• Net Sales: Nearly flat at $322 million compared to $323 million in the prior year period.
• Value Added Sales: Decreased to $171 million from $176 million in the prior year period.
• Adjusted EBITDA: Increased to $41 million with a margin of 24% compared to 22% in the prior year period.
• Net Loss: $25 million, an improvement driven by the deconsolidation loss recorded in Q3 2023.
• Total Debt: Reduced by $117 million, with new debt maturities extended to 2028.
• Unlevered Free Cash Flow: $9 million, a decrease of $3 million compared to the prior year period.
• Capital Expenditures: $6 million compared to $8 million in the prior year period.
• Full Year 2024 Net Sales Outlook: Revised to $1.25 to $1.33 billion.
• Full Year 2024 Adjusted EBITDA Outlook: Revised to $146 to $154 million.
• Full Year 2024 Unlevered Free Cash Flow Outlook: Revised to $50 to $80 million.

• Warning! GuruFocus has detected 6 Warning Signs with SUP.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Superior Industries International Inc (NYSE:SUP) achieved a major milestone by refinancing its debt, attracting $520 million in new capital and extending debt maturities to 2028.
• The company reduced its total debt by $117 million, significantly strengthening its balance sheet and competitive standing.
• Adjusted EBITDA increased by 6% year over year, with margins expanding by 200 basis points sequentially and year over year.
• Superior Industries International Inc (NYSE:SUP) has successfully negotiated recurring price increases with customers to recover inflationary costs, which are now reflected in more contracts going into 2025.
• The company has made progress in its European transformation, achieving sustained margin improvements despite lower production volumes.

Negative Points

• Value-added sales, adjusted for foreign exchange and deconsolidations, declined 2% year over year, underperforming industry production, which was down 6%.
• The company is facing a challenging demand environment, with industry production expected to decline by 6% in the second half of the year.
• Superior Industries International Inc (NYSE:SUP) is lowering its full-year 2024 financial guidance due to lower anticipated production volumes and challenging OEM production environments.
• The company is targeting a 15% reduction in G&A and manufacturing overhead, resulting in a restructuring charge of approximately $9.5 million in the fourth quarter.
• Despite improvements, the company has not yet reached full utilization of its Polish operations, which is necessary to achieve its $190 million adjusted EBITDA run rate.

Q & A Highlights

Q: Could you elaborate on the production challenges in North America and Europe? Are these issues more prevalent in one region over the other? A: The production challenges are split between both regions. North America saw a year-over-year decline of 5%, while Europe was down 6.5%. Despite these declines, our North American business has performed well, and we are 400 basis points ahead of the market when combining both regions. Looking ahead, the fourth quarter is expected to be challenging, with Europe projected to decline by 11% and North America by 3%.

Q: Can you provide details on the restructuring efforts and the expected financial impact? A: The restructuring is global, targeting a 15% reduction in G&A and manufacturing overhead, expected to deliver $10 to $15 million in run-rate savings by early 2025. This is in addition to the European transformation benefits, which will be more fully realized in 2025.

Q: What is the expected impact of the refinancing on your financials, and what are the terms of the new loan? A: The refinancing has strengthened our balance sheet, reducing total debt by $117 million and extending maturities to 2028. The new term loan has an interest rate of SOFR plus 750 basis points, with an effective rate of 12.6% in Q3. We will begin $1.3 million quarterly principal payments starting in Q4.

Q: How do you see the margin profile evolving with the recent actions taken? A: We expect to maintain and potentially improve our margin profile, aiming for margins north of 24% as we move into 2025. The restructuring and operational improvements should support this, although it depends on volume assumptions.

Q: Can you comment on the working capital situation and its expected resolution? A: The increase in working capital is primarily due to timing, with significant revenue in September driving up receivables. We expect this to unwind in Q4, although we are managing liquidity requirements under the new term loan, which may affect cash flow.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.