists you we us those

we're Europe, in Europe the of If situation European you as coming look not that that at some customers some those. Ukraine - utility of the costs are the it types costs operations pricing to with follow talking Russia into today our costs skyrocketed those the those and talking with And a are about of energy coming today we're actions going you and result. out of of what's associated has on - or the out Russia

it. on separately, bit. end And weakness a market the can expand just little Got you

covered but weakness then And that. quite a bit, on well. maybe as I other think auto you the in color slides aerospace the

Yes.

been to that customer customer. going it have So down profitability rationalizing Taunton some closing as an base, been tight the a by adjustment, of aerospace we're sales a by analysis we process were we've a as shutting example, we that through that Attleboro is very is product, on confident profitability it going business relates And where us a as facility, our done be relates the relocating that moving industry for we're a as it to side, profitable business overall forward. our to on we're and also down just defense going the operations, and - production. general to we've aerospace facility And segment and seen

sort here cost more couple on the Got right. structure. of A All it.

forward? mentioned facility to able this driver that going operational mentioned EBITDA, You you on give the $XX going you more the year that also details still million the $XX that expect but means SG&A. guess primary time? improvement. million more through Are be Or do I closures, any to of that's a in at you

the where there, the maintenance, facility longer expect you or certainly things of costs, facility no facility facility indirect moves, support costs, right? in - fixed one to have couple Well, just You reduction costs lease of we're within the have issues certain exists. a shedding costs, shed because utility functions that

are those out. coming So costs

of our that favorable. more some structure business just addition, In cost where to moving is facilities is

variable that our So on margin is to we going business that expect accelerate.

of We've have reduction some our continued SG&A-related costs. estimates. in that we So our incorporated in seen

there on cost on there there. or our are become there's think for overhead that we some indicated, we other continue strings facilities As can to the efficient there. opportunity reductions order costs And pull pull we're other things to within also some in functions how And to looking indirect since more of I at out. continued we're XXXX, for working us

in turn Got it. queue have the couple it can more a but on get ones, I I needed. if I'll quick back now, back but for

Yes.

good, you're Why I go you think Tom. ahead? don't

Is Okay. point to facilities -- or full at the back China this

an interesting had been or three We was the facility last in the through of operating had That actually two the quarter, development. disruptions. days

had the during for was then for employees back the start end in where But days, them the back all another or our the of Chinese the at three hoteling one what's the in down in created you up. quarantined region, which quarantined Greater that Wuxi actually and on we of were our that quarter our close area space of and COVID significant If area, allowed including period facilities or shutting us for days of for an material they facilities Shanghai portions gone or production securing them But where us relocated facilities government government to the there brought to the outbreaks of Chinese days. problems down were five shut a to where time. actually was ports, actually contact two six facilities follow it and actually five that

you normalized but has its more So it's I changed would stance. the in point at government this time, tell not

think knows as they line the a stance it to I that of hard have COVID. spread everybody relates

that closely. being employees And as watching our very about we're any it to our or certainly, very relates something facilities. it's visitors we're So diligent to

Great. right. All

the planned Does reentry you you're whole fourth issue. I separate mean at a the trying do create have medical amounts, quarter you of that Another point? XXXX? now, another what Because small medical market. to aware wasn't can't but until into new was business it mentioned, the life sciences some segment

Yes.

agreement previous acquirer a signed through we Life have noncompete the Sciences we XXXX. our of So group that of extends with that October

our customers. some And manufacture of products making compete the long-term we so is we're with group to that continue medical and or types in those that be call not on of to allowed were business, what some allowed customers But remain of the we are that of to we types thing in which for of a supply strategic products type can that us. instruments to group that

the to available able and back is through activities revisit there. And that's our closer going the to be certainly, calling us view to those customers. pursue staffing opportunities what that to other So related it's on we're in that put and an going noncompete, that opportunities. we're in of get to that the to as and we need to ready entry position expiration we market prior the referring space medical to that some into But a for us are available

more - sales-type M&A, involve just or the be Could entry too, efforts?

the competencies opportunity core to in doing that already business some what seek we the the we and think we're in-house. of We where that applications similar that and opportunities of capability existing other expand for out to metal have have machining of nature types there's use

it. I'm more done. All Got and couple ones right. A financial

think, - and year, the imply, QX on the growth correct on my that? math would outlook, that based I Is that QX. the revenue So double-digit revenue outlook for for

From a basis? year-over-year

Yes.

I look. to need

I I have be The you're can - on that color received delaying that another any that other up. looking -- CARES while that is Act issues refund, it? quick or any when is give you tax one can mean, Or

on would I it's Look, frustrating end. Tom, an tell on Yes. situation that, extremely our you

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This concludes the question-and-answer Warren would over President and our Veltman, turn back conference CEO. session. to I to like

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Thank has you your The participation. concluded. now for conference

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