Superior Industries International Inc

Good day and welcome to the Superior Industries Third Quarter 2021 Earnings Teleconference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Clemens Dinks. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to our Third 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 Marcia Boulevard, our President and Chief Executive Officer, and Tim Trenary, our Executive Vice President and Chief Financial Officer. Before I turn the call over to Marcia, 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 2 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 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 are therefore not calculated in accordance with U.S. GAAP. Reconciliations of these measures to the most directly comparable US GAAP measures can be found in the appendix of this presentation. With that, I'll turn the call over to Mashi to provide the portfolio and business update.

Thanks, Clement, and thanks, everyone, for joining our call. I will begin by providing an overall summary of our results on slide five. This quarter, as you are probably aware, we saw unprecedented industry volume declines and volatility caused by OEM chip shortages and other supply chain constraints. At the same time, inflationary pressures drove raw material prices higher, particularly aluminum, and impacted other cost factors. Our team responded with agility by executing on several cost reduction actions as well as commercial initiatives to protect our margins. this while maintaining laser focus on our long-term value creation roadmap. Despite these headwinds and with markets declining 28%, we reported another quarter of sustained double-digit growth over market, 13% growth over market to be specific. Superior is capturing the accelerated demand towards premium content driven by secular tailwinds. including electrification, CO2 reduction, and vehicle differentiation. A case in point, 19-inch and larger wheels represented more than 48% of our OEM shipments in the third quarter. Further, our commitment to expand our product portfolio continues through various product launches that I will discuss later. For the quarter, we delivered $30 million in EBITDA. The year-on-year decline is attributed to the 20% decline in our unit volumes. Further, the rapid increase in the cost of aluminum and volatile schedules have increased our working capital, which we expect to normalize over time. While the industry is being impacted by severe volume declines due to supply chain disruptions, we believe that the underlying consumer demand for vehicles is very strong. And as transitory headwinds subside, we expect strong growth across the industry to fulfill backlogs and vent up demand. At Tailwind, we are well prepared to capitalize on. For the full year, we have adjusted our outlook to reflect lower industry production volumes. We are narrowing our adjusted EBITDA guidance to the low end of our previous range and adjusting cash flow guidance to reflect escalating commodity costs. Our refreshed guidance reflects the same EBITDA margins of 22% at midpoint and is in line with our guidance provided at the beginning of the year. I will discuss this in more detail in a later slide. Overall, our team continues to demonstrate remarkable ability to remain nimble and flex cost to match declining volumes. Slide six specifically highlights the severe OEM schedule volatility and volume declines we experienced during the quarter and the expectation for the remainder of the year. This is reflected in the IHS volume on the right side of the chart. At the same time, an increase in global demand combined with supply constraints, such as delays at ports and energy shortages in China, have driven significant increases in aluminum prices and, to a lesser extent, other costs, impacting our cash flow and operability. Tim will provide further details on this. In addition, our operations in Europe were impacted by a partial shutdown of our German manufacturing operation earlier in the quarter that was caused by severe flooding in the city of Verdun. While we anticipate strong tailwind from pent-up demand, as well as the move to premium wheels, we expect the macro challenges impacting industry to persist for the balance of 2021. Slide seven highlights industry production across our manufacturing regions. Our value added sales were down 16% compared to the prior period, but still represent 13% growth over market. We have continued a legacy of consistent growth over market for several years now. We are responding on multiple fronts as highlighted on slide eight, with measures to flex manufacturing costs at our operations to exercise commercial discipline, to reduce costs, and to ensure prudent capital and inventory management. In a post-COVID world, we have a tried and true operational playbook that we are putting into action. Our response included temporary layoffs in Mexico, short-time work program in Germany, and hiring freezes. We are also prudently planning operating volumes based on experience and visibility on the ground so that we can most efficiently meet the production needs of our customers and avoid inventory pilots. We are also focused on commercial discipline by ensuring timely recovery of aluminum escalation in line with our contracted terms. Furthermore, Our forward-looking purchasing execution has provided protection against the recent manufacturing cost increases. At the same time, we remain focused on continuous improvement at the enterprise level. As an example, just last week, we had our first class of Six Sigma Black Belt graduates in Mexico. This is an important milestone in creating a continuous improvement culture across our entire enterprise. Lastly, we are reprioritizing capital expenditures and are further adjusting production levels to align with our customers' conservative production schedules, which will enhance our cash flow. Slide 9 highlights our long-term initiatives that are critical to driving profitable growth. A key component to our continued growth over market is our differentiated portfolio of products. we continue to innovate and produce technologies that capture the secular tailwind of tomorrow, including expanding upon our electrification portfolio of lightweighting and aerodynamic features, as well as advancement in our more sustainable products, such as PVD technology, which I will speak to later. Flight 10 further highlights the attractive space where we have positioned our business, The automotive wheel industry continues to shift to premium wheels, and this shift is expected to accelerate over time. Here, we are incredibly well positioned with one of the broadest portfolio of premium products. Larger, lighter, and more aerodynamic wheels with premium finishes. This will ultimately continue to drive more content for Superior. Here's another proof point on slide 11 of how our portfolio of differentiated technologies continues to globally be recognized. Our award-winning PVD technology we previously discussed is an environmentally friendly, highly durable, complex scoring process that offers an average mass reduction of 10 pounds versus chrome, improving fuel efficiency, and reducing CO2 emissions. It has passed some of the most demanding stress tests the auto industry has to offer. I am pleased to report that this technology has gained approval from a second major North American OEM. This is a testament to superior innovation and differentiation and is the foundation for future sustainable growth over markets. Slide 12 makes the case further. and showcases some of our product launches for the quarter. Our content on Audi, Aston Martin, BMW, and other models. Once again, these launches speak to the continued adoption of our portfolio of differentiated technologies. For example, seven of the nine launches you see on this chart have large wheels. Eight are premium finishes. Six are electric vehicles. And eight have large weighting technologies. Fundamentally, our portfolio of technologies continues to be a competitive advantage. I will now address our full-year outlook on slide 13. Our outlook has largely been affected by unpredictable decline in production in both regions, North America and Europe. As such, we are narrowing the range for adjusted EBITDA to the range of $160 million to $165 million for the year. and expect cash flow from operations to be $25 million to $55 million at the end of 2021. As I mentioned earlier, our narrowed adjusted EBITDA guidance represents an EBITDA margin in line with our guidance issued earlier this year, despite a 9% decline in unit shipments, underscoring the strength of our team and their execution in an incredibly challenging environment. While we anticipate supply chain headwinds and rising raw material costs to persist through the remainder of the year, we believe these challenges are temporary. As conditions improve, we expect overwhelming demand across the industry to fulfill backlog and support spend up demand. In conclusion, I am pleased that the continued response of our team to this very, very challenging environment we're facing. I am confident that once economic conditions return to normalcy, Superior will capitalize on the pent-up demand for our portfolio and the continuous secular trend for premium content. I would like to thank the entire Superior team for their hard work this quarter, and I look forward to finishing the year off strong. I will now turn the call over to Tim to walk through the financial results. Tim?