NN (NNBR) Q3 2026 earnings review
NN raises its full-year outlook, but launch costs widen losses
NN, a maker of precision metal parts, is growing revenue and raising its outlook, but launch costs still leave it unprofitable on a reported basis. Third-quarter sales jumped 26%, and operating profit excluding one-offs more than doubled as its electrical stamping unit expanded margins. Chief executive Harold Bevis raised the full-year targets for a third time, pushing expected second-half sales and profit well above what the company's prior plan pointed to.
| Revenue | $131.1M +26.2% from a year ago |
|---|---|
| Ebitda, excluding one-offs | $18.5M 14.1% margin, up 2.2 percentage points |
| New business wins (12 months) | $130M 2026 outlook raised to $110–130M |
| Full-year revenue outlook | Raised $20M middle of the range: 16% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because record contract awards of $130 million over the past year are now lifting both revenue and segment profit margins. Retiring most of the expensive preferred stock also removed a heavy drag on common shareholders, even though issuing new shares diluted their stake by 57%. One caution: management still lists raw material cost pass-throughs first among sales drivers, and factory launch charges widened the reported operating loss.
The question now is how much of the 26% sales jump came from shipping more data center, defense and medical parts rather than passing higher metal prices to customers. If unit volumes drove the gain, gross margins will climb above 20% as launch costs fade; if metal prices carried it, growth will slow when commodities cool. The revenue breakdown in the third-quarter filing and fourth-quarter gross margin will tell.
🐂 Bull Case
New Business Wins Topped $130 Million
NN measures future growth through new business wins, which state the peak yearly sales of newly signed customer contracts. Over the twelve months ended September, the precision metal parts maker secured $130 million in new awards and is now "winning more than 1 new program per day" across data centers, medical equipment and defense.
That pace forced a major increase to the full-year wins outlook, which jumped from a range of $80–100 million to $110–130 million. Because new awards take several months of tooling before factories ship parts, most of that $130 million is not in current revenue yet. The company expects to launch over 150 programs worth about $100 million in peak yearly sales during 2026.
What to watch: fourth-quarter revenue against the $111.7 million implied by the full-year outlook. Beating that figure would show that new defense and medical programs are turning into factory shipments on schedule.
Power Solutions Lifted Operating Profit
Power Solutions makes stamped metal parts for electric grids, data centers and vehicles. Segment revenue jumped 40.6% from a year ago to $63.2 million, bringing its share of company sales to 48.2%. Unlike last quarter, when segment profitability stayed flat, Power Solutions expanded its operating margin excluding one-offs by 1.6 percentage points to 19.6%.
Mobile Solutions, which makes machined parts, also grew sales 15.3% to $68.2 million and lifted its operating margin excluding one-offs by 2.0 percentage points to 5.9%, aided by a Chinese joint venture. Together, higher volumes and better product mix pushed consolidated Ebitda margin excluding one-offs up 2.2 percentage points to 14.1%.
What to watch: Power Solutions operating margin excluding one-offs next quarter. Holding near 20% would prove that higher-margin electrical and medical parts outweigh zero-margin metal cost pass-throughs.
New Shares Retired Most Preferred Stock
For years, expensive preferred stock and heavy debt limited what NN could spend on factory equipment. Chief executive Harold Bevis said the company completed $143 million of capital transactions to fix the balance sheet. Critics note that issuing common stock diluted existing owners and left expensive term loans in place.
- Series D preferred stock on the balance sheet: $35.6 million, down from $112.4 million at the end of 2025
- Common stock raised: $69.4 million in cash, used to redeem $70.0 million of preferred stock
- Diluted share count: 78.1 million shares, up 57.5% from 49.6 million a year ago
- Quarterly interest expense: $5.5 million, including $5.0 million of non-cash interest over the first nine months
"We paid off all of our preferred stock via several debt-for-equity transactions over the last 4 months," Bevis said, though the September balance sheet still carried a $35.6 million preferred balance. Removing most of the preferred dividend helped lift net profit per share excluding one-offs to $0.07, up from a $0.01 loss a year ago.
What to watch: terms for refinancing the asset-backed credit line and term loan in 2027. Bevis said "we will fix at the right time" those remaining debt facilities.
🐻 Bear Case
Metal Pass-Through Still Clouds Volume Growth
Management attributes NN's 26.2% sales growth to new program launches and strong demand in targeted markets. However, when the release explains third-quarter revenue growth for both the company and Power Solutions, it lists the "pass-through of increased raw material costs to customers" ahead of volume and currency gains.
Passing higher gold, silver and steel costs to buyers raises reported sales dollars without adding profit. That dynamic showed up in the cost of making products, which rose 2.9 percentage points of revenue from a year ago to 86.1%. Even after stripping out $7.0 million of factory and startup charges, gross margin excluding one-offs rose only 0.5 percentage points to 19.3%, down from 20.3% in the second quarter.
Because the company still does not split revenue growth between metal price pass-throughs and unit volume, outsiders cannot tell how much of the 26.2% top-line increase came from shipping more parts. If metal prices fall, reported revenue growth will slow even if factory volumes hold steady.
What to watch: the revenue disaggregation note in the third-quarter 10-Q filing. It will show whether growth markets or metal-heavy products drove the sales jump.
Program Launches Widened the Operating Loss
Winning new contracts requires upfront spending on workers, machines and plant layouts before parts ship at full volume. Those launch expenses caused NN's reported operating loss to widen by $1.1 million from a year ago to $3.3 million, driven by "higher labor costs associated with increasing headcount to support new business" and legal fees.
- One-off facility and personnel add-backs: $6.8 million in Q3, up from $2.7 million a year ago
- Mobile Solutions reported operating loss: $6.3 million, more than double last year's $2.9 million loss
- Third-quarter free cash flow: negative $1.3 million by our math, as capital spending rose to $6.4 million
- Reported net loss: $4.6 million, which would have been $7.4 million by our math without a $2.8 million Brazil tax gain
What to watch: fourth-quarter operating cash flow and capital spending. Positive free cash flow would show that newly launched programs are starting to pay back their setup costs.
Risks this quarter didn't answer
Several standing questions about factory capacity and end-market sales lacked specific numbers in the earnings release.
- Data center machine timeline: NN is "installing over 50 new machines dedicated to this market through Q1 2027" for its $66 million pipeline, extending a rollout previously expected by November 2026.
- Defense and medical ramp revenue: the company is ramping up firearm accessories and 30 medical equipment platforms, but gave no third-quarter dollar sales for either line.
- Legacy automotive exposure: Bevis mentioned exiting low-profit auto programs, but the release did not update the share of revenue tied to passenger and commercial vehicles.
👓 Other Themes
Cost-Out Target Raised and Small Acquisitions Return
NN expanded its internal cost-cutting goal for 2026 from $10 million to $12 million across 335 global projects, and noted those savings are not fully in current results yet. With the preferred stock refinancing behind it, Bevis said the company is now positioned to "explore logical, small bolt-on acquisitions" alongside its internal growth investments.
💲 Other KPIs
Uncollected customer bills rose 29.2% from $59.8 million at the end of 2025, absorbing $17.4 million of operating cash over the first nine months. The increase tracks the 26.2% jump in third-quarter sales and new program launches. The parts maker kept working capital between 16.5% and 16.7% of sales over the past six months.
By our math, short-term and long-term debt totaled $168.8 million at the end of September, up from $159.5 million at year-end 2025 and $166.5 million in June. While equity deals retired preferred stock, borrowing rose slightly as the US manufacturer drew $10.0 million on its term loan earlier this year.
NN's share of after-tax profit from its Chinese manufacturing joint venture climbed 59.3% from a year ago, accelerating from $2.2 million in the first quarter and $2.4 million in the second quarter by our math. That profit accounted for over three-quarters of Mobile Solutions' operating income excluding one-offs.
🔮 Guidance
Raised. The middle of the range moved up $20 million to $490 million, or 16% growth for the year. By our math, that leaves $111.7 million for the fourth quarter, up 6.7% from a year ago but down 14.8% from the third quarter on normal holiday slowdowns. It is the third raise this year, and each was bigger than the last: +$5M, +$10M, +$20M.
Raised. Finance chief Chris Bohnert lifted the target by $6 million at the middle of the range, pointing to 35% full-year growth and saying it "keeps us well on track to maintain pace with our 2029 financial goals". By our math, the plan leaves $15.4 million for the fourth quarter, a 13.8% margin against 14.1% in the third quarter. Third raise this year: +$2M, +$3M, +$6M.
Raised. Management lifted the middle of the range by $30 million, or 71% above 2025's $70 million total. Because trailing twelve-month awards already hit $130 million in September, the new range reflects contracts largely in hand. It is the third increase this year: +$10M, +$5M, +$30M.
❓ Key Questions
How much of the 26% sales growth was metal prices?
The release again lists raw material cost pass-throughs first among revenue drivers, while gross margin excluding one-offs dipped from 20.3% in the second quarter to 19.3%. Investors need the split between unit volume and metal pricing.
Why is $35.6 million of preferred stock still on the books?
Chief executive Harold Bevis stated that NN paid off all of its preferred stock over the last four months, yet the September 30 balance sheet still shows $35.6 million of Series D preferred stock. Did the final exchange close in October?
Did the data center machine rollout in China slip?
Last quarter management expected all 50 data center machines in Wuxi to be installed by November 2026. The release now says installations run through the first quarter of 2027. What caused the longer schedule?
When will new program launches stop losing money on a reported basis?
One-off personnel and facility startup charges jumped to $6.8 million in the third quarter, pushing the reported operating loss to $3.3 million. How many quarters will the 150 program launches weigh on reported profit and cash flow?