Superior Industries International Inc

Hello and welcome to Superior Industries' third quarter 2022 earnings teleconference call. My name is Priscilla and I'll be your coordinator for today's event. Please note, this call is being recorded and your lines will be on listen only. However, you will have the opportunity to ask questions at the end during the Q&A session. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. We are joined today this morning by Majdi Abulaban, President and CEO, Tim Trenary, Executive Vice President and CFO, and Joanne Finorn, Senior Vice President, Investor Relations. I will now hand you over to your host, Ms. Joanne Finorn, to begin today's conference. Thank you.

Good morning, everyone, and welcome to our third quarter earnings call. During our call this morning, we will be referring to our earnings presentation, which, along with our earnings release, is available on the Investor Relations section of Superior's website. I am joined on a 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 Mashti, 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 Mashti to provide a business and portfolio update.

Thanks, Joanne, and thanks, everyone, for joining our call today to review our first quarter results. I'll begin on slide five with the highlights. Our team delivered another quarter of solid results, including double-digit growth in value-added sales and adjusted EBITDA. along with substantial margin and content per wheel expansion. This while facing continued industry supply chain disruptions, depressed volumes, and commodity cost increases. In line with the plans we laid out in our value creation roadmap, we have remained focused on driving operational improvements across the enterprise, while continuing to collaborate with customers and suppliers on inflationary cost recovery and other cost reduction solutions. We also continue to leverage our differentiated portfolio to capture demand for premium meals. expanding content per wheel in the quarter by 10%. These combined efforts have enabled us to achieve EBITDA margins on par with pre-pandemic levels, while overcoming persistent macroeconomic headwinds, including inflationary cost increases, as well as unfavorable effects. This is a testament to the capabilities of our leadership team as well as our operational strength. While these headwinds continue to weigh in on our operating environment, we are seeing some signs of improvement in industry production, which we expect to continue heading into 2023. During the quarter, we also maintained focus on cash generation and preservation through prudence with capital expenditures and working capital management. This has enabled us to achieve a historic low net debt of $456 million and to maintain strong liquidity of $283 million. Moving on to slide six, which highlights regional industry production. While industry production is improving with notable increases on a year-over-year basis in both North America and Europe, sequential comps actually point to continued industry supply chain challenges. Having said that, demand for our innovative portfolio product continues to play out, manifesting itself in sustained growth above market. As I mentioned last time, this trajectory has not necessarily been linear. but it has equated to long-term high performance and profitable growth. In fact, our portfolio has delivered a compound annual growth rate of 7% since early 2019. We expect this trajectory to continue as markets recover further. In addition to recovering markets, our ongoing focus on enhancing our portfolio technology will continue to serve as a tailwind driving growth over market. Consumer demand for lighter and larger wheels with premium finishes has remained strong. And our ability to meet this demand has been a key driver in our long-term outperformance. Moving on to slide seven, to address our current operating environment. While global industry production remains significantly below pre-COVID levels due to the lingering challenges addressed on the left side of this chart, we are beginning to see some improvements. Compared to prior years, global production volumes in our markets increased 28%, supported in part by the easing of semiconductor supply chain constraints. That said, we expect the tailwinds shown here, including low dealer inventory, a record aging fleet, and pent-up demand to continue to propel our business forward. And while an inflation-driven demand destruction scenario is plausible, we do not see that playing out.