Superior Industries International Inc

Good day and welcome to the Superior Industries first quarter 2021 earnings teleconference. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Clemens Dinks. Sir, please go ahead.

Thank you. Good morning, everyone, and welcome to our first quarter 2021 earnings call. During our discussion today, we will be referring to our earnings presentation, which, along with the earnings release, is available on the investor relations section of Superior's website. I'm joined on the call by Majdi Aboulaban, our President and Chief Executive Officer, and Tim Trenary, our Executive Vice President and Chief Financial Officer. Before I turn the call over to Majdi, I would like to remind everyone that any forward-looking statements contained in this presentation or commented on today are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. please refer to slide two of this presentation for the full safe harbor statement and to the company's SEC filings, including the company's current annual report on Form 10-K for a more complete discussion of forward-looking statements and risk factors. We will also be discussing various non-GAAP measures today. These non-GAAP measures exclude the impact of certain items and therefore are not calculated in accordance with U.S. GAAP. Reconciliations of these measures to the most directly comparable U.S. GAAP measures can be found in the appendix of this presentation. With that, I'll turn the call over to Majdi to provide the portfolio and business update.

Thanks, Clemens, and good morning, everyone. Thank you for joining our call, and thank you for your longstanding partnership and support of Superior. Before I start today, a few words with perspective from my side. We are very pleased with the results we will share with you today. As I stated in the last earnings call, we are very excited to have a business built for profitable growth as the industry recovers. Our first quarter results are actually a testament to what we have established for ourselves. With that, I will start on slide five with the highlights for the quarter. For the first quarter, we have, again, delivered strong performance, delivering growth above market, expanding profitability, and achieving solid cash generation. Our teams continue to execute against our value creation roadmap, capitalizing on secular trends with our portfolio of innovative technologies. As OEMs are adopting strategies to advance electrification, CO2 reduction, and vehicle differentiation, we realize a 17% increase in value-added sales and deliver 39% growth in EBITDA, and solid cash from operations. Further, we delivered on a favorable product mix as well, driven by our disciplined portfolio strategy and strong execution, despite supply chain disruptions affecting our customers. During the first quarter, we also benefited from an OEM mix shift towards premium vehicles as OEMs manage through supply chain constraints. Tim will provide more detail on that in a moment. That said, we are confident that we are positioned superior for consistent growth above market in the high single digit range for the foreseeable future. Highlighting our product positioning actually is the fact that 19 inch and greater wheels in this quarter represented over 43% of our shipments compared to less than 30% in 2019. I will discuss other portfolio drivers in a later slide that I think you will find interesting. These results underscore our operational capabilities and our portfolio strength, a combination of which has positioned Superior for continued profitable growth well into the future. Moving on to slide six, we remain committed to executing our strategy to deliver shareholder value. When I first introduced this strategy, we were actually squarely focused on stabilizing the business. Once we completed that, we moved rapidly into driving operational excellence across the business, which has been tremendously successful. This discipline resulted in improved gross margins, specifically in our North American operations, expanded EBITDA margins globally, and an accelerated drive to realize synergies across the entire company, especially between our two regions, North America and Europe. This improved profitability translated into enhanced cash flow generation and a stronger financial position. In addition to improving margins and cash flow, we are well positioned to drive consistent profitable growth as you have witnessed over the last several quarters. We continue to develop our portfolio bringing new sophisticated technologies to market, enabling us to secure additional new business wins and further expand our customer base. As we continue to make progress along this roadmap, our results clearly demonstrate that our strategy is working, creating incremental shareholder value with each step. Slide 7 showcases a major achievement from executing the strategy I described on the prior slide, driving efficiencies and enhancing profitability. Year over year, the EBITDA margin of our North American operations expanded more than 500 basis points, despite facing stiff headwinds, including the temporary shutdown of our Mexican facilities in February due to power outage, supply chain constraints, and volatile customer demand. We look forward to maintaining this trend of margin expansion as the year continues, driving our strengthened portfolio and continued execution of our operational excellence initiatives. Turning on to slide A. As we have said many times, we are in a unique position to address that attractive secular trend that we believe will support growth for years to come. OEMs have clear mandates toward electrification, fuel efficiency, and aerodynamics. as well as consumer preference for larger diameter wheels with premium content. Superior's efforts to maintain its leadership from a technology perspective has driven both significant content increases and growth over market. More specifically, looking at the key trends, we have seen our wheels utilizing these technologies significantly grow as a percent of our portfolio. Importantly, our customers recognize the value of these technologies, affording us up charges between 15% and at times actually more than 50% compared to a base level wheel. These technologies have also created a significant competitive advantage over some of our competitors as many premium customers demand these capabilities to do business with them. As we continue to innovate and develop our portfolio of premium technologies, we expect to further solidify our leadership position and capture long-term growth. To that end, moving on to slide nine, I am pleased to say Superior has been named as a finalist for the prestigious Space Award for RPVD technology, which offers an environmentally friendly, highly durable alternative to chrome. In addition, this technology offers an average mass reduction of over 10 pounds per vehicle, which improves vehicle efficiency, and reduces CO2 emissions. It is a proven technology that was launched on the Ford F-150 last year and actually won a Ford Global Excellence Award. We are honored to be in the final group considered for the PACE Award and see this as a testament to the outstanding work of our teams, further underscoring the innovative, market-leading technology we offer our customers. Moving on to slide 10. Here you see some of the exciting product and customer firsts we launched in the first quarter, both in North America and in Europe. In North America, we launched content on the VW Atlas, the Dodge Ram, and the Nissan Micro. The Atlas launch actually is our first Volkswagen in North America, consistent with our strategy to grow the European OEMs in this region and leveraging the relationship we have with VW in Europe. The Dodge Ram Launch is the first platform which features our Matt Kinnish technology. In Europe, we launched content on the Volvo XC60 and XC40, the Land Rover Defender, and the Range Rover Sport, the latter of which marked our first 23-inch wheel using our flow-forming light-weighting technology. Before I turn over the call to Tim, let me quickly discuss the current industry environment on slide 11. The IHS forecasts, which have been reduced over the last eight weeks, are still showing significant improvements for light vehicle production in 2021 versus last year. Having said that, the recovery to 2019 levels is still underway. As a reminder, we have taken a conservative market recovery outlook in our last guide. So effectively, IHS guidance has now closed the gap to our original outlook. Our underlying market assumptions of our four-year outlook remain intact. We remain confident that the industry recovery will continue for some time to come. However, we are currently monitoring the ongoing semiconductor shortages and other supply chain challenges, which may result in highly volatile customer demand throughout the year. We are also following continued COVID restrictions that are primarily affecting the European end markets. With this in mind, we are maintaining our full-year guidance. For the full year, we anticipate delivering adjusted EBITDA in the range of $160 million to $180 million and cash flow from operations in the range of $110 million to $130 million. Our focus will continue to be on enhanced profitability and driving cash generation. In closing, I am very pleased with our strong results in the first quarter, and I'm confident that our growth over market momentum and enhanced margins will continue to support EBITDA growth and cash generation. The enhanced cash position and additional financial flexibility stemming from the recent extension of our revolving credit facility will enable us to invest more in the business, continue to deleverage our company, and deliver enhanced value to shareholders. I would like to thank our entire team for their hard work, and I also would like to compliment our outstanding leadership team in executing on our strategic plan to drive these results. With that, I will turn the call over to Tim. Tim?