Q2 2024 Superior Industries International Inc Earnings Call

August 8, 2024

Welcome to Superior Industries second quarter 2024 earnings conference call. This call is recorded.

Unknown Executive: 24-Earnings conference call. This call is recorded.

Tom McGill: We are joined this morning by Majdi Abulaban, President and CEO, Team Trainery Executive, Vice-President and CFO, and Tom McGill, Vice-President, Investor Relations.

Speaker Change: We are joined this morning by Majdi Abulaban, President and CEO , Tim Trenary, Executive Vice President and CFO , and Tom McGill, Vice President, Investor Relations. I will now hand you over to your host, Tom McGill, to begin today's conference. Thank you.

Tom McGill: I will now hand you over to your host, Tom McGill, to begin today's conference. Thank you.

Speaker Change: Good morning and welcome to our second quarter 2024 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.

Tom McGill: I'm joined today on the call by Majdi Abulaban, President and Chief Executive Officer, and Team Trainery, Executive Vice-President and Chief Financial 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 Provision of the Private Securities Litigation Reform Act of 1995. Please refer to slide two of this presentation for the full State Carver Statement and other companies' SEC filings, including the company's current annual report on 1.10-K for a more complete discussion of forward-looking statements and risk factors.

Operator: I'm joined today on the call by Majdi Abulaban, President and Chief Executive Officer, and Tim Trenary, Executive Vice President and Chief Financial Officer.

Operator: We are joined today on the call by Majdi Abulaban, President and Chief Executive Officer, and Tim Trenaryan, Executive Vice President and Chief Financial 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 State 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.

Speaker Change: I'm joined today on the call by Majdi Abulaban, our President and Chief Executive Officer, and Tim Trenaryan, Executive Vice President and Chief Financial Officer.

Speaker Change: Before I turn the call over to Majdi, I'd 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.

Speaker Change: 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 a more complete discussion of forward-looking statements and risk factors.

Tom McGill: 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 US GAAP. Reconciliation of these measures to the most directly comparable US GAAP measures can be found in the appendix of this presentation.

Operator: 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 USDA measures can be found in the appendix of this presentation. I now turn the call over to Majdi to provide a business and portfolio update.

Speaker Change: 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.

Speaker Change: 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 Majdi to provide a business and portfolio update.

Majdi Abulaban: I now will turn the call over to Majdi to provide a business and portfolio update. Thank you, Tom, and thank you all for joining our call today to review our second quarter, 2024 adult. I will begin with slide four. This quarter highlights the culmination of our efforts in recent use to position the company for sustainable growth and profitability. We have refocused our portfolio and winning products and have transformed our manufacturing operations into a petting class competitively advantage local customers. Combined, these actions have put Superior in its strong sustainable position and earn our place as the premier wheels solutions provider to lead the industry.

Majdi Abulaban: Thank you. Thank you, Tom. And thank you all for joining our call today to review our second quarter 2024 results. I will begin with slide four. In the second quarter, our team delivered a solid performance. I'll give you more color on this in a bit.

Majdi Abulaban: Thank you. Thank you, Tom.

Majdi: Thank you. Thank you, Tom. And thank you all for joining our call today to review our second quarter 2024 results. I will begin with slide four.

Majdi Abulaban: And thank you all for joining our call today to review our second quarter 2024 results. I will begin with slide four. This quarter highlights the culmination of our efforts in recent years to position the company for sustainable growth and profitability. We have refocused our portfolio on winning products and have transformed our manufacturing operations into a best-in-class, competitively advantaged local product. Combined, these actions have put Superior in a strong, sustainable position and earned our place as the premier wheels solutions provider to lead the industry. In the second quarter, our team delivered a solid performance.

Majdi: This quarter highlights the culmination of our efforts in recent years.

Majdi: to position the company for sustainable growth and profitability. We have refocused our portfolio on winning products and have transformed our manufacturing operations into a best-in-class, competitively-advantaged local footprint.

Majdi: Combined, these actions have put Superior in a strong sustainable position and earned our place as the premier wheels solutions provider to lead the industry.

Majdi Abulaban: In the second quarter, our team delivered a solid performance. Adjusted by lighting sales, our pay, the broader industry, despite software production, and adjusted EBITDA margins significantly expanded on a sequential base. And we previously highlighted. We have executed on our strategic actions to transform and elevate our footprint by transitioning all our global manufacturing capacity into local locations, advancing our local footprint and creating additional four-hour-oil customers seeking shorter the risk supply. Inc. In this regard, execution of Audioping and transformation remains on track. We have now completely exited our German manufacturing operations, and our wealth on our way ramping up in pool.

Majdi: In the second quarter, our team delivered a solid performance. Adjusted value-added sales outpaced the broader industry, despite softer production. And adjusted EBITDA margins significantly expanded on a sequential basis.

Majdi Abulaban: Adjusted Value Added Scale of PEAK, The Broader Industry, despite softer production, and Adjusted IMIRA Wardens significantly expanded on a sequential basis. As we previously highlighted, we have executed on our strategic action to transform and elevate our footprint by transitioning all our global manufacturing capacity into low-cost locations, advancing our local for local footprint, and creating additional value for our OEM customers seeking shorter de-risked supply chains. In this regard, the execution of our European transformation remains on track. We have now completely exited our German manufacturing operation and are well on our way to ramping up employment.

Majdi: As we previously highlighted, we have executed on our strategic action to transform and elevate our footprint by transitioning all our global manufacturing capacity into low-cost locations.

Majdi: advancing our local for local footprints and creating additional value for our OEM customers seeking shorter de-risked supply chains.

Majdi: In this regard, execution of our European transformation remains on track. We have now completely exited our German manufacturing operations and are well on our way ramping up in Poland.

Majdi Abulaban: This will position us for a significant property uplift by the end of this year. I am proud of our team's flawless execution on this track for so far. Our customers actually have been very, very pleased with these results and have recently recognized Superior with business wins and expansion of our technology partners. I'll give you more color on this in a bit. In terms of the operating environment of this quarter, industry production declined 3%, with key customer production declining 5%. In contract, Superior Value United sales adjusted for foreign exchange and deconsolidation in the quarter increased by 1%.

Majdi Abulaban: This will position us for a significant profitability uplift by the end of this year. I am proud of our team's flawless execution on this platform so far. Our customers have actually been very, very pleased with these results and have recently recognized Superior with business wins and expansion of our technology partners. I'll give you more color on this in a bit.

Majdi: This will position us for a significant profitability uplift by the end of this year.

Majdi: I am proud of our team's flawless execution on this platform so far.

Majdi: Our customers actually have been very, very pleased with these results and have recently recognized Superior with business wins and expansion of our technology partnership. I'll give you more color on this in a bit.

Majdi Abulaban: In terms of the operating environment this quarter, industry production declined 3%, with key customer production declining 5%. This action will strengthen our balance sheet and position the company for long-term growth. We are reducing outlook for net sales and value-added sales due to lower aluminum pricing and declines in industry production volumes; the team will provide more detail on this later. Now on the right, on the right side of the slide, we have received an A rating in research and development from us, reflecting the strength of our portfolio, as well as our industry leading R&D capability. We're very grateful for this recognition from all.

Majdi Abulaban: In terms of the operating environment this quarter, industry production declined 3%, with key customer production declining 5%. In contrast, Superior's value-added sales adjusted for foreign exchange and deconsolidation during the quarter increased by 1%. Encouragingly, we delivered solid adjusted EBITDA with 400 basis points of sequential margin expansion. This performance was supported by successful negotiations with our customers for real price increases due to cost inflation. On this point, I would like to highlight that we have successfully pivoted pricing dialogues with OEMs from one-time price recoveries to permanent price increases. Now, with regard to our plans to address our capital, we are in advanced discussions with lenders to retire our senior unsecured notes in the very near future.

Majdi: In terms of the operating environment this quarter, industry production declined 3% with key customer production declining 5%.

Majdi: In contrast, superior value-added sales adjusted for foreign exchange and deconsolidation in the quarter increased by 1%.

Majdi Abulaban: Encouraging, we delivered solid adjusted EBITDA with 400 basis points sequential margin expansion. This performance was supported by the successful negotiations with our customers for real price increases for cost inflation. On this dialogue with OEMs, from one-time price recovery to permanent price increases.

Majdi: Encouragingly, we delivered solid adjusted EBITDA with 400 basis point sequential margin expansion.

Majdi: This performance was supported by the successful negotiations with our customers for real price increases for cost inflation.

Majdi: On this point, I would like to highlight that we have successfully pivoted pricing dialogues with OEMs from one-time price recoveries to permanent price increases.

Majdi Abulaban: Now we'll regard to our plans to address our capital structure. We are in advanced discussions with lenders to retire our senior antiqued notes in the very near future. This action will strengthen our balance sheet and position the company for long-term growth. We expect to announce more information on this in a couple of weeks.

Majdi: Now, with regard to our plans to address our capital structure.

Majdi: We are in advanced discussions with lenders to retire our senior unsecured notes in the very near future.

Majdi Abulaban: This action will strengthen our balance sheet and position the company for long-term growth. We expect to announce more information on this in a couple weeks. As we look at the remainder of 2024, we are updating our four-year outlook. We are reducing our outlook for net sales and value-added sales due to lower aluminum pricing and declines in industry production volumes.

Majdi: This action will strengthen our balance sheet and position the company for long-term growth. We expect to announce more information on this in a couple of weeks.

Majdi Abulaban: As we look at the remainder of 2024, we are updating our full-year outlook. We are reducing outlook for net sales and value added sales due to lower aluminum pricing and declines in industry production bonds. While our teams have done an excellent job flexing costs and recovering price from customers for inefficiencies and inflation, we are reducing disproportionately. Our adjusted EBITDA guy won on maintaining margins. We are later focused on cash flow in a lower volume environment. Unlivered free cash flow remains unchanged as we reduce our capital expenditure. Our chain will provide more color on this life.

Majdi: As we look at the remainder of 2024, we are updating our four-year outlook.

Majdi: We are reducing outlook for net sales and value-added sales due to lower aluminum pricing and declines in industry production volumes.

Majdi Abulaban: While our teams have done an excellent job flexing costs and recovering prices from customers for inefficiencies and inflation, we are reducing, disproportionately, that is, our adjusted EBITDA guide while maintaining margins. We are laser focused on cash flow in a lower volume environment. Unlevered free cash flow remains unchanged as we reduce our capital expenditure outlay; the team will provide more coverage on this later. Moving on to slide five. We have some very, very exciting news to make, which underscores the momentum we are gaining in Europe with our customers as they recognize our unique competitive position as a technology leader with a competitively advantaged manufacturing. Starting on the left of the slide.

Majdi: While our teams have done an excellent job flexing costs and recovering price from customers for inefficiencies and inflation, we are reducing disproportionately our adjusted EBITDA guide while maintaining margins.

Majdi: We are laser focused on cash flow in a lower volume environment.

Majdi: Unlevered free cash flow remains unchanged as we reduce our capital expenditure outlook. Tim will provide more cover on this later.

Majdi Abulaban: Moving on to slide part.

Majdi Abulaban: We have some very, very exciting rules to make, which underscore the momentum we are gaining in Europe without customers as they recognize our unique competitive position as a technology leader with a competitively advanced manufacturing question. Starting on the left of the slide, we will award a record, 1.7 billion wheel program with our long-standing premium customer, Volvo, on a mid-size crossover platform. This program includes our premium aerodynamic and lightweight technology. It's valued at about $100 billion, and it's expected to launch in the fourth quarter of 2045. Our team is very proud of this achievement with Volvo.

Tim Trenaryan: Moving on to slide 5. We have some very, very exciting news to make which underscores the momentum we are gaining in Europe with our customers as they recognize our unique competitive position as a technology leader with a competitively advantaged manufacturing footprint.

Majdi Abulaban: We were awarded a record $1.7 billion wheel program with our long-standing premium customer Volvo on a mid-size crossover platform. This program includes our premium aerodynamic and light-weighted technology, is valued at about $100 million, and is expected to launch in the fourth quarter of 2025. Our team is very proud of this achievement with Volvo, and we look forward to a successful relationship with them. Now on the right side of the slide, we have received an A rating in research and development from us, a technology leader in the automotive space.

Tim Trenaryan: Starting on the left of the slide, we were awarded a record $1.7 billion wheel program with our long-standing premium customer Volvo on a mid-size crossover platform.

Majdi: This program includes our premium aerodynamic and light-weighting technology.

Tim Trenaryan: It's valued at about $100 million and is expected to launch in the 4th quarter of 2025. Our team is very proud of this achievement with Volvo. We look forward to a winning relationship with them.

Majdi Abulaban: We look forward to our winning relationship with them. Now on the right, on the right side of this slide, we have received an airing in research and development from others, a technology leader in the automotive space. This is a significant issue and positions us as a top-ranked supplier with this major OEM for airdition. The slackings, the strength of our portfolio, as well as our industry leading our DKB tools. We're very grateful for this recognition from others. Again, this underscores our momentum with European customers as they recognize the strength of our recently transformed footprint, our leadership in technology, and our long-standing customer relationships.

Tim Trenaryan: Now on the right, on the right side of the slide, we have received an A rating in Research and Development from UN, a technology leader in the automotive space.

Majdi Abulaban: This is a significant achievement and positions us as a top-ranked supplier with this major OEM for innovation, reflecting the strength of our portfolio, as well as our industry-leading R&D capability. We're very grateful for this recognition from all.

Tim Trenaryan: This is a significant achievement and positions us as a top-ranked supplier with this major OEM for innovation, reflecting the strength of our portfolio as well as our industry-leading R&D capabilities.

Speaker Change: We're very grateful for this recognition from Augie. Again, this underscores our momentum with European customers as they recognize the strength of our recently transformed footprint, our leadership in technology, and our long-standing customer relationships.

Majdi Abulaban: Again, this underscores our momentum with European customers as they recognize the strength of our recently transformed footprint, our leadership in technology, and our long-standing customer relationship. Slide 6 provides further detail on our European transformation. As we ramp up production in Poland, we will be closing the margin gap between North America and Europe in the second half of this year. We will benefit from higher cost absorption and improvement in our Polish operations as production ramps up.

Majdi Abulaban: Slide 6 provides further detail on our European transformation. As we ramp up production in Poland, we will be closing the margin gap between North America and Europe in the second half of this year. We will benefit from higher cost absorption and improvements in our Polish operations as production ramps up. In addition, we are continuing to improve our overall cost structure in Europe by consolidating half to market warehouses and rationalizing overhead. Further, we are pleased with the progress our teams have made in recent times negotiating with all European OEMs to implement real-price increases to recover inflationary costs.

Tim Trenaryan: Slide 6 provides further detail on our European transformation.

Majdi Abulaban: As we ramp up production in Poland, we will be closing the margin gap between North America and Europe in the second half of this year. Turning on to slide eight, which highlights superior growth compared to the broader industry in the second quarter. Regionally, North American OEM production increased but was offset by softer production among European OEMs. That said, both our North American and European operations grew ahead of their respective markets in the quarter. The right side of the slide highlights historical trends with long-term content growth per wheel of 34% since 2019. We have the Focus on Portfolio and Winning Products.

Tim Trenaryan: As we ramp up production in Poland, we will be closing the margin gap between North America and Europe in the second half of this year. We will benefit from higher cost absorption and improvement in our Polish operations as production ramps up.

Majdi Abulaban: In addition, we are continuing to improve our overall cost structure in Europe by consolidating aftermarket warehouses and rationalizing overhead. Furthermore, we are pleased with the progress our teams have made in recent times negotiating with all European OEMs to implement real price increases to recover inflationary costs. These conversations reflect the collaboration with our customers and our long-term nature of the relationship. Turning to slide 7, to further highlight our current operating environment.

Tim Trenaryan: In addition, we are continuing to improve our overall cost structure in Europe by consolidating aftermarket warehouses and rationalizing overhead.

Tim Trenaryan: yeah

Tim Trenaryan: Further, we are pleased with the progress our teams have made in recent times negotiating with all European OEMs to implement real price increases to recover inflationary costs.

Majdi Abulaban: These conversations reflect the collaboration with our customers and our long-term nature of the relationship.

Tim Trenaryan: These conversations reflect the collaboration with our customers and our long-term nature of the relationship.

Majdi Abulaban: Turning on to slide 7 to further highlight our current operating environment. The industry continues to face a complex landscape shaped by ongoing volume volatility and key customer shutdowns, high angular inventories, unfavorable production mix, and increased inflation in Europe. While industry recovery versus pre-coded level continues, we are seeing a slowdown. Industry production in our two regions declined 3% while production on our key customers declined 5%. That said, production remains below COVID levels. We expect in the long-term continued industry recovery supported by clean-top demand tailors. The occasion point here is that the US fleet age remains at an all-time high.

Tim Trenaryan: Turning on to slide 7, to further highlight our current operating environment.

Majdi Abulaban: The industry continues to face a complex landscape shaped by ongoing volume volatility and key customer shutdowns. High Angular Inventory, Unfavorable production mix, and increased inflation in Europe, while industry recovery versus pre-COVID levels continues. We are seeing a slowdown. Industry production in our two regions declined 3%, while production on our key customers declined 5%. That said, production remains below COVID levels.

Tim Trenaryan: The industry continues to face a complex landscape shaped by ongoing volume volatility and key customer shutdowns, high regular inventories, and a growing supply chain.

Tim Trenaryan: Unfavorable production mix and increased inflation in Europe .

Tim Trenaryan: While industry recovery versus pre-COVID level continues, we are seeing a slowdown. Industry production in our two regions declined 3%, while production on our key customers declined 5%.

Tim Trenaryan: That said, production remains below COVID levels. We expect, in the long term, continued industry recovery, supported by pent-up demand tailoring. The occasion point here is that the U.S. flea age remains at an all-time high.

Majdi Abulaban: We expect a continued industry recovery in the long term, supported by pent-up demand tailoring. The occasion point here is that the U.S. fleet age remains at an all-time high. Turning on to slide eight, which highlights superior growth compared to the broader industry in the second quarter. Global industry production, as well as production among key customers, both declined, while we delivered a 1% increase in value-added sales, adjusted for foreign exchange and deconsolidation. Regionally, North American OEM production increased but was offset by softer production among European OEMs. That said, both our North American and European operations grew ahead of their respective markets in the quarter. In addition, we have strategically pruned parts of our portfolio and exited underperforming programs.

Majdi Abulaban: Turning on to slide 8, which highlights superior growth compared to the broader industry in the second quarter. Global industry production as well as production among key customers both declined, while we deliver 1% increased value added sales adjusted for foreign exchange and deconsolidation. Regionally, North American volume production increased, but was offset by software production among European audience. Now that said, both our North American and European operations grew ahead of the respective market in the quarter. Further, we have strategically proved parts of our portfolio and exited under performing programs. We are seeing the benefit of these actions in our results.

Tim Trenaryan: Turning on to slide 8, which highlights superiors growth compared to the broader industry in the second quarter.

Speaker Change: Global industry production, as well as production among key customers, both declined while we delivered 1% increase in value-added sales, adjusted for foreign exchange and deconsolidation.

Tim Trenaryan: Regionally, North American OEM production increased but was offset by softer production among European OEMs. Now that said, both our North American and European operations grew ahead of their respective markets in the quarter.

Tim Trenaryan: Further, we have strategically pruned parts of our portfolio and exited underperforming programs. We are seeing the benefit of these actions in our results.

Majdi Abulaban: We are seeing the benefit of these actions in our results. Overall, we are performing well in a challenging environment. Moving on to slide nine, which highlights the continued positioning of our portfolio of premium technologies and how the accelerated adoption of these products is driving growth. The left side of the slide highlights some exciting launches in the second quarter. The right side of the slide highlights historical trends with long-term content growth per wheel of 34% since 2019.

Majdi Abulaban: Overall, we are performing well in a challenging environment.

Tim Trenaryan: Overall, we are performing well in a challenging environment.

Majdi Abulaban: Moving on to slide 9, which highlights the continued positioning of our portfolio of premium technologies and how they accelerated adoption of these products in driving growth. The last time the slide highlights some exciting launches in the second quarter. The right side of the slide highlights a storm conference with long-term content growth per wheel of 34% since 2019. We expect these macro trends driving the wheel space to continue well into the future.

Speaker Change: Moving on to slide 9, which highlights the continued positioning of our portfolio of premium technologies and how the accelerated adoption of these products is driving growth.

Tim Trenaryan: The left side of the slide highlights some exciting launches in the second quarter. The right side of the slide highlights a historical trend with long-term content growth per wheel of 34% since 2019.

Majdi Abulaban: We expect these macro trends driving the wheel space to continue well into the, I'm called. I am grateful to the superior team for the position we have created for our company. We have the Focus on Portfolio and Winning Products, transformed our manufacturing footprint to the best-in-class, competitively-advantaged local footprint, and we are strengthening our balance sheet as we retire our roots. Through outstanding execution by our team, Superior is now, more than ever, in a position for Sustainable Profitable Growth. Now, I will turn the call over to Tim to provide more detail on our financial results. Tim? Okay.

Tim Trenaryan: We expect these macro trends driving the wheel space to continue well into the future.

Majdi Abulaban: In closing, I am grateful to the superior team for the position we have created for our company. We have refocused our portfolio, and when we transform our manufacturing footprint to the investing class, competitively advantage local footprint, and we are strengthening our balance sheet as we retire our growth. Through our standing execution of our team, superior now more than ever is position for sustainable, profitable growth.

Tim Trenaryan: In closing, I am grateful to the Superior team for the position we have created for our company.

Speaker Change: We have refocused our portfolio on winning products, transformed our manufacturing footprint to the best-in-class, competitively-advantaged local footprint, and we are strengthening our balance sheet as we retire our notes.

Speaker Change: Through outstanding execution of our team, Superior, now more than ever, is positioned for sustainable, profitable growth.

Tom McGill: Now I will turn up all of our team to provide more detail on our financial results. Thank you, ma'am.

Speaker Change: Now, I will turn the call over to Tim to provide more detail on our financial results. Tim? Thank you, Majdi. On page 11, your transformation update.

Unknown Executive: On page 11, your transformation update. A recall that on August 31st last year, we announced an important strategic action. The continuation of our local for local manufacturing footprint optimization and the transformation of the release, 6% of our manufacturing footprint to a more competitive cost structure. More specifically, our production facility and for an old journey, otherwise known as Superior Industries Production, Germany, or SPG, enter productive shield proceedings in German court-administered reorganization process. Generally, except in accounting principles required an SPG statement of operations and balance sheet, would anyone to commence with the proceedings be consolidated from Superior Industries financial statements.

Tim Trenary: On page 11, your transformation update. Recall that on August 31st last year, we announced an important strategic action. The continuation of our local for local manufacturing footprint optimization and the transformation of the remaining 6% of our manufacturing footprint to a more competitive cost. More specifically, our production facility in Bernal, Germany, otherwise known as Superior Industries Production Germany, or SPG, entered productive shield proceedings and determined a court-administered reorganization process. Generally accepted accounting principles are required in SPG's Statement of Operations and Balance Sheet, beginning with the commencement of the proceedings, to be deconsolidated from Superior Industries' Financial Statement.

Tim Trenary: Accordingly, the income statement of SVG is excluded from the second quarter 2024 financial results, as is the balance sheet of SVG at quarter end. The deconsolidation... affects the year-over-year income. More specifically, in the second quarter of 2023, 245,000 wheels were sold by SVG.

Tim Trenaryan: Recall that on August 31st last year, we announced an important strategic action, the continuation of our local-for-local manufacturing footprint optimization, and the transformation of the remaining 6% of our manufacturing footprint to a more competitive cost structure.

Tim Trenary: The associated net sales and value-added sales were $31 million and $20 million, respectively, year over year, second quarter 2024 financial results and, therefore, adjusted, Capital Expenditures and Working Capital benefited from the closure of the facility. Adjusted EBITDA was $1,000,000 more; Capital Expenditures and Working Capital were $1,000,000 and $22,000,000 less, respectively. Resize the step change benefit of the transfer of wheels from Germany to Poland at $23 to $25 million annually. Capital expenditures should be approximately $10 million less per year. Superior's European Variable Contribution Margin should approach that of Superior North America. We expect the cost to complete the wheel transfer to be $20 to $35 million.

Majdi Abulaban: More specifically, our production facility in Bernal, Germany, otherwise known as Superior Industries Production in Germany or SPG, entered productive shield proceedings in a German court-administered reorganization process. Generally accepted accounting principles required SPG's Statement of Operations and Balance Sheet, beginning with the commencement of the proceedings, be deconsolidated from Superior Industries' Financial Statement.

Speaker Change: More specifically, our production facility in Bernal, Germany, otherwise known as Superior Industries Production Germany, or SPG, entered productive shale proceedings in German court-administered reorganization process.

Speaker Change: Generally accepted accounting principles require that SPG's statement of operations and balance sheet, beginning with the commencement of the proceedings, be deconsolidated from Superior Industries' financial statements.

Unknown Executive: Accordingly, the income statement of SPG is excluded from the second quarter of 2024 financial results, as is the balance sheet of SPG in court around. The deconsolidation affects the year-over-year counts more specifically in the second quarter of 2023. 245,000 wheels were sold by SPG. The associated net sales and value added sales were 31 million and 20 million, respectively. Year-over-year, second quarter, 2024 financial result and therefore adjusted to capital expenditures and working capital benefited from the closure of the facility. The adjusted even down was 1 million more capital expenditures and living capital over 1 million to 22 million less respectively.

Speaker Change: Accordingly, the income statement of SVG is excluded from the second quarter 2024 financial results, as is the balance sheet of SVG at quarter end.

Speaker Change: The deconsolidation affects the year-over-year costs.

Speaker Change: More specifically, in the second quarter of 2023, 245,000 wheels were sold by SVG.

Majdi Abulaban: The associated net sales and value-added sales were $31 million and $20 million, respectively. Capital expenditures and working capital will benefit from the closure of the facility. The second quarter of 2024, the Year-over-Year Sales Bridge, is on page 13. That's used for investing activities for the quarter of a day. Two million more than the prior year period because of a somewhat higher capital expenditure, an increase of $19 million compared to the prior year period, primarily because of the improvement in cash used by operators. Funded at $627,000,000.00

Speaker Change: The associated net sales and value-added sales were $31 million and $20 million respectively.

Speaker Change: Year over year, second quarter 2024 financial results and therefore adjusted capital expenditures and working capital benefited from the closure of the facility.

Speaker Change: theadjjust that ebitda was one million more deite expenditures and living capital than one million twenty-two million less respectively

Unknown Executive: The size and step change benefit of the transfer of wheels from Germany to Poland at 23 Capital Experiencers should be approximately 10 million less per year. Superior's European variable contribution margin should approach that Superior North America. We select the cost of complete the wheel transfer to P20 to 35 million. On the line, regarding the closure of SVG and transferred the wheels to Polo, the company successfully executed on a cost-effective facility closure in a high-cost country that results in a significant increase in unloved and pretty cash flow because of the reduction in capital employee and higher earnings.

Speaker Change: Resize the step change benefit of the transfer of wheels from Germany to Poland at $23-25 million annually.

Speaker Change: Capital expenditures should be approximately 10 million less per year.

Speaker Change: superiors europeanand variable contribution margin should approach thatat a superior in north america

Speaker Change: We expect the cost of complete the wheel transfer to be...

Tim Trenary: Bottom line, regarding the closure of SVG and transfer of the wheels to Poland, the company successfully executed a cost-effective facility closure in a high-cost country that resulted in a significant increase in unloaded free cash flows because of the reduction in capital employed and higher earnings. Let's look at the quarter on page 12. Second quarter, 2024 financial: Net sales decreased to $319 million per quarter compared to $373 million in the prior year period.

Speaker Change: for presenting today.

Speaker Change: because of the reduction in capital employed and higher earnings.

Unknown Executive: Let's look at the quarter on page 12, second quarter, 2014 for financial summary. That sales decreased to 319 million per quarter compared to 373 million in the prior year period. The normalization of the cost of aluminum and deconsolidation of SVG accounts for slightly more than all of this 54 million decline or 55 million. Value-ad sales decreased to 1.8 million per quarter compared to 200 million for the prior year period. The deconsolidation of SVG in poor exchange accounts for 19 million of this 20 million decline. Adjusted EBITDA was $40 million. The associated margin expressed as 8% of value-ad sales, 22% for the quarter; net loss was 11 million.

Speaker Change: Let's look at the quarter on page 12.

Tim Trenary: The normalization of the cost of aluminum and the deconsolidation of SPG accounts for slightly more than all of this $54 million decline, or $55 million. Value Added Sales decreased to $189,000,000, compared to $200 million for the prior year period. The deconsolidation of SVG and foreign exchange accounts for $19 million of this $20 million decline. Adjusted EBITDA was $40 million. The associated margin expressed as a percent of value-added sales was 22%. For the quarter, the net loss was $11 million.

Speaker Change: 2nd Quarter, 2024 Financial Summary

Speaker Change: That sales decreased to $319 million per quarter compared to $373 million in the prior year period.

Speaker Change: The normalization of the cost of aluminum and deconsolidation of SPG accounts for slightly more than all of this $54 million decline, or $55 million.

Speaker Change: value-add sales decreased to hundred the eighty million for the par

Speaker Change: compared to $200 million for the prior year period.

Speaker Change: The deconsolidation of SVG and foreign exchange accounts for $19 billion of this $20 million decline.

Speaker Change: adjusted ebitda was forty-nine the associated margin expressed to eight percent of valuateded sales twenty two percent

Unknown Executive: The second quarter, 2024, yield over your sales bridge, is on page 13. That is just mentioned. Value-ad sales declined to 20 million compared to the prior year quarter. Reflecting deconsolidation of SVG and EBITDA for exchange. If all right, aluminum cost passed through. The cost of risk was down to 34 million because of the lower cost of aluminum and deconsolidation of SVG.

Speaker Change: For the quarter, net loss was $11 million.

Tim Trenary: The second quarter of 2024 year over year sales bridge is on page 13. As just mentioned, value-added sales declined $20 billion compared to the prior year quarter, reflecting deconsolidation of SPG and the impact of foreign exchange. To the far right, aluminum cost passed through the customers was down $34 million because of the lower cost of aluminum and the deconsolidation of SDG.

Speaker Change: The second quarter of 2024 Year-over-Year Sales Bridge is on page 13.

Speaker Change: As just mentioned, value added sales declined to $20 million compared to the prior year quarter, reflecting deconsolidation of SPG and impact of foreign exchange.

Speaker Change: To the far right, aluminum cost passed through the customers was down $34 million because of the lower cost of aluminum and deconsolidation of SVG.

Unknown Executive: On page 14, second quarter, 2024, yield over your adjusted EBITDA. Adjusted EBITDA for the quarter decreased to 40 million compared to 52 million in the prior year period. The adjusted EBITDA margin for the quarter was 22% compared to 26% last year. Lower unit sales partially offset by favorable price-in-products. And to the far right, lower performance primarily because the second quarter of last year benefited from non-recurring recovery cost inflation on the primary reasons adjusted EBITDA declined. Importantly, the company has substantially completed the pivot to incorporating into yield pricing amounts necessary to offset, in large part, the impact on the cost structure of extraordinary cost inflation and other factors.

Tim Trenary: On page 14, second quarter 2024 year-over-year adjusted EBITDA. Just an year and a half with a quarter decrease to $40 million compared to $52 million in the prior year period. The adjusted EBITDA margin for the quarter was 22% compared to 26% last year. Lower unit sales partially offset by favorable price and product, and, to the far right, lower performance primarily because the second quarter of last year benefited from non-recurring recovery of costs were the primary reasons adjusted EBITDA declined. Importantly, the company has substantially completed the pivot to incorporating into mill pricing amounts necessary to offset, in large part, the impact on the cost structure of extraordinary cost inflation and other factors.

Speaker Change: On page 14, second quarter of 2024, year over year, adjusted EBITDA.

Speaker Change: Just an year and a half with a quarter decrease to $40 million compared to $52 million in the prior year period.

Speaker Change: The adjusted income margin for the quarter was 22% compared to 26% last year.

Speaker Change: Lower unit sales, partially offset by favorable price and product mix.

Speaker Change: And, to the far right, lower performance primarily because the second quarter of last year benefited from non-recurring recovery of cost inflation.

Speaker Change: are the primary reasons of Justin Bieber's decline.

Speaker Change: Importantly, the company has substantially completed the pivot to incorporating into real pricing amounts necessary to offset in large part the impact on the cost structure of extraordinary cost inflation and other factors.

Unknown Executive: The impact of four exchange and battle timing on the quarter compared to the prior year period was in material.

Tim Trenary: The impact of foreign exchange and battle timing on the quarter compared to the prior period was in the direct... An overview of the company's second quarter 2024 unleveraged free cash flow is on page 15. Cash use by operating activities was $8 million for the quarter compared to $28 million in the prior year period. Lower investment in working capital in the second quarter of this year, partially offset by lower earnings in the quarter, is the primary reason for a decrease in cash use by operators.

Speaker Change: The impact of foreign exchange and battle timing on the quarter compared to the prior period is unmaterial.

Unknown Executive: In overview of the company's second quarter, 2024, unlevered free cash flow is on page 15. Cash used by operating activities was 8 million for the quarter compared to 28 million in the prior year period. Lower investor and working capital in the second quarter of this year, partially offset by lower earnings in the quarter, are the primary reasons for the decrease in cash used by operating.

Speaker Change: An overview of the company's second quarter 2024 unleveraged free cash flow is on page 15.

Speaker Change: Cash use by operating activities was $8 million for the quarter compared to $28 million in the prior year period.

Speaker Change: Lower investment in working capital in the second quarter of this year, partially offset by lower earnings in the quarter, are the primary reasons for a decrease in cash used by operating activities.

Tim Trenary: That was used by investing activities for the quarter, Two million more than the prior year period because of a somewhat higher capital expenditure. There were no cash payments for non-debt financing activities in the second quarter of this year because the dividends paid on the preferred shares were paid in kind.

Unknown Executive: International Incense International Incense International Incense International Incense International Incense. The company opted to pick the status to maximize cash. Unlearned free cash roll for the second quarter of 2024 was tune on. An increase of 19.9 compared to the prior group period, primarily because of the improvement in cash used by operating activities.

Speaker Change: That's used by investing activities for the quarter of a day ago.

Speaker Change: Two million more than the prior year period because of the somewhat higher capital expenditures this quarter.

Speaker Change: there were no cash padments are non-b financing activities in the second quarter of this year because the dividends payorable with the ferred shares were pay any time

Tim Trenary: The company opted to pick the components to maximize capacity. Unlevered free cash flow for the second quarter of 2024 was $2 million, an increase of $19 million compared to the prior group period, primarily because of the improvement in cash use by operators. No review of the company's capital structure as of June 30, 2024, may be found on page 16. The national balance sheet at quarter end was $172 million. Funded Debt was $627,000,000.00, and Net Debt was $455 million.

Speaker Change: The company opted to pick the dividends to maximize cash.

Speaker Change: Unleveraged free cash flow for the second quarter of 2024 was $2 million.

Speaker Change: An increase of 19 million compared to the prior group period, primarily because of the improvement in cash used by operating activities.

Unknown Executive: 24-Earnings Conference Call. This call is recorded. We are joined this morning by Majdi Abulaban President and CEO, Team Trainery Executive, Vice-President and CFO, and Tom McGill, Vice-President Investor Relations.

Unknown Executive: No review of the company's capital structure as of June 30, 2024, may be found on page 16. The cash on the balance sheet at quarter end was $172 million. Funded debt to $127 million at quarter end and net debt was $425 million. The leveraging of balance sheet and their foreign lover free cash roll remains the top priority.

Speaker Change: No review of the company's capital structure as of June 30, 2024 may be found on page 16.

Speaker Change: the from the balancesheet quarter was one who studying to noted

Tom McGill: I will now hand you over to your host, Tom McGill, to begin today's conference. Thank you.

Speaker Change: funded depth to hundred and twenty -seven during the quarter end and net debt was four hundred fifty five th

Tom McGill: Good morning, and welcome to our second quarter of 2024 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'm joined today on the call by Majdi Abulaban, a President and Chief Executive Officer, and Team Trainery Executive, Vice-President and Chief Financial 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 State Carver Provision of the Private Security's Litigation Reform Act of 1995.

Tim Trenary: Deleveraging the balance sheet and, therefore, unlevered pre-cash flow remains a top priority. The company's debt maturity profile, that is at the end of the quarter, is on page 17. As Majdi noted, we are in advanced discussions with lenders to retire the senior unsecured notes in the coming weeks. The revolving Credit Facility was undrawn at quarter end, and we are in compliance with all loan cuts.

Speaker Change: The Leveraging the Balance Sheet and Therefore Unlevered Free Cash Flow remains a top priority.

Unknown Executive: The company's debt maturity profile at the beginning of the quarter is on page 17. As Massey know it, we are in advanced discussions with lenders to retire the senior unsecured belts and come in ways. Revolving quite a few of you is undrawn at quarter end, and we are in compliance with all loan companies.

Speaker Change: The company's debt maturity profile, as at the end of the quarter, is on page 17. As Majdi noted, we are in advanced discussions with lenders to retire the senior unsecured notes in the coming weeks. The revolving credit facility was undrawn at quarter end, and we are in compliance with all loan covers.

Unknown Executive: The full year of 2024 financial outlet at 18. For the full year of 2024, we now expect net sales in the range of 1.35 to 1.41 billion. And value net sales in the range of 695 to 725 million. The reduction in expected sales would less lower loan across the lower expected OEM-like vehicle production. We are lowering the adjusted EBITDA to 1.50 to 1.65 million due to lower sales output. We still expected the lower amount of free cash roll in the range of 1.10 to 1.30 million. Primarily because capital expenditures are expected to be lower, offsetting the lower adjusted EBITDA.

Tim Trenary: Full Year 2024 Financial Outlook, NJTD, for the full year 2024. We now expect net sales in the range of 1.35 to 1.41 billion and Value Added Sales in the range of $695 to $725 million. The reduction in expected sales reflects lower aluminum costs and lower expected OEM light vehicles. We are lowering the adjusted EBITDA to $150-$165 million due to lower sales output. We still expect to deliver on London's free cash flow in a range of $110 to $130 million, primarily because capital expenditures are expected to be lower, offsetting the lower adjusted equity.

Speaker Change: The full year 2024 financial outlook at NJT.

Speaker Change: For the full year 2024, we now expect net sales in the range of $1.35 to $1.41 billion.

Tom McGill: Please refer to slide two of this presentation for the full State Carver Statement and other companies SEC filings, including the company's current annual report on 1.10K for 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 USGAP. Reconciliation of these measures to the most directly comparable USGAP measures can be found in the appendix of this presentation.

Speaker Change: and value-added sales in the range of $695 to $725 million.

Speaker Change: Reduction in expected sales reflects lower aluminum costs and lower expected OEM light vehicle production.

Speaker Change: We are lowering the adjusted EBITDA to $150-$165 million due to lower sales out.

Speaker Change: We still expect to deliver on mother free cash flow in the range of $110 to $130 million, primarily because capital expenditures are expected to be lower, offsetting the lower adjusted EBITDA.

Unknown Executive: The outlook for capital expenditures is now $40 million. 10 million lower as the company continues to reduce the capital of density while strategically investing into the desert. We mild tax expense of approximately 30 million per year.

Tim Trenary: The output for capital expenditures is now $40 million, $10 million lower, as the company continues to reduce the capital intensive, all strategically invested in the business. We modeled a tax expense of approximately $30 million for the year.

Speaker Change: The output for capital expenditures is now $40 million, $10 million lower as the company continues to reduce the capital intensity.

Majdi Abulaban: I now will turn the call over to Majdi to provide a business and portfolio update.

Majdi Abulaban: Thank you, Tom, and thank you all for joining our call today to review our second quarter, 2024 adult. I will begin with slide four. This quarter highlights the culmination of our efforts in recent use to position the company for sustainable growth and profitability. We have refocused our portfolio and winning products and have transformed our manufacturing operations into a petting class competitively advantage local customers. Combined these actions have put superior in its strong sustainable position and earn our place as the premier wheels solutions provider to lead the industry.

Speaker Change: All strategically invested in the business.

Speaker Change: We model tax expense of approximately $30 million for the year.

Unknown Executive: In closing, our teams have done a great job executing our European transformation and keeping us on track to achieve our operational and financial priorities.

Majdi Abulaban: In closing, our teams have done a great job executing our European transformation and keeping us on track to achieve our operational and financial priorities. This concludes our prepared remarks. Mikey and I are happy to take questions.

Speaker Change: In closing, our teams have done a great job executing our European transformation and keeping us on track to achieve our operational and financial priorities. This concludes our prepared remarks, Moniki and I are happy to take questions.

Unknown Executive: This concludes our prepared remarks. Mikey and I are happy to take questions.

Unknown Executive: Thank you. If you like to ask a question or make a contribution on today's call, please press thumbs up on your telephone keypad. We will be advised when to ask your questions.

Operator: Thank you. If you'd like to ask a question or make a contribution on today's call, please press star on your telephone keypad. We will take our first question from Michael Ward of Freedom Capital. Your line is open, please go ahead.

Operator: Thank you. If you'd like to ask a question or make a contribution on today's call, please press star on your telephone keypad; you will be advised when to ask your questions. We will take our first question from Michael Ward of Freedom Capital. Your line is open, please go ahead.

Speaker Change: Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad.

Speaker Change: You'll be advised when to ask your questions.

Gary Prestopino: We will take our first question from Michael Watt, Freedom Capital. Your line is open. Please go ahead.

Speaker Change: We will take our first question from Michael Ward, Freedom Capital, your line is open, please go ahead.

Michael Ward: Good morning, everyone. Um, Majdi, I think you mentioned something and I didn't quite catch it. Has there been a change in the pricing with the vehicle manufacturers?

Majdi Abulaban: Good morning, everyone. I think you mentioned something, and I didn't quite catch it. Is there a change in the pricing with vehicle manufacturers?

Michael Ward: Good morning, everyone.

Majdi Abulaban: In the second quarter, our team delivered a solid performance. Adjusted by lighting sales, our pay, the broader industry, despite software production, and adjusted EBITDA margins significantly expanded on a sequential base. And we previously highlighted. We have executed on our strategic actions to transform and elevate our footprint by transitioning all our global manufacturing capacity into local locations, advancing our local footprint and creating additional four-hour-oil customers seeking shorter the risk supply. Inc. In this regard, Execution of Audioping and Transformation remains on track.

Michael Ward: Majdi, I think you mentioned something and I didn't quite catch it, is there a change in the pricing with the vehicle manufacturers?

Majdi Abulaban: I was really referring to the negotiations might for price increases. We have called and talked about it last year, and we shared with you our success.

Majdi Abulaban: I was really referring to the negotiations. Mike about price increases. We have, you recall, talked about it last year and we shared with you our success, and this year we pivoted to permanent price increases on our wheels with customers to recover inflation. So the answer is yes, I'm referring to negotiations for price increases, and I will tell you that our discussions with customers have been very productive, and we have been successful in reflecting inflation in our prices now, I would say, 90% of the way we are reflecting inflation in our prices through agreements

Majdi: I was really referring to the negotiations.

Speaker Change: Mike, for price increases, we have, you recall, we talked about it last year and we shared with you our success and this year we pivoted to permanent price increases on our wheels with customers to recover inflation. So the answer is yes, I'm referring to negotiations for price increases.

Majdi Abulaban: This year we pivoted to permanent price increases on our wheels with customers or recovery inflation. So the answer is yes, I'm referring to negotiations for price increase. and I will tell you that our discussions with customers have been very productive, and we have been successful in reflecting now, I would say 90% of the way we are reflecting inflation in our price to agreements with all customers.

Speaker Change: And I will tell you that our discussions with customers have been very productive and we have been successful in reflecting now, I would say, 90% of the way we are reflecting inflation in our price to agreements with our customers.

Majdi Abulaban: And the deal with Volvo, is that the sign of more to come with some of these, the luxury based manufacturers in Europe giving you a new cost structure, is that what that is? Absolutely, I think the one, you know, Volvo, with German customers and with Volvo and JLR, we were always been in a strong position. This is an excellent sign, a combination of easy, long-standing relationship, and well done, our competitive position, by far, because of our competitive position. I also share with you, in representation, new developments with Audi. You know, the A technology rating is the highest, with Audi, and really indicative of what's to come. We have been in dialogue with customers, advanced dialogue actually, to continue to grow the business and leverage what we have from a portfolio in a standpoint, and a footprint standpoint. You may have heard me refer to this, the majority of the capacity in Europe for wheels resides in either the three countries, Germany, Austria, Spain, and Europe, Italy. So it's really all about the high cost from a manufacturing standpoint, at least for wheels, and we're now 100% in Poland. Customers know it, and you know, I was telling you the transformation we executed on in a very short time, you know, closing a plant, major operation, moving into Poland, without any disruption. You know, we just came out of the meeting with Audi a couple days ago, they were basically through the execution and quote unquote, they said it's the largest insolvency that's seen in recent times, and they've not seen one that has been executed, flawlessly of this one. So this actually elevated, so a competitive position is elevated, our position might be customers, and the way they seem, I definitely think it's going to come back.

Majdi Abulaban: And the deal with Volvo, is that a sign of more to come with some of these luxury-based manufacturers in Europe giving you a new cost structure? Is that what that is?

Majdi Abulaban: We have now completely exited our German manufacturing operations and our wealth on our way ramping up in pool. This will position us for a significant property uplift by the end of this year. I am proud of our team's flawless execution on this track for so far. Our customers actually have been very, very pleased with these results and have recently recognized Superior with business wins and expansion of our technology partners. I'll give you more color on this in a bit.

Speaker Change: And the deal with Volvo, is that the sign of more to come with some of these luxury-based manufacturers in Europe , given your new cost structure? Is that what that is?

Majdi Abulaban: Absolutely. And I think the one with Volvo, with German customers, and with Volvo and JLR, we've always been in a strong position. This is an excellent sign, a combination of a long-standing relationship and our competitive position, by far, because of our competitive position. I also shared with you in the presentation new developments with Audi. You know, the A technology rating is the highest with Audi and really indicative of what's to come.

Speaker Change: Absolutely, and I think the one, you know, with Global, with German customers and with Global and JLR, we've always been in a strong position. This is an excellent sign, a combination

Speaker Change: It's been a longstanding relationship.

Speaker Change: As well as on our competitive position, by far, because of our competitive position. I also shared with you in the presentation, new developments with Audi. You know, the A technology rating is the highest.

Majdi Abulaban: In terms of the operating environment of this quarter, industry production declined 3%, with key customer production declined 5%. In contract, Superior Value United sales adjusted for foreign exchange and deconsolidation in the quarter increased by 1%. Encouraging, we delivered solid adjusted EBITDA with 400 basis points sequential margin expansion. This performance was supported by the successful negotiations with our customers for real price increases for cost inflation. On this dialogue with OEMs, from one-time price recovery to permanent price increases.

Majdi Abulaban: We have been in dialogue with customers, advanced dialogue, actually, to continue to grow the business and leverage what we have from a portfolio standpoint and a footprint standpoint. Mike, you may have heard me refer to this.

Speaker Change: with Audi and really indicative of what's to come. We have been in dialogue with customers, advanced dialogue actually, to continue to grow the business and leverage what we have from a portfolio standpoint and a footprint standpoint.

Majdi Abulaban: The majority of the capacity in Europe for wheels resides in either the three countries, right, Germany, Austria, Spain, Italy. So it's really all about the high cost from a manufacturing standpoint, at least for wheels. And we're now 100% in Poland, customers know it. And, you know, I would tell you the transformation we executed in a very short time. Closing a plant, a major operation, moving it to Poland without any disruption

Speaker Change: Mike, you may have heard me refer to this.

Mike: The majority of the capacity in Europe for wheels resides in either the three countries, right? Germany, Austria, Spain, and a little bit Italy.

Mike: So it's really all ultra-high cost from a manufacturing standpoint.

Speaker Change: At least for wheels, and we're now 100% in Poland, customers know it, and I would tell you the transformation we executed on in a very short time.

Majdi Abulaban: Now we'll regard to our plans to address our capital structure. We are in advanced discussions with lenders to retire our senior antiqued notes in the very near future. This action will strengthen our balance sheet and position the company for long term growth. We expect to announce more information on this in a couple of weeks.

Mike: Closing a plant, major operation, moving it to Poland without any disruption.

Majdi Abulaban: Now we just came out of a meeting with Adi a couple of days ago; they were very pleased with the execution of the project. University of Maryland College of Agriculture, Committee for Sustainable Agriculture, and Educational Solutions.

Mike: Now, we just came out of a meeting with Audi a couple of days ago.

Speaker Change: They were very pleased with their execution and quote-unquote

Speaker Change: They said it's the largest insolvency they've seen in recent times.

Mike: and I have not seen one that has been executed flawlessly as this one. So, this actually elevates... So, our competitive position has elevated our position, Mike, with customers and the way this team has executed...

Gary Prestopino: That's what it sounds like. Tim, do you have the unit shipment data separated between North America and Europe?

Tim Trenary: That's what it sounds like. Tim, do you have the Unitship?

Tim Trenary: I do have it, but I don't have it with me right now.

Mike: That's what it sounds like. Tim, do you have the...

Tim Trenaryan: Unit shipment data separated between North America and Europe .

Michael Ward: It is in total, Mike, on one of the pages. I saw the total number; I was just curious by region. Yeah, I don't, I don't have it by region. Okay, will it be in the queue, or not?

Gary Prestopino: I do have it; I don't have it with me right now. It is in total, like on one of the pages. I saw the total number; I was just curious by region.

Tim Trenaryan: I do have it. I don't have it with me right now. It is in total, Mike, on one of the pages.

Mike: I saw the total number, I was just curious by region.

Gary Prestopino: I don't have it by region. Okay, will it be in the queue or leave it as is, yes. Okay, and when you talk about it.

Operator: Okay, will it be in the queue or not?

Speaker Change: I don't have a violation right now.

Mike: Okay, will it be in the queue, or?

Tim Trenary: I believe it is, yeah. Okay.

Mike: I believe it is, yes.

Mike: Okay, and when you talk about...

Gary Prestopino: Okay, when you talk about the margins, it sounds like the margin is in the second half in Europe; we'll be getting closer to North America, and that's a substantial change.

Michael Ward: And when you talk about, Okay, when you talk about the margins, it sounds like the margins in the second half in Europe will be getting closer to North America. And that's a substantial change. You know, what would it look like in the first half? And what type of change are we getting the annual rate of 23 to 25 million in savings?

Majdi Abulaban: Moving on to slide part. We have some very, very exciting rules to make, which underscore the momentum we are gaining in Europe without customers as they recognize our unique competitive position as a technology leader with a competitively advanced manufacturing question.

Mike: Okay, when you talk about the margins, it sounds like the margins in the second half in Europe .

Speaker Change: We'll be getting closer to North America, and that's a substantial change. You know, what did it look like in the first half, and what type of... We're getting the annual rate of the $23 to $25 million in savings? Is that what we're going to see in the second half? We're going to start to see that pretty quickly?

Majdi Abulaban: You know, what would it look like in the first half, and what type of, is, we're getting the annual rate of the 23 to 25 million in savings? Is that what we're going to see in the second half? We're going to start to see that pretty now. The wheels are starting to, the launches are going right now. Very heavy right now, we've started a little business. So, the guys in Poland are extremely busy right now, consumed with launching these new wheels. I mean, we know how to build these wheels. We've built them before. We've built them in Germany, so they're new to the guys in Poland, so it's not.

Majdi Abulaban: Is that what we're going to see in the second half? We're going to start to see that.

Majdi Abulaban: Starting on the left of the slide, we will award a record, 1.7 billion wheel program with our long-standing premium customer Volvo on a mid-size crossover platform. This program includes our premium aerodynamic and lightweight Technology. It's valued at about $100 billion and it's expected to launch in the fourth quarter of 2045. Our team is very proud of this achievement with Volvo. We look forward to our winning relationship with them.

Majdi Abulaban: Yeah, the wheels, the wheels are starting to launches are ongoing right Okay. Okay.

Unknown Executive: Now the wheels are starting to, the launches are ongoing right now. Unknown Executive, Mehmet Dere, Superior Industries International Inc., Mehmet, 23 to 25 million.

Mike: Now the wheels, the wheels are starting to, the launches are ongoing right now, very heavy right now. Okay.

Majdi Abulaban: So the guys in Poland are extremely busy right now consumed with launching these new wheels. I mean, we know how to build these wheels. We've built them before, but we're going on the journey. Unknown to the guys in Poland, so it's not rated. Unknown Executive, Mehmet Dere, Tom McGill, Superior Industries International Inc., and I, you know, in fairness, it'll take them a little while probably to get their arms around some of the processes.

Mike: atom

Mike: or

Speaker Change: So the guys in Poland are extremely busy right now, consumed with launching these new wheels. I mean, we know how to build these wheels. We've built them before, but we're building the journey.

Majdi Abulaban: Now on the right, on the right side of this slide, we have received an airing in research and development from others, a technology leader in the automotive space. This is a significant issue and positions us as a top-ranked supplier with this major OEM for airdition. The slackings, the strength of our portfolio, as well as our industry leading our DKB tools. We're very grateful for this recognition from others. Again, this underscores our momentum with European customers as they recognize the strength of our recently transformed footprint, our leadership in technology and our long-standing customer relationships.

Majdi Abulaban: The code is a brand new, brand new launch, but there is some, it does require the retention.

Speaker Change: Unknown to the guys in Poland, so it's not, it is.

Mike: What I call this a brand new launch, but there is some, it does require the retention. So, we expect to have all of those launches done by the end of the third quarter.

Majdi Abulaban: So, we would expect to have all those launches done by the end of the third quarter. And, you know, in fairness, it'll take them a little while, probably, to get their arms around some of the process. So, you know, all the wheels will be manufactured in Poland by the fourth quarter, and this step changed the 25 to 23 to 25 million annually. We'll present itself for a full year, 2025. We won't have all that. Right. Okay.

Speaker Change: And I, you know, in fairness, it'll take them a little while probably to get their arms around some of the processes. So, you know, all the wheels will be manufactured in Poland by the fourth quarter. And this step change, the 25,

Majdi Abulaban: So you know, all the wheels will be manufactured in Poland by the fourth quarter, and this step change of 25, 23 to 25 million annually will present itself for the full year 2025. We won't have a full test run of it.

Mike: $23 to $25 million annually will present itself for the full year 2025.

Michael Ward: Okay, and just lastly, is there any implication with the notes coming current on the balance sheet, or is that just all part of the negotiation, which sounds like it's pretty close to getting resolved?

Speaker Change: Right, okay and just just lastly is there any implication with the notes coming current on the balance sheet or is that just all part of the negotiation which sounds like it's pretty close to getting resolved?

Majdi Abulaban: And just lastly, is there any implication with the notes coming current on the balance sheet, or is that just all part of the negotiation, which sounds like it's pretty close to getting resolved? Yeah, I, the notes being current on the balance sheet and not affected the discussions. Right.

Tim Trenary: Yeah, I the notes being current on the downsheet are not affected by this discussion. Right. Thank you.

Speaker Change: Yeah, the notes being current on the downsheet have not affected the discussions.

Michael Ward: Great. Thank you very much, everyone.

Gary Prestopino: Thank you very much, everyone. We will take our next question from Gary Prestopino, Barrington Research. Your line is open.

Mike: Great. Thank you very much, everyone.

Speaker Change: Thanks, buddy.

Operator: We will take our next question from Gary Prestopino, Barrington Research. Your line is open, please go ahead.

Speaker Change: We will take our next question from Gary Prestopino, Barrington Research. Your line is open. Please go ahead.

Gary Prestopino: Please go ahead. Good morning, Matt.

Gary Prestopino: Good morning, Majdi. I have several questions here. First of all, on the pricing that you've negotiated with the OEMs. Do these negotiations in terms of how you're structuring, I guess, your contracts or whatever, are they going to be tied to some kind of inflation metric that if prices change again going forward in terms of whatever inputs you're putting in there, you automatically get an escalation, or do you have to go back and renegotiate the contract? So, Gary, when you think about it,

Gary Prestopino: Several questions here.

Gary Prestopino: Good morning, Matt. Good morning.

Gary Prestopino: First of all, on the pricing that you've negotiated with the OEMs. Do these negotiations, in terms of how you're structuring, I guess, your contracts or whatever, are they going to be tied to some kind of inflation metric that, if prices change again going forward, in terms of whatever inputs you're putting in there? That you automatically get an escalation, or do you have to go back and renegotiate the contract?

Gary Prestopino: Several questions here. First of all,

Gary Prestopino: on the pricing that you've negotiated with the OEMs.

Gary Prestopino: These negotiations, in terms of how you're structuring, I guess, your contracts or whatever, are they going to be tied to some kind of... inflation metric that if prices change again going forward in terms of whatever inputs you're putting in there, do you automatically get an escalation, or do you have to go back and renegotiate the contract?

Majdi Abulaban: Turning on to slide 7 to further highlight our current operating environment. The industry continues to face a complex landscape shaped by ongoing volume volatility and key customer shutdowns, high angular inventories, unfavorable production mix and increased inflation in Europe. While industry recovery versus pre-coded level continues, we are seeing a slowdown. Industry production in our two regions declined 3% while production on our key customers declined 5%. That said, production remains below COVID levels.

Gary Prestopino: Do these negotiations, in terms of how you're structuring, I guess, your contracts or whatever, are they going to be tied to some kind of...

Speaker Change: inflation metric that if

Speaker Change: prices change again going forward in terms of whatever inputs you're putting in there that you automatically get an escalation or do you have to go back and renegotiate the contract?

Majdi Abulaban: So Gary, when you think of pricing and price transfer as customers, two elements, right. You're very well aware of the aluminum contractual relationship, aluminum transfer costs. That's an automatic. You know that everything else we have negotiated is really for mostly for labor costs and other inflationary costs in manufacturing. So those are permanent. There are some price increases, but I'll see less than 20% of the price increases negotiated on related to energy index. So, for the most part, the price increases that have built in our plan and actually you see them in Q2, Gary. that have been hard ability to get price in the order, enables us to offset some of these volumes you've seen in the industry.

Majdi Abulaban: So Gary, when you think of pricing and price transfer as customers, two elements, right? You're very well aware of the aluminum contractual relationship, aluminum pass for a cost.

Speaker Change: So, Gary, when you think of pricing and price transfer as customers, two elements, right? You're very well aware of the aluminum contractual relationship, aluminum pass through a cost.

Majdi Abulaban: Unknown Executive, Mehmet Dere, Tom McGill, Superior Industries International Inc., Unknown, I'll see less than 20% of the price is related to the energy industry. So for the most part, the price increases that are built in our plan, and actually you see them in Q2, Gary, I think. , Unknown Executive, Mehmet Dere, Tom McGill, Superior Industries International Inc. So the direct answer is, for the most part, these prices have increased; these prices are permanent and not one-offs and are not indexed for now.

Majdi Abulaban: We expect in the long-term continued industry recovery supported by clean-top demand tailors. The occasion point here is that the US fleet age remains at an all-time high. Turning on to slide 8, which highlights superior growth compared to the broader industry in the second quarter. Global industry production as well as production among key customers both declined while we deliver 1% increased value added sales adjusted for foreign exchange and deconsolidation. Regionally, North American volume production increased but was offset by software production among European audience.

Gary Prestopino: That's an automatic, you know that.

Gary Prestopino: Now everything else we have negotiated is...

Speaker Change: for labor costs and other inflationary costs in manufacturing.

Speaker Change: so those are who are perminates there are some some price increases but i

Majdi Abulaban: I'll see a less than 20% of the price increase. So, for the most part, the price increases that are built into our plan, and actually you see them in Q2, Gary, I think. So the direct answer is, for the most part, these prices have increased.

Speaker Change: I'll see less than 20% of the price increase.

Speaker Change: Unknown Administrator, Related to Energy Index.

Gary Prestopino: So, for the most part, the price increases that have built in our plan, and actually you see them in Q2, Gary, and we think that our ability to get price in the quarter enables us to offset some of these volumes we've seen in the industry.

Majdi Abulaban: So the direct answer is, for the most part, these price increases are permanent and not one-offs and not indexed for now. So they're permanent but not indexed? Most of them, yes.

Majdi Abulaban: Now that said, both our North American and European operations grew ahead of the respective market in the quarter. Further, we have strategically proved parts of our portfolio and exited under performing programs. We are seeing the benefit of these actions in our results.

Gary Prestopino: So, the direct answer is, for the most part, these price increases...

Gary Prestopino: Permanent and non-one-offs and non-indexed for now.

Gary Prestopino: So they're permanent.

Majdi Abulaban: A small element, yes. A small element. This whole element, Gary, primarily in Europe is indexed to energy, and that's because energy costs, gas, and electricity in Poland are volatile in North America.

Gary Prestopino: but not indexed.

Majdi Abulaban: A small element, a small element, Gary, primarily in Europe, is indexed to energy and that's because the energy costs, gas and electricity and fuel in our world tiles in North America. Okay.

Gary Prestopino: Most of them, yes. A small element...

Majdi Abulaban: Overall, we are performing well in a challenging environment. Moving on to slide 9, which highlights the continued positioning of our portfolio of premium technologies and how they accelerated adoption of these products in driving growth. The last time the slide highlights some exciting launches in the second quarter. The right side of the slide highlights a storm conference with long-term content growth per wheel of 34% since 2019. We expect these macro trends driving the wheel space to continue well into the future.

Gary Prestopino: A small element, Gary, primarily in Europe is indexed to energy, and that's because the energy costs, gas and electricity in Poland are more volatile than North America.

Gary Prestopino: And then let's jump to the win with Volvo. So that's obviously the data you share with us; that's over the life of the program. And so, how long does that program run? All of these programs, Gary, are on between three or five years, right? So this oil is a brand new flat, I mean, three localization out of China, it's a mid-size SUV. It is actually going to be manufactured, not too far from our clients in Poland. Okay. And it's a, this is EV because I think Volvo said they're going entirely EV eventually. Is this an EV?

Gary Prestopino: And then let's jump to the win with Volvo, obviously, the data you share with us that's over the life of the program. And so how long did that program run?

Speaker Change: Okay and then let's let's jump to the win with Volvo. That obviously the data you share with us that's over the life of the program.

Speaker Change: and so how did that program run?

Majdi Abulaban: I know all of these programs carry on for between three years, right? So this one is a brand new flag. I mean, you know, it's really localization out of China. It's a midsize SUV. It's actually going to be manufactured not too far from our plant in Poland.

Speaker Change: All of these programs carry on between three to five years, right? So this one is a brand new platform.

Majdi Abulaban: In closing, I am grateful to the superior team for the position we have created for our company. We have refocused our portfolio and when we transform our manufacturing footprint to the investing class, competitively advantage local footprint, and we are strengthening our balance sheet as we retire our growth. Through our standing execution of our team, superior now more than ever is position for sustainable, profitable growth.

Speaker Change: I mean, you know, it's really localization out of China. It's a mid-size.

Speaker Change: It's actually going to be manufactured not too far from our plants in Poland.

Majdi Abulaban: in Poland

Gary Prestopino: Okay. And it's a, um, is this an EV? Because I think Bo said they're going entirely electric eventually. Is this an EV?

Speaker Change: Okay, and it's a, is this an EV? Because I think Bo said they're going entirely EV eventually. Is this an EV?

Majdi Abulaban: I'm sorry, I didn't hear you. Yeah, that's correct, Gary; you didn't need EV. Okay.

Speaker Change: Thanks for having us.

Majdi Abulaban: Yeah, that's correct, Gary. Okay.

Speaker Change: I'm sorry, I didn't hear you.

Gary Prestopino: Okay.

Speaker Change: Yeah, that's correct, Gary. It is an EEP.

Gary Prestopino: And then, could you, in terms of acquiring these notes... which is great. You've made progress in, but could you give us conceptually? What the retirement is going to be like. I mean, you're going to replace the notes with something, I guess. I'm trying to get a kind of feel for how this is going to work and, you know, is there going to be a step change if you have to replace them with some kind of another debt structure or whatever? What's going to be the step change in interest rates on the new debt?

Gary Prestopino: And then could you, in terms of retiring these notes, which is great, you've made the progress in, but could you give us conceptually what the retirement is going to be? I mean, you're going to replace the notes with something, I guess. I'm trying to get a, get a feel for how this is going to work. And, you know, is there going to be a step change? If you have to replace them with some kind of another debt structure, whatever, what's going to be the step change up in interest, the interest rate on the new debt?

Unknown Executive: Now I will turn up all of our team to provide more detail on our financial results. Thank you, Ma'am.

Speaker Change: Okay, okay. And then could you, in terms of retiring these notes,

Speaker Change: Which is great you've made the progress in but could you give us conceptually

Unknown Executive: On page 11, your transformation update. A recall that on August 31st last year, we announced an important strategic action. The continuation of our local for local manufacturing footprint optimization and the transformation of the release, 6% of our manufacturing footprint to a more competitive cost structure. More specifically, our production facility and for an old journey, otherwise known as superior industries production, Germany, or SPG, enter productive shield proceedings in German court-administered reorganization process.

Speaker Change: what the retirement is going to be. I mean, you're going to replace the notes with something, I guess. I'm trying to get a kind of get a feel for.

Speaker Change: How this is going to work and, you know, is there going to be a step change if you have to replace them with some kind of another debt structure or whatever? What's going to be the step change up in interest rate on the new debt?

Majdi Abulaban: So, Gary, we're not done with this transaction yet, as we said, we'll characterize it as being an advanced discussions, which we are. So it's, I'm not everybody, frankly, until we conclude these discussions and complete this refinancing to discuss the construct of the capital structure. Okay.

Tim Trenary: Gary, we're not done with this transaction yet. As we said, we characterize it as being in advanced discussions, which we are. So it's not a liberty, frankly, until we conclude these discussions and complete this refinancing to discuss the structure of the capital. Okay. Thank you.

Majdi Abulaban: Gary, we're not done with this transaction yet. As we said, we characterize it as being in advanced discussions, which we are. So it's, I'm not at liberty, frankly, until we conclude these discussions and complete this refinancing to discuss the structure of the capital.

Speaker Change: a dairy

Majdi Abulaban: We're not done with this transaction yet.

Speaker Change: as we've saidimply characterizing this vated advan discussions which we are so 's i'm not as liberty frankly until we conclude these discussions and complete this refinancing to discuss the construct of the capital structure

Unknown Executive: Generally, except in accounting principles required an SPG statement of operations and balance sheet, would anyone to commence with the proceedings be consolidated from superior industries financial statements. Accordingly, the income statement of SPG is excluded from the second quarter of 2024 financial results, as is the balance sheet of SPG in court around. The deconsolidation affects the year-over-year counts more specifically in the second quarter of 2023. 245,000 wheels were sold by SPG. The associated net sales and value added sales were 31 million and 20 million respectively.

Gary Prestopino: Okay, thank you.

Mehmet Dere: Thank you. We will take our next question from Their Dutchman; your line is open, please call it.

Operator: We will take our next question from Mehmet Dere, Dutch Bank. Your line is open, please go ahead.

Speaker Change: We will take our next question from Mehmet Dere, Dutch Bank. Your line is open, please go ahead.

Mehmet Dere: Hey guys, can you hear me well? Yes. Hello. Hey. Yeah, fantastic.

Mehmet Dere: Hey guys, can you hear me well? Yes. Can I?

Speaker Change: heyguys going to hear well

Majdi Abulaban: Hey, Hey. Good to see you. Yeah, fantastic.

Gary Prestopino: that's thisically line

Mehmet Dere: I have a very simple question, actually, again, on the redemption of the bonds. Can you give us the main reason behind the delay in the redemption or the refinancing? That's the first question. The second question is: You started talking about the redemption of the bond, and then after that, you said a few seconds ago about refinancing. The new form of this new debt structure: are there going to be new bonds involved, or are you going to refinance?

Speaker Change: ay yeah knowbody know i' just

Mehmet Dere: I have a very simple question actually, again, on the redemption of the bonds.

Mehmet Dere: Yeah, fantastic. I have a very simple question, actually, again, on the redemption of the bonds. Can you give us the main reason behind the delay for the redemption or the refinancing?

Mehmet Dere: Can you give us the main reason behind the delay for the redemption or the refinancing? That's the first question.

Unknown Executive: Year-over-year, second quarter, 2024 financial result and therefore adjusted to capital expenditures and working capital benefited from the closure of the facility. The adjusted even down was 1 million more capital expenditures and living capital over 1 million to 22 million less respectively. The size and step change benefit of the transfer of wheels from Germany to Poland at 23 Capital Experiencers should be approximately 10 million less per year. Superior's European variable contribution margin should approach that superior North America. We select the cost of complete the wheel transfer to P20 to 35 million.

Gary Prestopino: That's the first question. The second question is:

Mehmet Dere: And the second question is... is you start talking about the redemption of the bonds. And then, after that, you said a few seconds ago about reconnecting.

Speaker Change: That's the first question. The second question is...

Gary Prestopino: You started talking about the redemption of the bond and then after that you said a few seconds ago about refinancing.

Majdi Abulaban: The new form of this new depth structure, are they going to be new bonds involved or are you going to refinance this with the loan or can you give us a broad guidance for this? Thank you. Yeah, Mehmet, as I just described, we're just not prepared to make any comments with respect to the new capital structure until we've completed the activities in the refinancing. Okay, great.

Speaker Change: The new form of this, of the new debt structure, are there going to be new bonds involved, or are you going to refinance this with a loan, or can you give us a broad guidance for this? Thank you.

Majdi Abulaban: Yeah, Mehmet, as I just described, we're just not prepared to make any comments with respect to this new capital structure until we've completed

Tim Trenary: Yeah, as I just described, we're just not prepared to make any comments with respect to this new capital structure until we've completed the refinance.

Majdi Abulaban: Yeah, Mehmet, as I just described, we're just not prepared to make any comments with respect to this new capital structure until we've completed the activities and the refinancing.

Unknown Executive: On the line, regarding the closure of SVG and transferred the wheels to Polo, the company successfully executed on a cost-effective facility closure in a high-cost country that results in a significant increase in unloved and pretty cash flow because of the reduction in capital employee and higher earnings.

Mehmet Dere: Okay, great. And in terms of timing, you said you would come out with more details in a couple of weeks or in a few weeks. Can you give us a bit more of, you know, more guidance here, more color? Is it going to be more in September or October, like?

Majdi Abulaban: And in terms of timing, we said you will come out with more details in a couple of a few weeks. Can you give us a bit more guidance here, more color? Is this going to be more in September or October like? Again, I'm going to suggest that we wait to complete the discussions, and then we can discuss the capital structure. Okay, all right, thank you very much.

Mehmet: Okay, great. And in terms of timing, you said you will come out with more details in a couple of weeks or a few weeks. Can you give us a bit more of, you know, more guidance here, more color? Is it going to be more in September , October-like?

Majdi Abulaban: Again, again, I'm going to suggest that we wait to complete the discussions, and then we can discuss the capital structure.

Tim Trenary: Again, again, I'm going to suggest that we wait to complete the discussions, and then we can discuss the catalyst.

Unknown Executive: Let's look at the quarter on page 12, second quarter, 2014 for financial summary. That sales decreased to 319 million per quarter compared to 373 million in the prior year period. The normalization of the cost of aluminum and deconsolidation of SVG accounts for slightly more than all of this 54 million decline or 55 million. Value-ad sales decreased to 1.8 million per quarter compared to 200 million for the prior year period. The deconsolidation of SVG in poor exchange accounts for 19 million of this 20 million decline. Adjusted EBITDA was 40 million. The associated margin expressed as 8% of value-ad sales, 22% for the quarter, net loss was 11 million.

Majdi Abulaban: Again, again, I'm going to, I'm going to suggest that we wait to complete the discussions and then we can discuss the capital structure.

Gary Prestopino: Okay, all right. Thank you very much.

Mehmet Dere: Okay, all right. Thank you very much. As a reminder,

Gary Prestopino: Okay, all right, thank you very much.

Unknown Executive: As a reminder, if you like to ask a question, please press star one on your telephone keypad now. We'll pause for just a quick moment to allow everyone an opportunity to signal for questions.

Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now. We'll pause for just a quick moment to allow everyone an opportunity to signal for questions. There are no further questions on the line. I will now hand you back to Majdi Abulaban for closing remarks.

Operator: as the reminder if you like to ask a question please press star one on your telephone key at now we will possibleuse for just a quick moment to allow and running opportunity to signal for questions

Unknown Executive: There are no further questions on the line.

Operator: that

Majdi Abulaban: I will now hand you back to Majiti Abulaban for closing remarks. Thank you, thank you, Alan, and thank you, everyone, for joining our call to the superior team. Thank you. Everything that you have done has been extremely difficult and closely impossible. There is also a really a product of your unwavering commitment. So thank you, and thank you everyone for joining.

Speaker Change: there are no further questions on the line i will not hand you back to marjin abulaban for closing remarks

Majdi Abulaban: Thank you. Thank you, Alan. And thank you, everyone, for joining our call to the superior team. Thank you. Everything that you've done, everything that you have done has been extremely difficult and close to impossible. That is also a product of your unwavering commitment. So thank you, and thank everyone for joining. Have a great day.

Majdi Abulaban: and if you was thank you allen and thank you everyone for joining our call

Majdi Abulaban: to the to the superior team thank you everything that done everything that you have done has been extremely difficult and close impossible that is also really a product of you unwavery commitment

Majdi Abulaban: So thank you, and thanks, everyone, for joining us. Have a great day.

Majdi Abulaban: Have a great day.

Majdi Abulaban: So thank you, and thanks everyone for joining. Have a great day.

Unknown Executive: Thank you for joining today's call. You may now disconnect. Thank you.

Speaker Change: thank you for joining today's call you may now disconnect

Unknown Executive: And to the far right, lower performance primarily because the second quarter of last year benefited for non-recurring recovery cost inflation on the primary reasons adjusted EBITDA declined. Importantly, the company has substantially completed the pivot to incorporating into yield pricing amounts necessary to offset in large part the impact on the cost structure of extraordinary cost inflation and other factors. The impact of four exchange and battle timing on the quarter compared to the prior year period was in material.

Unknown Executive: In overview of the company's second quarter, 2024, unlovered free cash flow is on page 15. Cash used by operating activities was 8 million for the quarter compared to 28 million in the prior year period. Lower investor and working capital in the second quarter of this year partially offset by lower earnings in the quarter on the primary reasons for the decrease in cash used by operating.

Unknown Executive: [inaudible] The company opted to pick the status to maximize cash. Unlearned free cash roll for the second quarter of 2024 was tune on. An increase of 19.9 compared to the prior group period, primarily because of the improvement in cash used by operating activities.

Unknown Executive: No review of the company's capital structure as of June 30, 2024, maybe found on page 16. The cash on the balance sheet at quarter end was $172 million. Funded debt to $127 million at quarter end and net debt was $425 million.

Unknown Executive: The leveraging of balance sheet and their foreign lover free cash roll remains the top priority.

Unknown Executive: The company's debt maturity profile at the beginning of the quarter is on page 17.

Unknown Executive: As Massey know it, we are in advanced discussions with Lenders to retire the senior unsecured belts and come in ways. Revolving quite a few of you is undrawn at quarter end and we are in compliance with all loan companies.

Unknown Executive: Primarily because capital expenditures are expected to be lower, offsetting the lower adjusted EBITDA. The outlook for capital expenditures is now 40 million. 10 million lower as the company continues to reduce the capital of density while strategically investing into the desert. We mild tax expense of approximately 30 million per year.

Unknown Executive: In closing, our teams have done a great job executing our European Transformation and keeping us on track to achieve our operational and financial priorities.

Unknown Executive: This concludes our prepared remarks, Mikey and I are happy to take questions. Thank you.

Unknown Executive: If you like to ask a question or make a contribution on today's call, please press thumbs up on your telephone keypad. We will be advised when to ask your questions.

Michael Watt: We will take our first question from Michael Watt, Freedom Capital. Your line is open. Please go ahead.

Majdi Abulaban: Good morning, everyone. I think you mentioned something and I didn't quite catch it. Is there a change in the pricing with vehicle manufacturers? I was really referring to the negotiations might for price increases. We have called and talked about it last year and we shared with you our success. This year we pivoted to permanent price increases on our wheels with customers or recovery inflation. So the answer is yes, I'm referring to negotiations for price increase, and I will tell you that our discussions with customers have been very productive and we have been successful in reflecting now, I would say 90% of the way we are reflecting inflation in our price to agreements with all customers.

Majdi Abulaban: And the deal with Volvo, is that the sign of more to come with some of these, the luxury based manufacturers in Europe giving you a new cost structure, is that what that is? Absolutely, I think the one, you know, Volvo, with German customers and with Volvo and JLR, we were always been in a strong position, this is an excellent sign, a combination of easy, long-standing relationship, and well done, our competitive position, by far, because of our competitive position, I also share with you, in representation, new developments with Audi, you know, the A technology rating is the highest, with Audi, and really indicative of what's to come, we have been in dialogue with customers, advanced dialogue actually, to continue to grow the business and leverage what we have from a portfolio in a standpoint, and a footprint standpoint, you may have heard me refer to this, the majority of the capacity in Europe for wheels resides in either the three countries, Germany, Austria, Spain, and Europe, Italy, so it's really all about the high cost from a manufacturing standpoint, at least for wheels, and we're now 100% in Poland, customers know it, and you know, I was telling you the transformation we executed on in a very short time, you know, closing a plant, major operation, moving into Poland, without any disruption, you know, we just came out of the meeting with Audi a couple days ago, they were basically through the execution and quote unquote, they said it's the largest insolvency that's seen in recent times, and they've not seen one that has been executed, flawlessly of this one, so this actually elevated, so a competitive position is elevated, our position might be customers, and the way they seem, I definitely think it's going to come back. That's what it sounds like.

Majdi Abulaban: Tim, do you have the unit shipment data separated between North America and Europe? I do have it, I don't have it with me right now, it is in total like on one of the pages. I saw the total number, I was just curious by region. I don't have it by region. Okay, will it be in the queue or leave it is, yes. Okay, and when you talk about it. Okay, when you talk about the margins, it sounds like the margin is in the second half in Europe, we'll be getting closer to North America, and that's a substantial change.

Majdi Abulaban: You know, what would it look like in the first half, and what type of, is, we're getting the annual rate of the 23 to 25 million in savings, is that what we're going to see in the second half, we're going to start to see that pretty Now, the wheels are starting to, the launches are going right now. Very heavy right now, we've started a little business. So, the guys in Poland are extremely busy right now, consumed with launching these new wheels.

Majdi Abulaban: I mean, we know how to build these wheels. We've built them before. We've built them in Germany, so they're new to the guys in Poland, so it's not. The code is a brand new, brand new launch, but there is some, it does require the retention. So, we would expect to have all those launches done by the end of the third quarter. And, you know, in fairness, it'll take them a little while probably to get their arms around some of the process.

Majdi Abulaban: So, you know, all the wheels will be manufactured in Poland by the fourth quarter, and this step changed the 25 to 23 to 25 million annually. We'll present itself for a full year, 2025. We won't have all that. Right. Okay.

Unknown Executive: Thank you very much, everyone.

Gary Prestopino: We will take our next question from Gary Prestopino, Barrington Research. Your line is open. Please go ahead.

Majdi Abulaban: Good morning, Matt. Several questions here. First of all, on the pricing that you've negotiated with the OEMs. Do these negotiations in terms of how you're structuring, I guess, your contracts or whatever, are they going to be tied to some kind of inflation metric that if prices change again, going forward in terms of whatever inputs you're putting in there. That you automatically get an escalation, or do you have to go back and renegotiate the contract?

Majdi Abulaban: So for the most part, the price increases that have built in our plan and actually you see them in Q2, Gary, that have been hard ability to get price in the order, enables us to offset some of these volumes you've seen in the industry. So the direct answer is, for the most part, these price increases, are permanent and not one-offs and not index for now. So they're permanent but not indexed? Most of them, yes. A small element, a small element, Gary, primarily in Europe, is indexed to energy and that's because the energy costs, gas and electricity and fuel in our world tiles in North America. Okay.

Majdi Abulaban: And then let's jump to the win with Volvo. So that's obviously the data you share with us, that's over the life of the program. And so how long does that program run? All of these programs, Gary, on between three or five years, right? So this oil is a brand new flat, I mean, three localization out of China, it's a mid-size SUV. It actually going to be manufactured, not too far from our clients in Poland. Okay. And it's a, this is EV because I think Volvo said they're going entirely EV eventually, is this an EV? I'm sorry, I didn't hear you. Yeah, that's correct, Gary, you didn't need EV. Okay.

Majdi Abulaban: And then could you, in terms of retiring these notes, which is great, you've made the progress in, but could you give us conceptually what the retirement is going to be? I mean, you're going to replace the notes with something, I guess. I'm trying to get a, get a feel for how this is going to work. And, you know, is there going to be a step change? If you have to replace them with some kind of another debt structure, whatever, what's going to be the step change up and interest the interest rate on the new debt?

Gary Prestopino: Okay. Thank you.

Mehmet Dere: We will take our next question from their Dutchman, your line is open, please call it. Hey guys, can you hear me well? Yes. Hello. Hey. Yeah, fantastic. I have a very simple question actually, again, on the, on the redemption of the bonds. Can you give us the main reason behind the delay for the redemption or the refinancing? That's the first question. And the second question is.., is you start talking about the redemption of the bonds.

Mehmet Dere: And then after that you said a few seconds ago about reconnecting. The new form of this new depth structure, are they going to be new bonds involved or are you going to refinance this with the loan or can you give us a broad guidance for this? Thank you.

Majdi Abulaban: Yeah, Mehmet, as I just described, we're just not prepared to make any comments with respect to the new capital structure until we've completed the activities in the refinancing. Okay, great. And in terms of timing, we said you will come out with more details in a couple of a few weeks, can you give us a bit more guidance here, more color? Is this going to be more in September or October like? Again, I'm going to, I'm going to suggest that we wait to complete the discussions and then we can discuss the capital structure. Okay, all right, thank you very much.

Unknown Executive: As a reminder, if you like to ask a question, please press star one on your telephone keypad now, we'll pause for just a quick moment to allow everyone an opportunity to signal for questions. There are no further questions on the line.

Unknown Executive: Have a great day. Thank you for joining today's call.

Unknown Executive: You may now disconnect.

Unknown Executive: Thank you.

Q2 2024 Superior Industries International Inc Earnings Call

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