Superior Industries International Inc

Thank you for standing by and welcome. My name is Albert, and I will be your conference operator today. At this time, I would like to welcome everyone to the Superior Industries Third Quarter 2024 Earnings Call. We are joined this morning by Maggi Aboulaban, President and CEO, Dan Lee, Senior Vice President and CFO. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, Simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Dan Lee. Please go ahead.

Good morning, and welcome to our third quarter 2024 earnings conference 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 the call by Majdi Bulaban, our President and Chief Executive Officer. Before I turn the call over to Majdi, I 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 filing, 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. 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. I now will turn the call over to Majhi to provide a business and portfolio update. Majhi?

Good morning, all, and welcome to our third quarter 2024 earnings call. Before I begin, I would like to introduce Dan Lee, our new chief financial officer. Dan has over 30 years of global finance leadership experience, including several years as an automotive leader with Aptiv and Teneco. He joined Superior in 2023 as Vice President of Finance and CFO of our European business, where he played a key role in the strategic transformation of that business. He was also instrumental in the successful execution of our recent debt refinance. I am thrilled to welcome Dan to the executive team. I would also like to thank Tim Sinear, our prior chief financial officer, for his leadership and his many contributions to Superior over the years. We wish him the best in retirement. Moving on to our third quarter results on slide four. I am proud of our team's performance this quarter. Solid results in a very challenging demand environment. While production at key OEM customers has continued to soften, pressuring value-added sales, we deliver strong EBITDA growth and strong margins. Our performance this quarter highlights the strength of our competitive position, which we have established through the transformation of our global operations. Our low-cost manufacturing footprint now with all production consolidated in Mexico and Poland, gives us a distinct advantage over competitors who rely on imports from China or production in high-cost locations in Europe. This is actually a powerful combination when combined with our comprehensive portfolio of premier technology, supporting customers' demand for lightweight and aerodynamic wheels in Europe, and premium larger wheels in North America. In this challenging operating environment, we achieved a major milestone through the refinancing of our debt, attracting $520 million in new capital and extending our debt maturities to 2028. We also produced our total debt by $117 million. With this refinancing completed, we have significantly strengthened our balance sheet and competitive standing, positioning our company for sustainable long-term growth. Back to results. Value-added sales adjusted for foreign exchange and deconsolidation declined 2% year-over-year, outperforming, therefore, industry production, which was down 6%. Our North America business delivered a strong quarter, benefiting from earlier wins with Japanese OEMs in North America and stronger key customer production volumes compared to the prior year. This was offset by lower customer production volumes and lower adoption rates in our European business. Adjusted EBITDA increased 6% year-over-year, with margins expanding by 200 basis points sequentially and year-over-year. This margin expansion was primarily supported by favorable performance, including the $7 million benefit in lower conversion costs at our Polish facilities, which, by the way, was offset with volume declines in that region. We've also continued to make progress in negotiations with customers on price increases to recover cost inflation. These recoveries were comparatively lower than the prior year, which included one-time recovery for prior periods. I am pleased, though, that we have been successful in negotiating reoccurring price increases with customers to recover inflationary costs. Permanent price increases are now reflected in more of our contracts as we go forward into 2025. We are also pleased with the successful execution of our transformation in Europe. Despite lower production volumes, we are seeing benefits from this action. Our customers are recognizing the improved strategic position we have created in our localized low cost footprint. In fact, we are in advanced discussions with several customers seeking accelerated localized low cost solutions. We already realized short-term wins in both regions with OEMs and in the aftermarket. We have delivered sustained margin improvements in recent quarters despite stopping industry demand. In fact, industry production has declined worse than previously expected due to key customer shutdowns, higher dealer inventories, and vehicle affordability issues. Overall, we expect a 6% decline in industry production in the second half of 2024, and this is supported by recent IHS estimates. In response to challenging industry-wide operating conditions, we are taking action to align our global cost structure with the lower production environment and have targeted a 15% reduction in SG&E and manufacturing overhead. We expect these actions to deliver approximately $10 to $15 million in run rate savings once completed in early 2025. This will result in a restructuring charge of approximately $9.5 million, which will be recorded in the fourth quarter. These actions, combined with the competitive advantages we have built through the leading portfolio of technology, and our localized footprint will position superior for solid performance and continued margin expansion into 2025. Now, with this declining volume outlook, we are lowering our two-year financial guidance, including our expectations for value-added sales and adjusted EBITDA. However, we do expect to sustain our improved margin level. Dan will provide more details on the updated guidance ranges in his comments. I will now address our refinancing in a bit more detail on slide 5. The successful refinancing of our debt disorder is a testament to the investment community's confidence in our ability to deliver long-term growth. It is no small feat to have completed this transaction in such a challenging environment. We have significantly strengthened our financial profile, reducing total debt by $117 million and extending our debt maturities to the end of 2028. Our improved financial position and credit rating solidified our competitive standing as a leading supplier to global OEM with an extensive portfolio and low cost footprint that is unmatched in the industry. These actions combined with the operational improvements achieved through our European transformation, have reinforced our relationships with our global customers, and in fact, we are in advanced dialogues with several major European OEMs that recognize the savings we're able to deliver through this transformation. In North America, we have blind sights, actually, to new business wins, from two OEMs that need accelerated localization of their supply chain footprint. With the refinancing behind us, we are now able to fully leverage our competitive advantage to create new momentum for our business. Slide 6 highlights the accelerating momentum of the tailwinds we highlighted in prior calls. Increasingly, localized OEM production in the state of one supply chain and Geopolitical challenges. A case in point on this slide. We are highlighting a recent localization win with a Japanese customer in North America. This customer is localizing the supply chain footprint for one of their top platforms in North America, with expected production of around 250,000 wheels annually beginning in mid-2025. In addition, we have had similar success in Europe with a major win in the aftermarket, expecting again to start production in 2025 and anticipating to produce 200,000 wheels. Moving on to slide seven. Here we highlight the momentum of improving adjusted EBR margins this year, despite declining industry volumes. While global production has declined 6%, Since the beginning of this year, our value-added sales EBITDA margins have expanded by nearly 600 basis points. This margin expansion is driven by improvement across the business, including the transformation of our European business, consolidation of administrative functions, and improved fixed cost absorption and manufacturing performance. In addition, we have seen improved production efficiencies in Mexico and savings from global SG&E and manufactured overhead restructuring. Overall, these combined efforts have resulted in approximately a 14% global headcount reduction today. That said, we have not reached the full utilization of our Polish operations, which is necessary to achieve the $190 million in adjusted EBITDA run rate that we initially discussed earlier this year. The $190 million run rate assumes an underlying production volume of 15.2 million wheels. However, as current customer production volumes, we are delivering something more closer to 13.9 million wheels. So despite these lower volumes, the underlying assumption behind the value of our European transformation still stands as we have delivered significantly improved profitability throughout the year, which we will sustain heading into 2025. Moving on to slide 8, which highlights some of our exciting launches in the quarter. These programs highlight the accelerating adoption of our premium technologies, like weighting larger wheels and exciting premium finishes. the iconic Porsche Boxster, the Audi A7, and the Cadillac Optic EV of a few highlights this quarter. The accelerating adoption of our premium technology is evidenced by the continued growth in content per week, 34% growth in content since 2019. In closing, this was a challenging quarter for our entire industry. our focus all along has been on what we can control. We have transformed our manufacturing footprint. We have brightened our cost structure. And we have attracted capital and gained financial flexibility well into the future. Fundamentally, we have positioned our business for success. We are delivering solid financial performance and are encouraged by our accelerated momentum with customers in both North America and Europe in driving new business wins. We will continue to leverage our local footprint and portfolio of premium technology to advance our business and support long-term growth. I would like to thank the Superior team for their hard work this quarter and look forward to further progress heading into the new year. I'll now turn the call over to Dan to review our financial results in more detail. Dan?