Welcome to the Superior Industries S econd Quarter 2022 Earnings Telephone Conference call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Joanne Finnorn. Please go ahead. Good morning, everyone, and welcome to our second quarter 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 am joined on the call by Majdi Abulaban, 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 a portfolio and business update. Thanks, Joanne, and thanks everyone for joining our call today to review our second quarter results. I'll begin on slide five with the highlights. Our team delivered excellent results, highlighted by strong margin expansion, 24% growth in revenue, and 15% growth in EBITDA compared to the prior year. This while continuing our growth momentum with 5% Content per Wheel growth. This performance is a testament to both the capabilities of our leadership team as well as our operational strength, enabling us to successfully manage through an incredibly challenging environment with lower volumes, production volatility, and continuing inflationary pressures. Our teams are executing on several fronts, working to collaborate with our customers and suppliers on cost reduction solutions and inflationary cost recoveries, while continuing to drive operational improvements throughout the enterprise. These actions, combined with the continued secular demand trends for premium wheels, have strengthened our financial position and enabled our long-term content growth despite substantially reduced industry volumes. Further, in addition to growth in earnings, solid working capital management during the quarter enabled us to deliver strong cash flows and achieve a historic low net debt of $471 million. Slide six details industry production by region in the second quarter. While we saw a stronger recovery in production in North America and a mild recovery in Europe versus prior year, sequential comps actually point to continued industry supply chain challenges. Our focus on developing an innovative portfolio of products to meet the increasing demand for premium technologies has continued to play out, manifesting itself in sustained growth over market. This trajectory actually has not necessarily been linear, but it has equated to long-term outperformance and profitable growth. Due to record growth over market in the first half of 2021, to be specific, 20%, our flat growth over market in the first half of 2022 signifies our ability to sustain these heightened levels of value-added sales. Actually, since early 2019, we have delivered an 8% average annual growth over market on a combined basis. Moving on to slide seven to address our current operating environment. As noted on the first slide, industry production levels have remained depressed due to the ongoing challenges noted on the left side of the slide. Although we have seen a slight improvement compared to the first half of 2021, industry production remains down significantly for the first half of the year versus the same period in 2019. That said, tailwinds, shown here, have continued to propel our business forward, and pent-up consumer demand and low dealer inventory have left us well-positioned for substantial earnings growth once industry recovery is underway. Moving on to slide eight, I'll address our value creation roadmap. First, I am personally proud of how our Superior team continues to deliver on operational excellence. We are delivering outstanding quality and managing production efficiencies in the face of continuous cash flow volatility. We are continuing to drive enterprise cost reduction as well as continuous improvement in our business. Actually, our continuous improvement efforts are tracking to $8 million savings this year, really gaining good momentum. Tim will provide further color on this later. Equally important is the commercial discipline we have instituted throughout our company. Collaborating with our customers on implementing cost reductions and executing on cost recoveries. As I stated in our prior meeting, we are first focused on executing self-help initiatives, but we also expect our customers to step in for their fair share of inflationary cost recoveries, and here they are. A good example of the self-help initiatives is the continued use of recycled aluminum, which has now increased to 60% in some of our plants. Second, our focus on executing our strategy to deliver profitable growth by leveraging our portfolio of lighter and larger wheels with premium finishes has now actually expanded to leveraging our local for local footprints. Our manufacturing footprint is playing out as a competitive advantage as customers seek to localize and de-risk long supply chains from a logistics standpoint. I will speak later in the presentation how this competitive advantage is enabling us to grow with existing customers and to win with new ones. Slide nine highlights the collective results of our cost and commercial discipline, as well as the continued adoption of our product portfolios. Despite a year-over-year decline in shipments, we have substantially driven EBITDA margin expansion while growing net sales per wheel by 30% as well as content per wheel by 5%. Our team's continued ability to deliver these results in a constrained operating environment gives us enormous confidence in the growth opportunities that lie ahead in a normalized production environment. Slide 10 highlights the continued adoption of our portfolio of premium technologies and recent launches. Larger wheels, premium finishes, aerodynamics, and light weighting are almost becoming a standard in our business. The recent Lucid and Volvo launches are but one example. These product launches continue to reflect the growing diversity of our customer base and the breadth of our premium technologies. As we have consistently stated, and I stated previously, the market is actually continuing to move to our space. Moving on to slide 11. As I mentioned earlier, our local for local footprint has become a key competitive advantage, particularly in recent years as OEMs look to de-risk long supply chains to mitigate operating headwinds. Our global manufacturing facilities are strategically located in the same regions where our customers operate. Here we are benefiting. As OEMs looking for a long-term solution to supply chain challenges, especially OEMs who import wheels from outside the regions, are now looking to us. They're looking to us for partnerships as a local supplier. This slide highlights how our in-region local footprint is being recognized by new and existing customers looking to de-risk their long supply chains. A substantial win with a new Japanese OEM operating in North America, starting actually next year. This will bring over $100 million in lifetime revenue and 1.6 million lifetime wheels. We are also excited to announce our first aftermarket partnership with Wheel Pros in North America for supply of locally manufactured wheels. Wheel Pros is the largest aftermarket distributor in the U.S. Moving on to slide 12. I will now address our full year 2022 outlook. We have a more conservative view of industry vehicle production volumes versus the current IHS outlook, as we expect supply chain challenges to continue to impact OEM production in the first half. Sorry, in the second half. Specifically, we believe the European market will continue to be challenged, and as such, we're expecting flat to mid-single-digit industry production growth. In line with that expectation, and to reflect the impact of the euro exchange rate, we are lowering the unit volume and value-added elements of our guide. While we are narrowing the EBITDA range, we remain confident in delivering to the midpoint of our original guide. In closing, I am very pleased with the performance we achieved in the quarter and would like to thank our teams for their hard work and commitment to positioning Superior for success in a very tough operating environment. Heading further into the year, we look forward to continuing this progress while generating value for our shareholders. With that, I will turn the call over to Tim. Tim. Thank you, Majdi. Good morning, everyone. Commodity cost increases, especially the cost to alloy aluminum and the cost of energy, general inflation and global supply chain instability and constraints continue to burden the company's cost structure. It doesn't help that light vehicle production in our markets is down about 15% from pre-COVID and now pre-semiconductor shortage time. Accordingly, late last year, we began to adjust the company's manufacturing cost structure to reflect lower light vehicle production. ECI, our established and disciplined enterprise cost improvement program, supported by our expanding Lean Six Sigma capabilities, what we refer to internally as CI or continuous improvement, have helped considerably in this business environment. Because this business environment is so extraordinary, we've been clear that we expect our customers who have demonstrated retail pricing power to pay their fair share of the cost inflation burden on our company. These three actions, manufacturing cost structure adjustments, our ECI and CI programs, and recovery of extraordinary cost inflation from our customers, are bearing fruit. Last quarter, Q1, the company's adjusted EBITDA margin on $189 million value-added sales was 26%. This quarter, Q2, the margin was 28% on $186 million of sales. We are pleased with the execution of our cost out programs and the performance of our manufacturing, commercial, and procurement teams. Let's look at slide 14, second quarter financial summary. The company sold 4 million wheels in the quarter, 4% fewer than in the prior year period. Net sales increased to $432 million for the quarter, compared to $347 million in the prior year period. The increase in net sales is primarily from higher aluminum cost pass-through to our customers. The cost of aluminum and the cost to alloy the metal remains elevated. Value-Added Sales decreased to $186 million for the quarter, compared to $196 million in the prior year period, primarily due to fewer wheels sold and a weaker euro. We reported net income of $11 million for the second quarter, or earnings per diluted share of $0.07, compared to net income of $2 million and a loss of $0.26 per diluted share in the prior year period. The year-over-year sales bridge is on slide 15. Volume, price, and mix was negligible. The weaker euro burdened Value-Added Sales by $11 million, and aluminum cost passed through to our customers was up $94 million, about 60% compared to the prior year period. On slide 16, Adjusted EBITDA increased to $51 million in the quarter, compared to $45 million in the prior year period. The Adjusted EBITDA margin for the quarter was 28%. Volume, price, and mix was a $4 million burden on EBITDA. The weaker euro, a $1 million burden. Metal timing was negligible. Recovery of extraordinary cost inflation from our customers supplemented Q2 financial performance of $12 million. Slide 17, second quarter cash flow. Cash flow provided by operating activities was $12 million, compared to $14 million in the prior year period. Net cash used in investing activities increased to $16 million compared to $10 million in the prior year period, as capital spending continued to normalize in the quarter. Cash payments for non-debt financing activities was $4 million, flat compared to the prior year period. Free Cash Flow for the quarter was -$8 million. An overview of the company's capital structure is on slide 18. Funded debt was $593 million at quarter end, $23 million less than year-end 2021. The decrease results primarily from the weaker euro, and therefore depreciation of the euro-denominated debt. Liquidity was $287 million at quarter end, and net debt $471 million, $32 million less than year-end 2021, and the lowest since the Uniwheels acquisition. At the present elevated cost of aluminum, the company has a larger investment in aluminum on the balance sheet than is normal. We size this incremental investment at about $20 million at quarter end. This will come back to us as aluminum cost normalizes. The debt maturity profile is depicted on slide 19. We have no near-term maturities of funded debt. Revolving credit facilities which mature in May and October of 2023 were undrawn. The company is in compliance with all loan covenants. The capital markets are choppy, especially the leveraged finance market. Fortunately, the company isn't compelled to do anything at this time. With the passage of time, we intend to continue to prove out the operating model and improve our financial performance. We stay close to our financing relationships and intend to pursue a refinancing of the company at the appropriate time. The company's 2022 financial outlook is on slide 20. Projecting sales and financial performance in this business environment is no easy task. The timing of the industry recovery from the semiconductor shortage and the Ukraine conflict could have a meaningful impact on light vehicle production in the remainder of the year, and therefore, our sales. The euro is depreciated vis-à-vis the dollar. It's not clear where the currency goes from here. Global supply chains are unstable and sometimes constrained. The cost of manufacturing inputs, especially energy, are uncertain. The amount and timing of the recovery of extraordinary cost inflation from our customers is also uncertain. Having said that, we expect a muted recovery in light vehicle production in the back half of this year. Accordingly, we are lowering expected wheel sales, lowering the value-added sales range primarily to reflect the weaker euro, and narrowing the Adjusted EBITDA range, but maintaining the midpoint. We expect to sell 16 million-17 million wheels in 2022, with net sales in the $1.6 billion-$1.7 billion range and value-added sales in the $740 million-$800 million range. We expect adjusted EBITDA to be in the range of $165 million-$185 million and cash flow from operations to be $105 million-$150 million. Capital expenditures should approximate $75 million. Finally, we model a 20%-25% effective tax rate for the year. In closing, we delivered a solid quarter. Content per Wheel was up, supporting long-term growth over market. The Adjusted EBITDA margin was 28%. This margin includes recovery of extraordinary cost inflation from our customers, which supplemented Q2 financial performance. In a more normal business environment on Q2 Value-Added Sales of $186 million, we might expect the margin to be in the range of 22%-25%. We expect the discussions with our customers regarding recovery of extraordinary cost inflation to extend throughout the year. There can be no assurance that we will have continued success, and these recoveries may be lumpy. We intend to continue to supplement these recoveries with our ECI and CI programs. This, taken together with the company's demonstrated ability to maintain commercial, procurement, and operations discipline should put Superior on solid footing that benefits significantly from the operating leverage in our business when light vehicle build recovers. This concludes our prepared remarks. I'll now turn the call back over to the operator. We'd be happy to take your questions. Elaine? Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first question from Gary Prestopino from Barrington Research. Please go ahead. Hey, good morning, everyone. Good morning, Gary. How are you? Just fine. Thank you. I hope you guys are all well too. A couple of questions here. You said that the large diameter wheels were about 52% of all wheels produced. What was that figure last year, Majdi, so we can get an idea of how the shift is going? Last year, that was actually flat. Okay. It's flat, 52%. Okay. Gary, keep in mind, I think what you're gonna find is that the comps in 2022, when you start looking at content and revenue, are gonna be challenging. If you look at the first half of this year, okay, we're flat actually in terms of growth over market. If you look at last year, we actually, we kind of like, we were an outlier. First half was 17% growth over market, the entire year. Actually, the first half is 20%. The entire year was 17%. All of that mix, that massive mix that came our way after the microchip issues has been actually, think of it, has been sustained. We have, Gary, been consistent in our narrative on the portfolio. This is a company that will deliver 5%-10% growth over market, driven by lightweight technology, larger wheels, premium finishes. That continues to play out. If you go back to 2019, that 52% figure you mentioned was 28%. Right. This year is a bit of an outlier. I think the measure absent this comparison is Content per Wheel. You see that Content per Wheel has continued to grow 5% in this quarter and the same for last quarter as well. In fact, I have the numbers here. Okay. Go ahead. Okay. Well, I'm sorry. Go ahead, Majdi. I didn't mean to interrupt. No, I was just giving you some stats. Content per Wheel in Q1 of 2020 was $37. Content per Wheel in Q1 of 2021 was $42. Content per Wheel this quarter was $44. That's the way to look at it. Okay. This new program that you got with a Japanese OEM in North America, is that obviously a competitive takeaway? Was that a competitive takeaway from a Japanese company, or was there some other company that was producing? That was with a customer, just orders of magnitude, Gary. We do about 8 million wheels in the U.S., 8 million-10 million. We had very little business over the last few years, about 20,000 wheels. This was a major win for us. It is a conquest. It's really. I don't, I can't tell you which specific region. I know it comes from Asia, and I know it was a localization, and I know that specific OEM, you know, had their sights set on de-risking their supply chain. Frankly, to their credit, they were very aggressive with it. They moved very fast. This win is great in many ways for us. Obviously, it solidifies our position with another Japanese OEM in North America. That's one. The type of wheels that we won are more base-level wheels. You know, when you look at our capacity, the one area where we think we have capacity is in plant seven in Mexico, and it's all base-level wheels. It goes a long way to normalizing and leveling out our capacity utilization. Okay. Just lastly, in terms of this proliferation of electric vehicles, would you say that because of your technological capabilities that are outlined on I think slide 10, that you're kind of getting winning, you know, new programs on these EVs at a fairly rapid rate? I guess my question would be, is there anybody else out there that has these capabilities that you have that can service the EV market? Gary, there are others, but I think, you know, you would agree with me in the tier one space, it's about trust, long-standing relationships. Right. Technical capabilities, and we're in the forefront. The answer to your question is, yes, we are winning our fair share and more of EVs because of our well-established position. We're number one, two for the most part with most of the OEMs, maybe number three. That is the starting point. In fact, this quarter, it's not on the charts. We launched the Škoda electric vehicle in this quarter in Europe as well. Oh, good. You know, as to why we're more well-positioned on EVs, again, the wheel needs to be stronger. The wheel needs to be lighter. There are other technologies maybe you could use to make a lighter wheel, slightly lighter on an SUV, but when you start thinking of sedans, you really need the technologies that we have. We call it a flow-forming technology to strengthen the wheel for that application. We're in a good position. Okay. Across the board. Yeah, it looks like it. All right. Thank you. You're welcome. As a reminder, to ask a question at this time, please press star one. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. We will take our next question from Mike Ward from Benchmark. Please go ahead. Hi, Mike. Thanks. Good morning, Joanne. Good morning, Majdi. Good morning, Tim. Hi, Mike. Morning. Just to follow up on the question. Majdi, that's the first I've heard of the local for local trend. Is that mostly the Japanese-based manufacturers are doing that? Is that wheel-specific, or is it with other components as well? No. I mean, Mike, you're familiar with our industry. I mean, 50% of wheels, Yeah. In North America come on ships, right? That's a problem. Right. For our customers. Huge problem. Yeah. If you recall, we said we have, you know, we're number one market share-wise, tied with two and three. Ultimately, we have a big chunk of the capacity in this region. To answer to your question, no, it's not Japanese. On the chart, you'll see another North American customer that is accelerating localization as well. Actually, just about every, I wanna say, even going to the European customers, some of the quotes we're getting, you know, when you get a quote for these businesses three years out, you get the conditions that the customers expect. I'm right on top of the list. If you want a quote on this business, it needs to be made in the region where I manufacture my vehicles. It's a condition. It's accelerating. This win here was actually exciting and again, the nature of the win with a new customer, but also it goes in production next year, Mike. It does. Now do you have room at your existing facilities if you had to to increase capacity? Is there room to build out at all? It sounds like it might just be, yeah. Yeah. I mean, I think I would tell you our team in Mexico has done a phenomenal job on that dimension. Actually, maybe I'll talk about it later in operational performance. On the capacity side, Mike, you think of our plants, they're not really one plant. Each plant is three plants in one, right? You have casting, you have machining, and you have paint. Within each one of these plants, you have a sub-process. It's very hard to quantify capacity. I mean, the easiest way to look at it, you know, we're still 15% volume-wise from where we were. Yeah. Not too long ago, so that's a good metric. Within the factory, I mean, you know, when you think of machining centers and adding more light-weighting capacity, we can bolt on capacities right there. You can. Okay. Okay. Same thing with casting. Paint gets to be hard, and that was a problem for us, and that's why we invested $40 million in a paint line last year that's coming into production this year. Okay. Well, that's good news. Yeah, yeah. If you- We feel very good about our capacity and readiness for. Yeah. For the ramp of the industry. Now where is that Japanese facility, is it one facility you're supplying? Can you tell us where it's based? Is it U.S., Canada, or Mexico? It's in the U.S. It's in the U.S. Has it already been producing? It's not a new startup facility. It's something that they're substituting an import into your local production. That is correct. Okay. On page 12, your second half outlook, especially in North America, seems to be well below what the companies are saying and what you're seeing from some of these outside data sources. What are your thoughts on that? You know, when you think of our guide, Mike, you know, I mean, we have been consistent for three years now. We have been aggressive on execution and conservative in our outlook, right? We go out with guides, and we hit our numbers. I mean, when you think of, you know, where volumes are going, we're very concerned about Europe. We're concerned about Ukraine. Volume-wise, we don't see it. IHS sees recovery in the second half. We're saying we don't see it. If we're wrong, we'll be happy about that because I'll tell you, if you make more wheels in this business, you know, the margin, the variable margin in our 35%-40%. We would like that, and we'll deliver on that. I think the second thing as we look at our guide is, you know, when you think of customer recoveries, you know, we've gotten what we need to get the balance right between cost and price so far. You know, we have more work ahead of us, and there is uncertainty in pricing and what we think we're gonna get in the second half. We have taken a conservative approach to that. Again, the market comes back, we build very well and it'll be good for us. Okay. On the recovery side, I hadn't seen that going back in the past. I don't know if you have with this disruption in production and getting recoveries from the vehicle manufacturers, but it sounds like it's a real thing, and it sounds like they're going to be along with some of the extra excess freight costs as well. Is that correct? That is absolutely correct. There's some room on that side as well. Thank you very much. Appreciate it. You're very welcome. Thank you. We will take our next question from Gary Prestopino from Barrington Research. Please go ahead. Yeah, Majdi, just to follow up on this new wheel program with the Japanese OEM. It's 1.6 million wheels. It starts in 2023. You said it has a lifetime value of $100 million in revenue. Is that correct? That is correct. Does that mean in 2023 you're going to be doing exactly 1.6 million wheels? Or does that gradually ramp throughout the year? Gary, not at all. When we speak of lifetime revenue, we speak of, you know, a program life. If it's three years, four years, five years, we add up the volume in those years. In this case, it goes to 25. It's three years worth of volume. Okay. It's three years worth of volume. Thank you. You're welcome. That concludes today's question and answer session. Majdi Abulaban, at this time, I would like to turn the conference back over to you for any additional or closing remarks. Thank you. Thank you, operator. We appreciate your participation in today's earnings call. Listen to the Superior team. Thank you for an excellent quarter that exceeded expectations. I know very well that everyone around the globe worked hard to get to this point. I could not be more proud of this team. You have established a well-deserved reputation as a team and as a leadership team that delivers. Clearly, we have more work ahead. For now, many thanks. That's it, operator. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.