Q1 2022 Superior Industries International Inc Earnings Call

May 4, 2022

Good day and welcome to the Superior Industries first quarter 2022 earnings teleconference call. Today's call is being recorded and at this time I'd like to turn the call over to Kevin <unk>. Please go ahead Sir.

Thanks Dana.

Morning, everyone and welcome to our first quarter earnings Conference call.

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 Master 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 Marty 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.

<unk> calculated in accordance with U S GAAP.

Reconciliations of these measures to the most directly comparable U S. GAAP measure can be found in the appendix of this presentation with that I'll turn the call over to Marty to provide a portfolio business update.

Thanks, Glenn and thanks, everyone for joining our call today to review our first quarter results.

I will begin on slide five with the highlights.

Our team delivered strong results achieving solid revenue growth ahead of market.

Coupled with strong profitability and cash generation.

While navigating through an incredibly challenging operating environment with lower volumes production volatility and continuing inflationary pressures.

Most notable.

We have been able to generate EBITDA and profit margins on par with pre pandemic levels and that is on lower volumes here.

Here, we have continued to collaborate with our customers and suppliers on price recoveries and cost reduction solutions to mitigate the impact of ever persistent inflationary pressures.

These results underscore book the operational strength of our teams.

As well as our continued ability to capitalize on demand for our premium wheels, extending our trajectory of growth above market and expanded content per wheel.

Further our performance this quarter resulted in significant cash flow from operations supporting a decrease in net debt to $477 million and enabled us to further invest in the business.

Slide six details industry production by region spin.

Specifically the significant industry declines in Europe , which was impacted by the Ukraine conflict.

Despite these declines we delivered 5% growth over market on a combined basis.

We saw continued favorable mix during the quarter supported by increased adoption of light weighting technologies and larger wheels premium finishes.

Slide seven summarizes our current operating environment.

Reiterating my comments from the first slide.

First quarter industry production levels fell another 10% compared to the first quarter of last year.

In fact, we continue to see many of the same challenges that impacted production in 2021 further exasperated by the conflict in Ukraine, and a heightened inflationary environment.

With that said the strong tailwind shown on the left side of the chart have supported our growth over market and expanded profitability against depressed industry production levels.

Actually superior is incredibly well positioned to deliver earnings growth one.

Industry volumes begin to recover and should this recovery begin begin earlier than expected, we anticipate substantial upside to our performance for the year.

Moving onto slide eight.

We continue to stay focused on our value creation roadmap through consistent execution on our operational excellence.

<unk> profitable growth initiatives.

Our team's commercial discipline has been critical in working closely with customers to recover inflationary cost increases through price, while offsetting other by identifying cost reduction solutions.

While we are pleased with the progress in the quarter, we clearly have more work ahead.

At the same time, our procurement team has leveraged <unk>, our long standing relationship with our supply base to manage volatility and costs.

The regional nature and diversified nature of our supply base has been a great asset for us.

I do want to share with you a good example of the collaboration between our customers suppliers and our manufacturing teams.

Which is the increased use of recycled aluminum and our manufacturing processes.

I would tell you that this type of this type of collaboration efforts on the customer and supplier front.

Have been across the entire superior enterprise.

And I am very proud of how our team has responded.

Okay.

Another challenging aspects of the quarter is the continued last minute volatility that our operating team has had to deal with.

This is clearly more heightened in Europe with the Ukraine War.

From a customer standpoint, we are focused on diligently planning volumes based on buying behaviors with the goal of offsetting order volatility and ensuring stable production levels.

We are also engaging with customers on cost recovery for extreme last minute production releases and with suppliers to mitigate disruption.

Finally internally, we have enacted both short and longer term strategies flexing labor costs, while also driving structural enhancements through operational excellence and continuous improvement initiatives.

In terms of profitable growth, our product portfolio of differentiated technologies and capabilities has continued to enable us to capitalize on the macro trends driving increased demand for light weighting technologies and put a larger wheels with premium finishes.

This is evident in our consistent growth over market over the last four years.

The collective results of all of these actions is illustrated on slide nine.

As I've stated previously despite a double digit decline in shipments since the first quarter of 2021.

We have maintained strong EBITDA margins at pre COVID-19 levels, 26%, while meaningfully growing content per wheel.

These results are also supported by the 12% growth net growth in net sales.

Which reflect executing on contract terms and negotiating recoveries with customers.

The collective effort demonstrated on this slide gives us incredible confidence in our ability to execute.

And to accelerate growth in a more normalized industry production environment.

Okay.

Moving on to slide 10 to highlight how our innovative products positioned superior for success and help capture the secular tailwind supporting our growth.

We have one of the most comprehensive portfolio of technologies in the industry.

And the increased demand, we're seeing for our premium offerings. So we have the right breadth and mix to meet customer needs.

Our launch highlights for the quarter further illustrate this point with a range of our capability is being utilized on both the Cadillac lyric and silverado platforms.

Moving on to slide 11 to provide an update on our recent sustainability initiatives.

On the environmental front, we are making progress on our <unk> strategy as we work towards our goal to be carbon neutral by 2039.

In 2021 alone we were able to achieve a 9% reduction in our carbon footprint and.

And expect to continue this trend this trend through manufacturing enhancement and further development of environmentally sustainable capabilities.

On the social front, we highlight our recent Dave understanding event.

Held across multiple locations and attended by the entire superior team.

This successful event focused on fostering diversity and inclusion within the workplace and featured guest speakers as well as interactive breakout sessions and training sessions.

In addition to our day of understanding we launched a fundraising campaign with company matching contributions to support humanitarian relief for migrants who suffered from the conflict in Ukraine.

I would tell you that we are very proud of our team in Poland as they open their hearts and homes for many of the Ukrainian migrants.

I will now address our full year 2020 to outlook on slide 12.

We are maintaining our current guidance based on the assumption of mid to high single digit growth in North America.

And mid single digit growth in Europe for the year.

Adjusted EBITDA is anticipated to be in the range of $160 million to $190 million with cash flow from operations between 105 and $150 million.

This includes the expected benefit from further accelerating cost recovery and continuous improvement efforts to mitigate inflationary headwinds.

While visibility towards recovery has been fairly limited.

We currently expect headwinds to begin easing and industry production to increase in the second half of the year.

In closing I am very proud of the hard work of our teams in delivering solid results for the quarter.

We plan to continue this momentum as we head further into 2022.

And with that I will turn the call over to Tim Tim.

Thank you Marcy and good morning, everyone.

Commodity cost increases, especially the cost alloy aluminum and the cost of energy <unk>.

General inflation and global supply chain constraints make for a very difficult operating environment.

This was exacerbated by diminished light vehicle build and fluctuating customer demand schedules.

With respect to the cost inflation to preserve our margins, we have and will continue to vigorously pursue customer recovery of the extra ordinary inflation cost pressure on our business.

The timing of these recoveries may be lumpy and there is no assurance, we will be able to completely recover these costs.

<unk> said, there and notwithstanding that value added sales declined by 9% from a year ago.

Superior delivered a 26% EBITDA margin nearly the same margin as a year ago.

This is a reflection of the company's commercial procurement and operations discipline.

Let's take a look at slide 14 first quarter financial summary.

We also sold in the first quarter were $4 1 million down nine 5% from the prior year period.

Light vehicle build in our markets was down somewhat more 10, 4% compared to the prior year period.

Net sales increased to $401 million for the quarter compared to $358 million in the prior year period.

The increase in net sales was primarily from higher aluminum cost pass through the cost of aluminum is up about 50% from a year ago.

Value added sales decreased to $189 million for the quarter comp.

Compared to $207 million in the prior year period, primarily due to fewer wheels sold and a weaker euro partially offset by favorable product mix.

We reported net income of $10 million for the first quarter or earnings per diluted share of <unk>.

Compared to a net income of $13 million or earnings of <unk> 18 per diluted share in the prior year period.

The year over year sales ridges on slide 15.

To the far right.

Luminaire cost pass through was up $61 million compared to the prior year period.

To the left value added sales declined by $18 million or by 9% compared to the prior year period.

Improved mix, partially offset the impact of the 10% decline in year over year light vehicle production in our markets.

On slide 16 adjusted.

Adjusted EBITDA decreased to $49 million in the quarter compared to $55 million in the prior year period.

The EBITDA margin for the quarter was 26% about the same as the prior year period, notwithstanding the lower sales.

That's quite an accomplishment in this environment.

Slide 17 first quarter cash flow.

Cash flow provided by operating activities was $45 million compared to $18 million in the prior year period.

Substantially all of this improvement is working capital management.

Net cash used in investing activities increased to $18 million compared to $10 million in the prior year period as capital spending normalized in the quarter.

Cash payments for non debt financing activity was flat compared to the prior year period.

Free cash flow was therefore $22 million substantially greater than the prior year period.

An overview of the company's capital structure can be found on slide 18.

Funded debt was $611 million at quarter end compared to $616 million in the prior year period.

The decrease results primarily from the weaker euro and therefore depreciation of the euro denominated debt.

Liquidity was $328 million at quarter end.

That quarter was $77 million $23 million less than year end 2021.

At the present elevated cost of aluminum the company has a larger investment in aluminum on the balance sheet that is normal we size quicker metal investment at about $20 million at quarter end.

We believe this will come back to us as aluminum cost normalizes.

Were it not for this incremental $20 million investment in aluminum.

Net debt at quarter end would have been at the lowest level in superiors recent history.

The debt maturity profile as depicted on slide 19.

We have no near term maturities of funded debt.

Revolving credit facilities, which mature in May and October 2023 were undrawn.

The company is in compliance with all loan covenants.

We recently entered into $250 million of interest rate swap agreements in anticipation of a refinancing that.

The capital markets, However are choppy, especially the leveraged finance markets.

Fortunately the company isn't compelled to do anything at this time and with the passage of time, we expect to continue to prove out the operating model and therefore improved financial performance.

We stay close to our banking partners and expect to pursue a refinancing of the company when the time is right.

The company's 2022 financial outlook is on slide 20.

As <unk> noted we are reaffirming guidance for.

For 2022, we expect to sell 16, four to $17 7 million wheels.

We expect net sales to be in the range of one six to $1 7 billion in value added sales to be in the range of $780 million to $840 million.

This results in expected adjusted EBITDA afforded off from $160 million to $190 million.

Cash flow from operations from $105 million to $150 million.

The expected impact throughout the second quarter of the Ukraine conflict is included in this outlook.

Our capital expenditures are expected to be about $80 million. This year as we continue to strategically invest in our finishing capabilities and advance our portfolio of technologies to capture the secular trends of tomorrow.

We continue to model, a 25% to 30% effective tax rate for the year.

To sum it all up it was a good quarter, but the work is not done.

Our continuing objective is to cover extra ordinary inflation costs with customer recoveries.

We expect the discussions with our customers to extend throughout the year and as I said earlier, the recoveries may be lumpy.

We intend to continue to supplement these cost recoveries with our enterprise cost improvement and continuous improvement programs.

This taken together with the company's demonstrated ability to maintain commercial procurement and operations discipline should put superior positioning to benefit significantly from the operating leverage in our business, where light vehicle build recovers and also from the company is evolving we will making technologies and.

<unk> product portfolio.

This concludes our prepared remarks, we're happy to address any questions. You may have turning the call back to the operator honor.

Thank you if you would like to ask a question you can do so now by pressing star one on your telephone.

Star one if you'd like to ask a question.

We will now take our first question from Gary.

Hi, Stefano from Barrington Research. Please go ahead.

Hey, good morning, everyone.

Good morning, Gary.

Several questions first of all if we could refer to slide 10.

Maggie.

Yes in <unk>.

Each of those categories light weighting premium finishes electrification, especially large diameter wheels, 19 inches or greater could you give us some idea of.

The percentage shifts.

Year over year in your portfolio.

That are moving to each of these four categories.

Yes, Gary if you if you recall, we actually <unk>.

Laid out.

Not only the current growth rates, but also the projected growth in each of these in our in our earnings call last time.

Last quarter I would tell you that light weighting continues to be to be very strong actually very strong specifically the flow forming technologies.

Get you the exact numbers, but that's north of 25% growth year on year.

Premium finishes also also as well.

Our large diameter wheels.

50% of our wheels now.

<unk>.

19 inches or larger when you look back in 2019 less than 28% with 19 inches or larger.

One thing we are seeing now even more prevalent Gary is.

Is the use of inserts to make wheels more aerodynamic.

This is an emerging technology it adds a lot of content.

To the wheel and we're quoting on a lot of business is now where customers are requiring that technology. So.

But I'll get you the exact numbers and all of these four segments.

Our prior earnings call.

Okay that would be really helpful. Just for our knowledge base here and then if we go to the chart on that a little bit of trouble understanding. This chart I would like to explain it on page six with growth over market.

Total growth over market was 5% but.

It appears that I am.

Just trying to understand how does that break down between North America and Europe .

And the data that you supply here.

So this quarter if you if you Peel the onion on the region, you will see that Europe delivered substantial growth above market and Youll see that North America.

At market, both on units and value added sales, but do you have a comp issue in North America with last year.

Last year North America generated.

No.

About 14% growth above market actually north of that so there was a big pull on the content.

In North America, and the comp is is.

Is weighted.

In the opposite direction. If you look at our year to date growth over market, which is the best measure I think when you look at growth mobile market data, Gary the quarterly look as always.

It is lumpy the annual look as always more.

So you look at our LTM our growth over market in the last four quarters is north of 13% that's really the best measure.

The North America pumping in.

In this quarter is an anomaly in that market, but in reality, it's just coming off of a very very strong quarter last year.

Okay, and then specifically could you just maybe give us.

Some of the ways that you're being impacted by the conflict in Ukraine.

No sure actually it's been it's had a little impact on US directly we don't have any contracts directly with Russia or Ukraine, we have no manufacturing presence in either of those locations. We don't have contracts with suppliers in those countries all of our contracts on a from a supply standpoint outside of those countries.

The impact we've seen as you can imagine is is really our customers and the sudden change not only the drop.

Europe for us dropped 25% in March in the last two weeks.

So that would be that would be the impact we see that easing a bit NDA in the second quarter Gary.

But limited impact from our standpoint, it remains to be seen overall, where Europe is going in the second half.

From a growth standpoint.

Okay. Thank you.

Thank you we will now take our next question from Richard <unk> from Deutsche Bank. Please go ahead. Your line is open.

Thank you guys and good quarter, considering the industry circumstances.

First question you mentioned, just now that you've recently entered into some swap agreements in anticipation of a refinancing I was wondering if you could just.

It's probably.

Probably a little bit more detail in terms of what exactly that means and the plans. There and then second question. Obviously it was good free cash flow quarter.

Yes.

Strong relative improvement in working capital was a big factor and it looks like specifically there was a big jump in accounts payable and I'm just wondering what.

This is calling on that balance sheet item is there something that's changed.

Permanently for the business in terms of payable days.

Hi, Richard It's it's Tim.

The.

With respect to the last question.

Payables.

At year end.

2021 were unusually low they did not equal the sort of rhythm of the business now why why was that.

That was because you may recall.

In the fourth quarter of last year, we started to manage down some inventory build that we experienced in Q3. So in the course of managing down inventory build.

He doesn't buy as much product as otherwise would five.

So that's a roundabout way of saying that the payables were unusually low.

At year end okay.

This past year.

And then.

What transpired is when we turn the buyback on in the first quarter.

There's two dynamics there.

Have now on a build of.

Payables in the quarter and also much of that buy.

As aluminum.

So if you if you look at the quarter over quarter results.

Cash flow provided by the growth in payables is outsized in the first quarter of 'twenty two compared to the first quarter of 'twenty, one there's nothing unusual going on other than than that.

Okay.

That answer your.

Questions.

That's very clear yet.

With respect to your.

Interest rates swap question.

We do not have any impending maturities. So we have the luxury of the company has the luxury of of accessing the capital markets.

When when the time is more more optimal than it is today.

In anticipation of doing so.

In.

But not too distant future, we will see how the market behaves and.

And how.

Our industry behaves, but in anticipation of doing so and in light of the.

The increasing interest rate environment.

Clemens Eni deemed it appropriate to enter into a series of interest rate swap agreements going out to 2025 that would mitigate the impact of any further increase in interest rates between now and whatever date, we might do a refinancing so it was sort of a preemptive move.

If you will to facilitate any refinancing and to reduce the company's interest burden.

After our refinancing.

Understood. Okay, that's very clear and Thats you said 2025 is the maturity on those interest rate swaps.

Well.

<unk> down so we started that we started $2 50, and it steps down to $150 million I believe of 2025.

Got it.

Thank you very much.

Youre welcome Richard.

Okay.

We will now.

Next.

Question.

Follow up question from Gary <unk> from Barrington Research. Please go ahead.

I just have a quick question on recycled aluminum is there much of a differential in the cost of recycled aluminum too.

Yes.

Client or yourself versus not.

Non recycled.

It depends really this has always been around it's always been an initiative. It does require a lot of process discipline. There is a delta and as time goes by it depends on what happens with commodities, Gary sometimes it's a big Bang for the Buck sometimes it's marginal in this case as you think about all the.

The ingredients that go into aluminum and aluminum per metric ton being north of 3000.

It's a it's a big opportunity for us and it takes some work actually take some work and collaboration.

So where it stands right now.

<unk> a benefit for us.

Okay. Thank you.

Gary I might add that it also is no.

<unk>.

And environmentally conscious thing to do so it's a it's an opportunity.

For the company to continue to contribute a bit to reducing the carbon footprint.

Okay. Thank you.

Thank you.

We will now take our next question from Mike Ward Benchmark. Please go ahead. Your line is open.

Thanks very much.

Everyone I apologize and I apologize if I missed this can you talk about the aftermarket business in Europe , and what impact does that have.

It is doing and what impact does that have on the.

Content per unit on the European business.

So for us the aftermarket business has been a good balance there of the volatility in the market.

Mike.

And as you know the market in general is highly dependent on imports from the far eastern.

That supply chain has been a challenge so for US if you look at last year for US as you look at the quarter last year was a very strong year for us. This year is fairly solid both have been ahead of the OEM side the side of the business from a content standpoint, if that's your question and our content per wheel tends to be much higher on the <unk>.

M side, but in terms of volume it's been it's been a big positive.

Okay. So the.

The content that we see is actually understated because of on a relative basis. The aftermarket is performing a little bit better.

No.

On a volume basis.

Aftermarket performs better on a content basis.

You know, it's much higher on the OEM side on the OEM side on the <unk>.

Aftermarket scientists.

Sure so on a relative basis to the aftermarket unit volume outperform the OEM business in the quarter.

Yes.

Okay. So that drives down the content per unit, we see the blended content per unit is actually understated because of the strength in the aftermarket business relative to the OEM business.

It always is yes, that's a good question with all of this morning.

Now from what I can tell.

Did you used to break it out but you don't see the gross the EBITDA contribution from your North American operations.

Just based on your performance in the quarter and looks like the margin was probably the best you've had in North America since 2016.

Okay.

That is correct.

I'll, let Tim add to this but as you know North America performance has been a focus for us and we're very very pleased with the progress.

I would tell you that in our Mexican operations are delivering the best performance.

On multiple fronts, the best quality, we've had in seven years in Mexico, we have three powerful plan, Mike delivering record level of scrap the team in general on the enterprise level, both the commercial side the manufacturing side on the procurement side are executing on eight cylinders is just very very proud of that team.

Europe . The Europe numbers are obviously very challenged very challenged with the with the volume situation.

In the quarter, Tim do you want add.

While the largest point Mike.

The region prior to March is joining the company was comparatively underperforming modesty abroad.

A collection of activities that the company executed on.

That started down this path of improving the performance I would also say that the company was able to attract Michael Dora about a year ago two to be the president of the North American region, I'd say, Michael has done a nice job of picking up on what margin he started and the execution really at all.

All levels has really been been very satisfied.

Well, that's what it looks like Paul Congrats that's good news in a very tough environment.

Thank you.

Thanks, Mike.

Yes.

There are no further questions in the queue at this time.

Thank you.

We appreciate your participation in todays earnings call. We're extremely encouraged by our performance in the first quarter and while operating challenges persist. We are confident in our ability to overcome headwinds and generate shareholder value. Thank you again for joining and have a wonderful day.

Ladies and gentlemen that will conclude today's conference you may now all disconnect.

Okay.

[music].

Okay.

Yes.

[music].

Thank you Dana good morning, everyone and welcome to our first quarter earnings Conference call.

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 Modesty 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 Marty 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.

We will also be discussing various non-GAAP measures today.

These non-GAAP measures exclude the impact of certain items and therefore are not.

Not calculated in accordance with U S. GAAP reconciliations of these measures to the most directly comparable U S. GAAP measure can be found in the appendix of this presentation with that I'll turn the call over to Marty to provide a portfolio business update.

Thanks, Tim Thanks, Carmen and thanks, everyone for joining our call today to review our first quarter results.

I will begin on slide five with the highlights.

Our team delivered strong results achieving solid revenue growth ahead of market, coupled with strong profitability and cash generation.

This while navigating through an incredibly challenging operating environment with lower volumes production volatility and continuing inflationary pressures.

Most notable we have been able to generate EBITDA and profit margins on par with pre pandemic levels and that is on lower volumes.

Here, we have continued to collaborate with our customers and suppliers on price recoveries.

And cost reduction solutions to mitigate the impact of ever persistent inflationary pressures.

These results underscore book the operational strength of our teams.

As well as our continued ability to capitalize on demand for our premium wheels, extending our trajectory of growth above market and expanded content per wheel.

Further our performance this quarter resulted in significant cash flow from operations supporting a decrease in net debt to $477 million and enabled us to further invest in the business.

Slide six details industry production by region.

Specifically the significant industry declines in Europe , which was impacted by the Ukraine conflict.

Despite these declines we delivered 5% growth over market on a combined basis.

We saw continued favorable mix during the quarter supported by increased adoption of light weighting technologies and larger wheels premium finishes.

Slide seven summarizes our current operating environment.

Reiterating my comments from the first slide.

First quarter industry production levels fell another 10% compared to the first quarter last year.

In fact, we continue to see many of the same challenges that impacted production in 2021 further exasperated by the conflict in Ukraine, and a heightened inflationary environment.

With that said the strong tailwind shown on the left side of the chart have supported our growth over market and expanded profitability against depressed industry production levels.

Actually superior is incredibly well positioned to deliver earnings growth once.

Industry volumes to begin to recover and should this recovery begin begin earlier than expected, we anticipate substantial upside to our performance for the year.

Moving on to slide eight.

We continue to stay focused on our value creation roadmap through consistent execution on our operational excellence and profitable growth initiatives.

Our team's commercial discipline has been critical in working closely with customers to recover inflationary cost increases through price.

While offsetting other by identifying cost reduction solutions.

While we are pleased with the progress in the quarter, we clearly have more work ahead.

At the same time, our procurement team has leveraged our long standing relationship with our supply base to manage volatility and cost.

The regional nature and diversified nature of our supply base has been a great asset for us.

I do want to share with you a good example of the collaboration between our customers suppliers and our manufacturing teams.

Which is the increased use of recycled aluminum and our manufacturing processes.

I would tell you that this type of this type of collaboration efforts on the customer and supplier front half.

<unk> been across the entire superior enterprise.

I am very proud of how our team has responded.

Another challenging aspects of the quarter is the continued last minute volatility that our operating team have had to deal with.

This is clearly more heightened in Europe with the Ukraine War.

From a customer standpoint, we are focused on diligently planning volumes based on buying behaviors with the goal of offsetting order volatility and ensuring stable production levels.

We are also engaging with customers on cost recovery for extreme last minute production releases.

And with suppliers to mitigate disruption.

This is evident in our consistent growth over market over the last four years.

The collective results of all of these actions is illustrated on slide nine.

As I stated previously despite a double digit decline in shipments since the first quarter of 2021.

We have maintained strong EBITDA margins at pre COVID-19 levels, 26%.

While meaningfully growing content per wheel.

These results are also supported by the 12% growth net growth in net sales.

Which reflect executing on contract terms and negotiating recoveries with customers.

The collective effort demonstrated on this slide gives us incredible confidence in our ability to execute.

And to accelerate growth in a more normalized industry production environment.

Moving on to slide 10 to highlight how our innovative products position superior for success and help capture the secular tailwind supporting our growth.

We have one of the most comprehensive portfolio of technologies in the industry.

And the increased demand, we're seeing for our premium offerings. So we have the right breadth and mix to meet customer needs.

Our launch highlights for the quarter further illustrate this point with a range of our capabilities being utilized on both the Cadillac lyric and Silverado platforms.

Moving on to slide 11 to provide an update on our recent sustainability initiatives.

On the environmental front, we are making progress on our onshore strategy as we work towards our goal to be carbon neutral by 2039.

In 2021 alone we were able to achieve a 9% reduction in our carbon footprint.