NN, Inc.'s Data-Center Coming-Out Party Has a Timing Problem

The preferred stock is gone and guidance is up, but the liquid-cooling machine ramp slipped from November to Q1 2027.

NNBR · Earnings Call · 2026-10-29

The balance-sheet inflection is real

For most of the past decade, NN, Inc. was a leverage story masquerading as an industrial. Q3 2026 finally changed the plot. Net sales rose 26% to $131 million, adjusted EBITDA rose 50% to $18.5 million, and management raised full-year revenue guidance to $480 million-$500 million and adjusted EBITDA to $64 million-$68 million. “Our Q3 net sales increased 26% year-over-year. Our Q3 adjusted EBITDA increased 50% year-over-year” — Harold Bevis, Chief Executive Officer · 2026-10-29. But the less flashy balance-sheet move is the real unlock: NN reduced total net debt and preferred stock from $261 million at year-end 2025 to $139 million on a Q3 pro forma basis, including redeeming the last $35 million of preferred at a $5 million discount. “we now have eliminated all preferred stock obligations dating back to 2021” — Chris Bohnert, Chief Financial Officer · 2026-10-29. Through Q2, the fundamentals still showed effective net cash of -$150 million and liabilities at 68% of assets. The preferred was a 2021-era scourge; eliminating it matters more than a single quarter of EBITDA. The new PIPE also brought growth-oriented institutional investors, and with cash taxes only $4 million-$5 million because of a large tax-loss carryforward “We have a very large tax loss deferral. So our cash taxes are very small. They're in the $4 million-$5 million range.” — Chris Bohnert, Chief Financial Officer · 2026-10-29, NN can redirect cash toward machines and M&A rather than the capital structure.

The data-center story: old theme, new scrutiny

Data center is not a new NN theme. It has been building for at least four quarters. On the August call, Harold Bevis said of liquid connectors, “we think we could do $100 million in that alone over time” — Harold Bevis, Chief Executive Officer · 2026-08-06. That number is now the official goal. Data-center-only revenue is running at $35 million, up from almost nothing at the start of last year; data center and grid together are $87 million trailing, defense electronics is $62 million, and medical is $13 million. The liquid cooling product line is described as exploding, and the data center pipeline is being chased across Wuxi, North Attleboro, and Kentwood. This is a real product story, not a slide. But the pace is where the call gets interesting. In August, management said the first 50 machines would be installed and that data-center sales would cross $1 million a month in November: “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” — Harold Bevis, Chief Executive Officer · 2026-08-06. On the Q3 call, the marker moved: “In Q3, we averaged 19 machines installed and commissioned, and Q1 will be at 55 machines, and our objective is 180 machines” — Harold Bevis, Chief Executive Officer · 2026-10-29. That is not a debacle — the 180-machine target is far larger than the original 50 — but it is a slip from November 2026 to Q1 2027. Management also introduced the language of constraints: “There is a strict process that is followed called PPAP, and that cannot be truncated or shortened” — Harold Bevis, Chief Executive Officer · 2026-10-29. Earlier this year, the same program was framed as an “immediate ramp-up kind of industry because the supply industry is behind” — Harold C. Bevis, Executive, likely CEO or President · 2026-03-05. The difference between those two statements is the difference between a promise and a schedule.

Data center is a big one for us. We were able to get into that business. It has grown a lot for us. It is fast-growing, and our opportunity set is fast-growing. It is really growing by leaps and bounds for us right now.
Harold Bevis, Chief Executive Officer · 2026-10-29

The global tape is a useful reality check. AI data center has been a crowded trade: the market's AI-data-center basket is up roughly 54% over 360 days but down about 5% over both 90 and 30 days, according to Know Trend's theme tape. NN's stock is up 50.6% over the last 90 days and sits 12% below its October 2 peak of $4.51. That divergence says the move is company-specific — a re-rating of the balance sheet and the growth mix — not simply beta to a hot theme.

The automotive subtraction

The guidance raise is not purely additive. Automotive is still about $200 million of roughly $500 million of sales, and management is now explicit about shrinking it. Ten automotive customers are near zero gross margin, tying up working capital and sales time. The plan is to reprice or exit: “The first move obviously is go and say, "Okay. Here's my new price that I need to continue to be your partner."” — Harold Bevis, Chief Executive Officer · 2026-10-29 That is a meaningful shift in tone. The automotive business has been discussed for years as a mix drag, but this is the first time management has put a board-level plan and a customer count behind the exit. It also explains why 2029 revenue guidance of $625 million looks conservative: the $50 million-per-year growth target has to overcome deliberate auto attrition. The meet comp clause in contracts gives customers the right to push back, so the exit will be negotiated, not switched off. The good news is that much of the auto equipment can be repurposed for defense and munitions work, which makes the subtraction less costly than a pure shutdown.

Pipeline, win rates, and the burden of proof

NN now talks like a company with a full funnel. The quoted pipeline is $750 million, the prospect list is over $1 billion, and the win rate is running above 25% on closed opportunities. New business wins hit $106 million in the first nine months, and guidance was raised to $110 million-$130 million. The company is launching more than 150 programs worth $100 million of annual sales. Management also says it has a 25% gross-margin floor and a 25% IRR floor on new business, targeting 35% gross margin. That discipline is credible because it is repeated from prior calls, not invented for this one. But the funnel needs translation. Bevis was candid that “For data center, it is mostly prospecting right now, so we are still working our way in to get to the firm quote stage” — Harold Bevis, Chief Executive Officer · 2026-10-29. The medical opportunity — a marquee customer with 30 machine platforms, starting with robotic orthopedic surgery — is still only $13 million of revenue. Defense is real at $62 million, with $10 million of wins this year and an $85 million quoted pipeline, but it is not yet big enough to carry the company. The Department of Defense and NATO munitions win is new and potentially large, but it is early. The Cable assembly plant in Juarez is another 2027 contributor that has not shipped yet. The plant certification progress is a genuine barrier to entry, but it also explains why medical has taken longer than expected. At 0.4x revenue and 62.8x operating income through Q2, the stock is not expensive on sales but still has thin earnings. The next proof point is simple: can the 55 machines in Q1 2027 produce the $1 million-a-month run rate that was supposed to arrive in November 2026? If yes, the data-center goal becomes credible and the re-rating has legs. If no, the market will treat the $100 million target as another pipeline slide. The preferred stock is gone; now the execution clock is running.