Executive Summary

Q1 2024 was a transitional quarter: net sales declined to $316.3M and adjusted EBITDA fell to $30.8M (18% of Value-Added Sales) as European restructuring and deconsolidation effects weighed on results; management affirmed FY24 guidance and reiterated exit run-rate of ~$190M adjusted EBITDA tied to Poland ramp .
Sequential profitability improved: adjusted EBITDA margin expanded by >400 bps vs Q4 2023 (18% vs 14%) on similar volume/value-added sales, reflecting early benefits from the transformation and cost mix .
Cash generation slowed: CFO was $3.5M and unlevered FCF $7.6M, impacted by higher net loss (including $18M non-cash tax restructuring) and working capital movements; net debt was $439.1M with ample cash of $191.1M .
Guidance maintained: FY24 outlook unchanged at net sales $1.38–$1.48B, VAS $720–$770M, adjusted EBITDA $155–$175M, unlevered FCF $110–$130M, capex ~$50M; management continues to expect exit-2024 adjusted EBITDA run-rate ~$190M as Poland fully absorbs transferred volumes .
Stock narrative catalyst: completion of European manufacturing transfer (Germany → Poland), narrowing EU/N.A. margin gap, and capital structure progress (refinancing planning underway), with second-half uplift supported by OEM production normalization and customer recoveries .

What Went Well and What Went Wrong

What Went Well

Completed exit of high-cost German facility and relocated production to Poland without delivery disruptions; management positions this as “one-of-a-kind” execution enabling a 100% low-cost local footprint and structurally higher profitability .
Sequential margin improvement: adjusted EBITDA margin expanded >400 bps QoQ to 18%, despite similar volume/value-added sales to Q4; management expects further margin uplift in H2 2024 from Poland cost absorption and SG&A consolidation .
Guidance affirmed with stronger exit run-rate: FY24 guide maintained, and exit-2024 adjusted EBITDA expected near ~$190M, driven by the Poland ramp and margin convergence in Europe .

Quote: “We expect Superior to exit 2024 as a business generating approximately $190 million of Adjusted EBITDA on unit sales of just over 15 million” — Majdi Abulaban, CEO .

What Went Wrong

Top-line and profitability pressure YoY: net sales fell to $316.3M (from $381.0M), adjusted EBITDA to $30.8M (from $45.5M), and net loss widened to $32.7M (from $4.0M), driven by lower aluminum pass-throughs, lower cost inflation recoveries, and lower unit shipments .
Cash flow compression: CFO dropped to $3.5M (from $38.7M) and free cash flow was negative (-$7.5M) due to higher net loss (including non-cash taxes), weaker payables, and other working capital shifts .
Non-cash tax restructuring charge: income tax provision rose to $16.6M (vs $3.3M) on an $18M non-cash tax restructuring, further depressing GAAP earnings in Q1 .

Financial Results

Income Statement and EBITDA

Metric ($MM, unless noted)	Q1 2023	Q4 2023	Q1 2024
Net Sales	$381.0	$308.6	$316.3
Value-Added Sales	$202.7	$168.7	$172.2
Gross Profit	$34.6	$14.8	$21.1
SG&A	$19.4	$34.3	$20.8
Income From Operations	$15.1	$(19.4)	$0.3
Net (Loss) Income	$(4.0)	$(2.4)	$(32.7)
Diluted EPS ($)	$(0.49)	$(0.44)	$(1.52)
Adjusted EBITDA	$45.5	$23.1	$30.8
Adjusted EBITDA Margin (% of VAS)	22%	14%	18%

Notes: Adjusted EBITDA and VAS are non-GAAP; see definitions and reconciliations in exhibits .

Cash Flow and Balance Sheet

Metric ($MM)	Q1 2023	Q4 2023	Q1 2024
Cash Flow Provided by Operating Activities	$38.7	$44.3	$3.5
Capital Expenditures	$(15.6)	$(11.7)	$(6.6)
Free Cash Flow	$16.5	$25.8	$(7.5)
Unlevered Free Cash Flow	$33.9	$50.2	$7.6
Cash and Equivalents (End)	$228.6	$201.6	$191.1
Total/Funded Debt	$649.8 (Total)	$637.5 (Total)	$630.2 (Total)
Net Debt	$421.2	$435.9	$439.1

KPIs

KPI	Q1 2023	Q4 2023	Q1 2024
Wheels Shipped (‘000)	3,858	3,495	3,623
Content per Wheel ($)	$52.54	$47.10	$47.29

Segment Breakdown

Metric ($MM)	Q1 2023	Q4 2023	Q1 2024
Net Sales – North America	$211.6	$179.7	$193.5
Net Sales – Europe	$169.3	$128.9	$122.8
VAS – North America	$105.8	$93.3	$100.7
VAS – Europe	$96.9	$75.4	$71.5

Guidance Changes

Metric	Period	Previous Guidance (Mar 7, 2024)	Current Guidance (May 2, 2024)	Change
Net Sales ($B)	FY 2024	$1.38 – $1.48	$1.38 – $1.48	Maintained
Value-Added Sales ($MM)	FY 2024	$720 – $770	$720 – $770	Maintained
Adjusted EBITDA ($MM)	FY 2024	$155 – $175	$155 – $175	Maintained
Unlevered Free Cash Flow ($MM)	FY 2024	$110 – $130	$110 – $130	Maintained
Capital Expenditures ($MM)	FY 2024	~ $50	~ $50	Maintained
Exit 2024 Adjusted EBITDA Run-rate	Exit 2024	~ $190	~ $190	Maintained
Tax	FY 2024	Modeled effective tax rate ~25–30%	Tax expense ~ $30M; includes $18M non-cash restructuring in Q1	Clarified (quantified expense vs rate)

Earnings Call Themes & Trends

Topic	Q3 2023 (Nov 1, 2023)	Q4 2023 (Mar 7, 2024)	Q1 2024 (May 2, 2024)	Trend
European transformation (Germany → Poland)	Announced SPG protective shield; ~800k wheels to Poland; EUR ~20M annual EBITDA uplift targeted	Deconsolidation: $80M non-cash; SPG out of results; ramp expected into 2024; EU margin +500 bps in H2	Exit of Germany completed; no delivery disruptions; benefit appears in Q2, stabilizes Q3	Execution completed; benefits inflecting H2
Customer recoveries & inflation	Pricing aligned with rising costs; CPW +29% vs 2020; recoveries can be “lumpy”	Q4 2022 had extraordinary recoveries; 2023 saw reduced recoveries; lumpiness expected	Lower recoveries pressured Q1; ongoing dialogues with OEMs to recover labor/energy	Recoveries normalize through H2
OEM production/macro	UAW impacts expected Q4; GM Mexico downtime; EU OEMs down ~1%	Detroit 3 down 7% in Q4; SPG/inefficiencies impacted	EU OEM production declines (Audi -26%); expect H2 pickup; localization tailwind	H1 soft; H2 recovery
Portfolio/technology (larger, lighter, finishes)	CPW +6% YoY; premium >52% of OEM ship; lightweighting growth	19-inch+ >51% of shipments; lightweighting doubling since 2019	Accelerated adoption; content growth narrative reiterated	Sustained mix accretion
Capital structure/refinancing	Swaps lowered cash interest; intent to address notes in 2024	Adviser engaged; aim to refinance notes before current; preferred may be involved	“Proceeding rapidly” on refinancing; prefer sooner rather than later	Active; timing nearer-term
Aftermarket (Europe)	Restocking for winter; strategic shift to distributors outside Germany	Reorganization of aftermarket logistics; EU admin consolidation	Continuing EU reorganization burden early 2024	Normalizing post-transfer

Management Commentary

“Successfully exited our high-cost German operations and relocated production to Poland… no disruptions or impacts on deliveries. This will… provide a significant profitability uplift… 100% low-cost manufacturer.” — CEO, prepared remarks .
“We saw more than 400 basis points sequential margin improvement in adjusted EBITDA on similar volume and value-added sales to Q4 of last year.” — CEO .
“We are affirming our guidance for 2024… we are on track to see significant improvement in margin in the back half of 2024… expect an improved run rate of approximately $190 million in adjusted EBITDA upon exiting 2024.” — CEO .
“Funded debt was $630 million… net debt was $439 million… deleveraging and unlevered free cash flow remain top priorities.” — CFO .
“Refinancing… we would like to get it accomplished sooner rather than later… preferred [equity] could very well be a part of the transaction.” — CEO/CFO, Q&A .

Q&A Highlights

Timing of deconsolidation/benefit: German SPG results are out permanently; revenue and margin benefits from transfer begin in Q2 and stabilize in Q3; high-content wheels shifting to Poland will lift Content per Wheel .
Cost to complete transfer: $20–$35M in cash restructuring/other costs; excluded from adjusted EBITDA but affect cash flow; most spending largely done by Q1 .
OEM production softness and H2 setup: VW Group (Audi -26%) and broader EU softness weighed on Q1; schedules indicate second-half improvement; timing of transition was “fortunate” amid Germany weakness .
Sequential EBITDA trajectory: first half slightly above Q4, ramping in Q3/Q4 as costs roll off and recoveries accrue; exit run-rate ~$190M .
Refinancing process: progressing; aim to complete before notes turn current; preferred equity may be involved; term loan/revolver “pre-wired” to contemplate refinancing .

Estimates Context

Wall Street consensus via S&P Global was unavailable for SUP Q1 2024 due to missing CIQ mapping; therefore, we cannot provide an estimates-based beat/miss assessment at this time. Values would have been retrieved from S&P Global if available.

Key Takeaways for Investors

Transformation inflection: structural cost relief from Germany→Poland is now executed; expect visible margin uplift in H2 with exit-2024 adjusted EBITDA run-rate near ~$190M, providing a credible catalyst path .
Sequential improvement underway: Q1 adjusted EBITDA margin recovered to 18% from 14% in Q4 despite similar volumes; expect continued sequential gains as EU inefficiencies abate .
Content growth supports mix: premium, larger, and lightweight wheels continue to increase CPW over multi-year horizons; temporary distortions from deconsolidation complicate quarter-to-quarter comparisons .
Cash flow to rebound: CFO/FCF compressed in Q1 due to higher net loss and working capital; safety stock unwind and supplier terms normalization should assist through 2024 .
Capital structure watch: refinancing timeline is an ongoing overhang but management is moving proactively; preferred equity changes possible; completing ahead of notes turning current is the stated goal .
OEM production normalization: second-half volumes (Europe & North America) plus recovery negotiations on inflation should bolster profitability; monitor Audi/VW and GM cadence .
Guidance steady: unchanged FY24 ranges with explicit H2 ramp; track quarterly progression vs margin convergence targets and VAS trajectory .

SUPERIOR INDUSTRIES INTERNATIONAL INC (SUP)·Q1 2024 Earnings Summary