Q4 2024 Core Molding Technologies Inc Earnings Call
Good morning, everyone and welcome to the core moldings technologies fourth quarter and full year fiscal 'twenty 'twenty four financial results conference call.
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Speaker Change: Now I will turn the call over to Sandy Martin three part advisors. Please go ahead.
Sandy Martin: Thank you and good morning, everyone. We appreciate you joining us for the core molding technologies conference call to review the fourth quarter and fiscal 'twenty 'twenty four results joining me on the call today are the company's president and CEO, Dave Duvall, and EVP and CFO John Zimmer.
Sandy Martin: This call is being webcast and can be accessed through core M. T Dot com the audio link on the Investor Relations events and presentations page today's conference call, including the Q&A session will be recorded please be advised that any time sensitive information may no longer be accurate as.
Sandy Martin: As of the date of any replay or transcript reading.
Sandy Martin: I would also like to remind you that statements made in today's discussion that are not historical fact, including statements of expectations or future events or future financial performance are forward looking statements and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Sandy Martin: By their nature forward looking statements are uncertain and outside of the company's control.
Sandy Martin: Actual results may differ materially from those expressed or implied please refer to today's earnings press release for our disclosures on forward looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.
Speaker Change: Core molding technologies assumes no obligation to publicly update or revise any forward looking statements management will refer to non-GAAP measures, including adjusted EPS adjusted EBITDA debt to trailing 12 months EBITDA ratio free cash flow and return on capital employed.
Speaker Change: Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Our earnings release has been submitted to the S. D. C. On form 8-K, now I would like to turn the call over to the company's President and CEO, Dave Dewalt.
Dave Dewalt: Thank you Sandy and thank you all for joining us.
Speaker Change: Before we review our 2024 financial results I want to sincerely. Thank all of our employees for their hard work and dedication throughout the year.
Speaker Change: Our organizational operational and product line profitability improvements, which were previous must win battles that we've successfully implemented over the past three years are evident in our ability to maintain our gross margin levels between our targeted range of 17% to 19% even with the reduced demand all plants continue to be profitable.
Speaker Change: As promised our book of business is solid and we see our customers benefiting from a stable partner that can invest in improving the quality of services and products we provide.
Speaker Change: Demonstrated by our recent supplier awards, such as the <unk> 10 P. P M and the ERP go live.
Speaker Change: We believe we are operating better than many in the industry.
Speaker Change: Launching new complex programs as well as one going delivery and support.
Speaker Change: We have created a strong team and a robust business model, which has provided record cash flows and has put <unk> in a position to drive growth our job is now.
Speaker Change: Our job is to now leverage all the work the teams have done to drive profitable growth.
Speaker Change: Driving growth both organic and inorganic is what we have to do and are relentlessly driving now invest.
Speaker Change: We invest for growth as our must win battle for 2025, and I know, we will be successful just like the other must win battles we have executed.
Speaker Change: We have the organizational capability assets and cash to invest in growth. We are actively engaged in evaluating acquisitions I'm confident we will execute an acquisition. This year, our newly implemented voice of the customer process has convinced us to invest in top coat paint capabilities and our Matamoros facility, which is now pay.
Speaker Change: Do for customers and bring that value add processing soft.
Speaker Change: Your ability to paint lines well some markets that we are driving to grow such as construction equipment aerial lifts and agricultural equipment.
Speaker Change: These solutions further engage with customers and provide a broader value proposition and I will share more in a few moments.
Speaker Change: Now turning to high level comments on the year as promised all of our plants continue to be profitable in 2020 for our book of business is growing and we have maintained solid product line profitability.
Speaker Change: Based on the successful completion of our last must win battle, which drove decisions and actions to exit or correct nonprofit rural business.
Speaker Change: We have a high performing business that is operationally positioned financially capable of significant growth.
Speaker Change: We won $45 million of new business in 2024, and driving profitable sales growth remains our most important focus.
Speaker Change: Now ill hit on a few of the financial highlights fiscal 2024 was another successful year for the company and a testament to our work over the last three years to stabilize margins despite lower revenues.
Speaker Change: We finished the year with sales of $302 million gross margins of 17, 6% and adjusted EBITA margins just over 11%.
Speaker Change: I am pleased to report that we generated record cash flow from operations of $35 million, which was driven by prudent working capital management stable margins and solid returns that John will discuss in a moment.
Speaker Change: Although market demand and product sales were down overall in 2024, we do not accept or tolerate the decline in sales and we firmly believe that our invest for growth strategy is the key to driving our growth engine.
Speaker Change: We have the same must win battle drive for excellence in Central Worksheet as we've shown over the last three years with our organizational operational and product line profitability must win battles.
Speaker Change: We acknowledged that a portion of sales growth in the past was a direct result of positive COVID-19 impacts higher customer demand and product stockpiling due to unpredictable supply chains, we have proven our ability to ramp up to capitalize on opportunities quickly and I'm confident we can do it again.
Speaker Change: Nearly all of our $45 million and new wins are launching in 2025.
Speaker Change: <unk> generated higher tooling revenue with a ramp up to full production levels in 2026.
Speaker Change: Also all the new wins 35 million are either new or replacement sales from existing or past customer relationships.
Speaker Change: This demonstrates the importance of continuing to grow wallet share with existing customers as well as the importance of diversifying our end markets. So that we can demonstrate our valued partnership with new customers in new industries.
Speaker Change: The replacement business, we secured in 2024 indicates that customers trust, our performance and ability to deliver.
Speaker Change: Finally, our pure new business wins last year on top of our 2020 for product sales translates to an 8% sales growth which is exciting.
Speaker Change: We will provide more on our fiscal 2025 outlook in a few minutes now I want to turn the call over to John to cover the financials in more detail.
Thank you, Dave and good morning, everyone for the full year net sales were $302 $4 million down 15, 5% driven by lower demand across our end markets are signaled throughout 2020 for the truck market is in a normal cyclical downturn and we expect to transition to a cyclical upturn in the second half of two.
Speaker Change: And 25 in all of 2026 due to upcoming environmental regulation changes in 2027.
Speaker Change: We also see some leveling off or stabilization in non truck markets gross profit for the year was 17, 6%, which is within our long term full year target range of 17% to 19% full year adjusted EBITDA was $33 8 million or 11, 2%.
Speaker Change: As Dave mentioned, we generated a record 30 $35 $2 million in cash flow from operations translating to a free cash flow of $23 $6 million for the year.
Speaker Change: Additionally, we invested $11 $5 billion of capital expenditures in 2024.
Speaker Change: Yeah.
Speaker Change: Sales were $62 5 million for the fourth quarter down 15, 3% due to the declines primarily in the truck and power sports markets.
Speaker Change: Demand in end markets, including industrial utility ability products grew.
Speaker Change: <unk> against the prior year quarter, and we expect the rebound in 2025 to continue in these markets and as we launch new programs.
Speaker Change: Our fourth quarter gross margin was $9 $9 million or 15, 8% of sales compared to 14, 8% in the year ago quarter. The majority of our cost of sales are variable and our ability to maintain gross margins within our long term range is based on how efficiently we can reduce variable expenses as demand forecasts change.
Speaker Change: Our operational team has a good line of sight on demand and quickly reduce variable costs in 2024.
Speaker Change: All of their efforts and our ability to reduce raw material price needed to achieve better customary pricing, mostly offset lost fixed cost leverage in the fourth quarter.
Speaker Change: SG&A expenses for the fourth quarter were $99 million compared to $8 4 billion in the prior year, primarily due to lower labor.
Speaker Change: Offset by an increase in both severance costs of $500000 foreign currency translation cost of $600000.
Speaker Change: Last quarter, we discussed the company's restructuring, which will generate annual savings of approximately $2 $6 million moving forward in the fourth quarter. We continued to right size the company in response to customer demand.
Speaker Change: Operating income for the quarter was <unk>.
Speaker Change: $9 million or one 4% of sales compared to three 4% of sales a year ago period.
Speaker Change: Net interest income was 94000 in the fourth quarter, which include 411000 of interest income on cash balances. This improvement from 175000 and net interest expense in the prior year quarter.
Speaker Change: The quarter's effective tax rate was impacted by a full year of catch up to a 23, 9% for the fiscal year 2024, which consist of the way the tax cost from the three tax jurisdictions, where we operate.
Speaker Change: We reported a slight net loss for the quarter of $39000 compared to net income of $2 2 million or diluted EPS of <unk> 25 cents in the comparable year period.
Speaker Change: Excluding the impact of severance our fourth quarter and full year 2024 diluted EPS would've been 10 cents and a $1 63, respectively.
Speaker Change: <unk> to $32 36 in the same periods in 2023.
Speaker Change: Okay.
Speaker Change: Our fourth quarter, adjusted EBITDA, including adjusted for severance cost was $5 $7 million for 92% of sales compared to $7 1 million or nine 6% of sales in the prior year's quarter. Please.
Speaker Change: Please see our earnings release for the GAAP to non-GAAP reconciliation tables.
Speaker Change: As of December 31, 2024, total outstanding liquidity was $91 8 million, which included $41 8 million of cash plus $50 million available under the revolver and capital credit lines.
Speaker Change: The company's term debt was $21 5 million at the end of the quarter and our debt to trailing 12 months EBITDA ratio continues to be less than one.
Speaker Change: Our return on capital employed a pretax return metric was nine 9%.
Speaker Change: For the full year 2024, excluding our cash balances was 13, 1%.
Speaker Change: We expect 2025 capital expenditures to be approximately $10 million to $12 million.
Speaker Change: Our capital allocation strategy remains unchanged and includes strategic investments.
Speaker Change: These are the best.
Speaker Change: And for our invest for growth acquisitions or debt repayment.
Speaker Change: The entire organization is aligned around our three growth pillars wallet share growth sales diversification and growth through acquisition.
Speaker Change: We will continue to be patient and selective of course, M&A, but we have increased our target pipeline over a year ago.
Speaker Change: I understand that both organic and inorganic growth core Berlin will provide long term growth enterprise value expansion and strong cash flow generation.
Speaker Change: We plan to continue with share repurchases under our previously announced share buyback plan, we repurchased approximately 172000 shares for the year at an average price of $17.09 per share.
Speaker Change: We expect full year 2025, net sales to be essentially flat compared to the prior year, but on a year over year comparison, we anticipate the first half of 2020 revenues to be down 5% to 10% as the Volvo transition continues to impact our revenues.
Speaker Change: For the full year 2025, we anticipate that the Volvo transition will reduce revenues by approximately $30 million.
Speaker Change: We expect to be able to offset all the impact through higher tooling sales as we launch new programs one in the prior year product revenues from these programs as we've watched them as the programs ramp up and product sales increases from forecasted rebounds in the truck market in the second half of the year.
Speaker Change: Gross margin in sugar should remain between 17 and 19% for the full year, even with the change in revenue mix to higher tooling sales in 2025 as our improvement efforts over the past several years continue to provide ongoing benefits.
Speaker Change: Regarding tariffs most of our raw materials are U S based for non U S. Based raw materials, we will try to mitigate any tariff impact. So we expect that we will have to pass through cost to our customers.
Speaker Change: We will monitor and adjust our cost structure for any customer demand impact as many of the Oems we serve have operations in Canada and Mexico.
Speaker Change: Work with our customers because those turbine cost effective ways to produce parts, which may be different.
Speaker Change: Answer for each customer based on component size and cost.
Dave: And with that I'd like to turn the call back over to Dave.
Dave: Thank you John.
Dave: As discussed last quarter, we are investing in our sales and marketing capabilities and resources, Alex Vance has joined the organization and our new executive role as Chief Commercial officer and has been working with our team over the last four months to restructure and transform our sales and marketing team as part of our invest for growth initiatives.
Dave: As with all core successful transformations, our must win battles in the last several years, we first optimize the execution process to meet our future vision.
Dave: As we did in 2024 and now we are investing to leverage this to support growth. Our 2025 invest for growth initiatives are built around three fundamental pillars and the first two represent the primary focus of core sales and marketing team.
Dave: First there's growing wallet share with our existing large customers buy directly engaging early in the design phase and working with customers across our entire portfolio of processes.
<unk> thermoplastics and thermal sets.
This is a key area, where we are employing our voice of the customer process. This is what drove our decision to invest in topco paint inner Matamoros facility.
Dave: Cap managers are highly focused on expanding business opportunities through quarters existing large customers by engaging and educating on the valuable all four processes within the customers' applications.
Dave: We have now won a major program in construction, where we are providing the compounded sheet molding compounds or S. M C.
Dave: The improvements we've made in the operations has increased our capacity and we are actively promoting our many different FMC formulations.
Dave: Any large OEM customer relationships rely on our expertise and ability to continually support developed and provide solutions that make their products more value.
Dave: OEM customers can and do trust core molding to partner with them and help grow their business. We are deliberately strengthening these relationships to more deeply understand our customers' needs and strategies and are voice of customer process is being embedded into our organization.
Dave: We need to be first in our customers' minds, when planning a new product or design.
Second pillar of Investor growth is just one execution for business diversification strategy.
Dave: We're excited about the new opportunity opportunities, we have won and new and emerging industries, including construction industrial energy and medical.
Dave: We need to accelerate our efforts further improve our ability to support customers with unique high value solutions by directly engaging with customers to help solve their product problems and demonstrate the value our technical solution sales approach can provide.
Dave: Identifying the highest potential products and customers and educating the customer on how core can provide better solutions for their applications is essential to efficiently execute our solutions sales process.
Dave: Our efforts are centered around first understanding what markets applications have the highest potential for course processes and increasing the number of leads through trade shows industry groups and sales agents.
Dave: We are focusing additional resources, where we have advantages which include large ultra large parts that are structural or more difficult to produce geographic proximity to our plants or where we identified distinct benefits from our multi process all right.
Dave: We will provide more color on these differentiators with examples in a moment.
Dave: Our third pillar of invest for growth is strategic M&A efforts as John mentioned, our pipeline of potential transactions with rapidly growing and we are actively pursuing one or more of these opportunities.
Dave: Acquisition is a major part of our diversification strategy as we understand new markets and user acquisition to accelerate our growth into the sales channels.
Dave: Expanding our business diversification strategy and completing an acquisition is a priority our strategic criteria for acquisition remains as follows.
Dave: New sales channel access, where we know we have a process fit and our ability to expand our solutions.
Dave: We are driving to expand product offerings industries and customer relationships.
Dave: Number two geographic locations, where we do not have locations today opening opportunities for customers, where logistics costs for our large parts may have a high burden.
Dave: Finally, we want processes that will complement our current processes and enable us to grow wallet share.
Dave: We fully expect to carry out an acquisition this year.
Dave: Turning as much prefer that I say expect versus will so I tried to stick with we expect to execute one acquisition this year.
Dave: Based on our three pillars supporting quarters invest for growth strategy I'm confident we will again be successful with these initiatives and goals in 2025.
Dave: This must happen and we're already seeing the benefits as shown by winning $45 million in new business last year.
Dave: We continue to develop new relationships and new industries, and we know that the most direct way to achieve growth through working with our current large customers to expand our product offerings.
We understand the importance of being first in the customers' mind to industrialize our designs.
Dave: As I mentioned initially our sales teams are approaching markets differently, and we're always driving to understand our customers' needs an exciting new opportunity opportunity. We have won and are now starting production.
Dave: The growing construction industry isn't ultra large turf protection match safely drive heavy equipment onto work sites without thinking into the board are tearing up the ground.
Dave: Reusable ground protection masks are the perfect solution for many end markets that require large moveable equipment for construction industrial and agricultural products.
Dave: Some of these turf match turf, Matt Rhodes go a mile to reach projects like wind turbines.
Dave: These turf massively over 800 pounds, a piece and there are few competitors like the malls such large structural parts.
Dave: We're currently working with that customer to make them, even larger and in a single shot on one of our largest presses.
Dave: An exciting new business for core and it is definitely a unique and high value solutions.
Dave: As I mentioned earlier, we are also developing and providing our sheet molding compounds or S. M C.
Dave: Final product.
Dave: Currently we have one business and home construction industry, providing our formulated solution, we produced the SMC and new customer bolt it to their requirements.
Dave: There are other large opportunities that we're currently quoting to provide our SMC formulations that we believe we have a high chance of winning.
Dave: They seek a consistent high quality SMC product that has a large processing window and meets the severe environment of their applications.
Dave: So an example of new and growing profit center for Us, which we are actively pursuing.
Dave: As I mentioned last quarter, we're entering areas like EV bus battery trays hospital bed frames, and the medical industry and solid retail products to big box reel to reel retailers like big rocks for residential backyard views.
Dave: We know we have the processes organizational capabilities and assets to drive revenue growth and our goal is to leverage that into the right markets and applications.
Dave: We excel at high complex highly engineered products, but we also produce super products on some processes, which can be opportunistic and generate short shorter cycle revenues.
Dave: We are excited about the potential needs of emerging verticals and look forward to introducing more in the coming months.
Dave: These solutions will also become a new feature to open up new markets and relationships, which could be meaningful in large and growing industries, including construction and industrial applications.
Dave: Also looking forward to and planning for our peak season in the truck market by 2026, it begins to ramp up in the back half of 2025.
Dave: There are new and interesting potential opportunities in the power sports segment, and we see meaningful opportunities with blue chip companies to expand our offerings in thermoplastics anthro missed that.
Dave: Each proprietary formula in process provides a unique solution that is developed to the customers' needs lightweight high strength corrosion resistance and lower total cost.
Dave: Most of these are large programs working with large single source customers, who require a varying level of validation before production Walsh. This creates a business model with a revenue stream characterized by long term programs and large complex single source solutions directly tied to the success of our customers and their markets.
Dave: Yeah.
Dave: Ultimately, we sell unique solutions for solving customers' problems or improves and existing traditional design. It takes time to gain acceptance, but we have proven that one score has demonstrated the capabilities. We have grown our value with those customers. This is the key to the invest for growth strategy.
Dave: As part of our invest for growth strategy, we're actively rebalancing assets and optimizing cost for long term success.
Dave: Momentum continues to grow with a strong pipeline of new opportunities in the truck market, including quotes for major programs really volatile.
Dave: Increased customer engagement and our presence at trade shows and what the industry groups create valuable connections across new verticals.
Dave: Our approach to transform that transformational change is working and has created and developed an inspired workforce workforce a culture a core.
Dave: I continue to be very grateful for the hard working collaborative team at core.
Dave: Since this is John's last earnings call Conference call.
Dave: To recognize his hard work and valuable contributions to our transformation journey and more importantly, as a friend and business partner.
Dave: I want to personally thank John for all that he has done for court to get where we are today.
Dave: John will continue to be an adviser for the foreseeable future to assist with the M&A work that is accelerating.
Dave: Finally, I want to thank our customers shareholders and the board for their continued support.
Dave: Before we get to questions I would like to share that John Alex and I plan to participate in the upcoming Roth capital markets Conference in Southern California next week, and we hope to see many of you there.
Dave: I would like to open the line for questions operator.
Dave: Thank you.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: Anytime your question has been addressed and you would like to withdraw your question. Please press Star and then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Chip Moore: And your first question today will come from Chip Moore with Ross. Please go ahead.
Chip Moore: Good morning, Thanks for taking the question, Hey, David John and John.
Speaker Change: Oh, Mike Congrats.
Chip Moore: Look forward to seeing you next week.
Chip Moore: Good.
Chip Moore: I wanted to ask I guess sort of the rate.
Chip Moore: The theme or or or common topic here is just uncertainty right in terms of.
Chip Moore: Macro end market, just I guess as you sit here in March.
Chip Moore: The tone of what you're seeing from customers and visibility.
Chip Moore: On that full year view.
Chip Moore: How have things changed or what are you seeing.
Speaker Change: From customers.
Speaker Change: Yes. Good question, Jim I mean, it's we've been kind of saying over the last three or four months. What we've seen is that in our pipeline you see usually in your pipeline you will see a lot more at the top end of your pipeline is coming in but we see a lot of our programs where they are right at the quote stage, where they're waiting and waiting for a decision looking whats happen.
Speaker Change: Prior to the New administration now with the talks with the tariffs. So you see a lot of waiting right now.
Speaker Change: That's where we see you on the large programs whether it gets done in Mexico or in the U S. Good for US is that we have facilities in both locations. So we're usually able to talk with the customer relative to opportunities on those programs, but yeah. You see you see a lot of people that are waiting to see what happens.
Speaker Change: Lately with the tariffs, whereas on then it's often it's on and off that.
Speaker Change: It makes people pause.
Speaker Change: Yeah for sure right.
Speaker Change: Good to see that are growing is like what those turf matched right I mean, that's really.
Speaker Change: U S based type, but consumption to where theyre doing windmills or construction out the large.
Speaker Change: Open areas, they don't want the attractors to fall in and some of those.
I call them turf roads are they could be a mile long so youre using a lot of those in place and it's.
Speaker Change: A market that may have been covered from external with China, where now it's been moved to the U S. Not only because its large and heavy but the assets that are needed to actually make those parts are pretty specific and is right up our.
Speaker Change: Our asset base.
Speaker Change: It fits us very well to where we could actually work with the customer and make larger ones was our largest breast.
Dave: Yeah, Thanks, Dave and I guess.
Dave: I guess I'm tariffs tariffs specifically.
Dave: Obviously, you've had some in place and then go away rather quickly and we'll see what what happens.
Dave: When things get finalized I guess.
Dave: In terms of impact on you it sounds like you've got some ability to shift things around I guess competitively.
Dave: How are you thinking about direct impacts and I guess.
Dave: Price pass through as well.
Dave: Yeah, we were pretty clear at the very beginning prior to the first communication that came out from our administration.
Dave: Because we are importer of record coming out of our Matamoros facility into Brownsville. So we would automatically be chart. So what we did is we estimated what that cost would be.
Dave: It automatically gets put on core we set up a process and communicated with all the large customers that are directly affected to wear.
Dave: We are in quarter one.
Dave: On record.
Dave: How that process would work and surcharges would be passed along with line item details to the customer. So we I mean I remember last time two years ago. When we went through the raw material.
Dave: Increases we wanted to make sure our lessons learned from that was b on it before it happened.
Dave: Have a process set up where its a surcharge.
Dave: This is the line item. This is how many you shipped it can be validated and then we set up the process with customers on relative to how that's going to get charged and how that we get paid.
Speaker Change: Perfect perfect, Okay very helpful.
Speaker Change: And maybe if I'd be glad I can ask another to our supply base and where we might have challenges or risks there and have already reached out to those suppliers and looked at what the extent was or what that how that we pass through.
Speaker Change: Key is as we talked about one of our must win battles on our product line profitability a lot of the contracts have been changed or we didn't have a contract. So these large raw materials would be pass through just like we did the same process, we did with the raw material inflation. So good questions, Jeff Yeah, we've been all over that one.
Speaker Change: Good to hear.
Speaker Change: And margins in general it sounds like you're comfortable.
Speaker Change: With the range and remind me I thought that.
Speaker Change: You know that bubble headwind that actually.
Speaker Change: Probably helps margins a little bit, but maybe some of the other moving pieces around.
Speaker Change: The new paint product in Mexico.
Speaker Change: FMC.
Speaker Change:
Speaker Change: Sales.
Speaker Change: How should we think about margins.
Speaker Change: Some of those initiatives.
Chip Moore: Chip I.
Chip Moore: I think you kind of remember rightly or Volvo business was not our highest margin business. So we knew it was leaving.
Speaker Change: Yes, it hurts the top line, but it actually helped the margin line overall.
Chip Moore: Yes.
Chip Moore: I think what we've done over the last two or three years really we look at the book of business.
Chip Moore: And it's solidly profitable.
So it allows us to actually kind of have the benefit of the diversification doesn't matter, which industry is performing better or worse, we kind of are going to get that at that range.
Chip Moore: For the new business.
Chip Moore: And those types of things.
Chip Moore: It's a little bit of a different type of sale we are solid.
Chip Moore: Good margin because it is our formula that we that we basically create so it has unique value to the customer.
Chip Moore: It doesn't have a lot of fixed costs involved in it either it usually just goes down one S. C line and kind of get to the.
Chip Moore: They didn't get shipped out so we're still pretty comfortable even with the change of mix then even look a little bit of Fortunately that we can stay in that 17 to 19. This year and really be set up that you know as revenues grow and we've really leveraged the fixed cost it really allows us to have that flow through the.
Chip Moore: Gross margin going forward.
Chip Moore: As revenues grow.
Chip Moore: That's the key point, Jeff I mean, when we look at where we are as far as we've seen the decrease relative to <unk> and we see the some of the market decrease, especially in truck power sports and we know that will come back. We're looking at ACP, we see that starting to come back at the end of this year and then with all the programs that we're launching.
Chip Moore: We actually would have had an eight 8% increase in revenue had it not been for the one big program exiting and we're still quoting on that we're still looking at how we can support ball though.
Chip Moore: But overall, where we've gotten the business now relative to the performance.
Chip Moore: Still being still above 17% gross margin with the lower revenue and adjusting the overall cost structure being fixed SG&A and our plants relative to lower sales when we see sales pick up and we start seeing these programs that we already have one that we're already starting to launch like the turf matched.
Chip Moore: We see we see that as a big benefit Corp.
Chip Moore: Yeah.
Speaker Change: Perfect perfect very helpful. Maybe just one last one guys.
Chip Moore: John.
Speaker Change: The tooling ramp up this year for some of that new business any way to help frame.
Chip Moore: How much tooling revenue could be up in terms of mix.
Chip Moore: Yes, I think that yes.
Chip Moore: I think we've kind of given some.
Chip Moore: The.
Chip Moore: The Volvo will have a $30 million product revenue kind of headwind against us and we will make up most of that to truly we have some juice programs coming out and so I think Julian revenue probably would be in the $30 million to $40 million range. This year.
Chip Moore: Which again is always good news some of its replacement business some of it's new business and so it's.
Chip Moore: As the indicator of future new business, but also indicator, where we got one current business and customers still trust us and wanted us to do their business, so, but so probably in that $40 million range.
Chip Moore: It's probably a ballpark of where we would see totally this year.
Chip Moore: Perfect perfect Okay.
Chip Moore: I'll hop back in queue, thanks very much.
Speaker Change: Great. Thanks, Jeff.
Speaker Change: Again, if you have a question. Please press star and then one.
Speaker Change: And your next question today will come from Larry Bumgardner private Investor. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: First off just congratulations to John on.
Speaker Change: Seeing us through the ups and down cycles and his oversight of the company for such a long time, Congrats I hope you enjoy your retirement.
Speaker Change: I appreciate that Larry.
Speaker Change: Second question on share repurchase I see you repurchased I think you said 172000 shares at 17 Bucks I guess I'm just looking at this from a bigger picture what acquisition could be possibly leverage your income statement more than.
Speaker Change: Repurchasing your own shares with a lot less risk of some kind of acquisitions.
Speaker Change: Over the years, we see acquisitions and not just not just you guys, but just across the spectrum of companies that most acquisitions are difficult.
Speaker Change: Most of them don't work out and.
Speaker Change: And you're sitting here with your stock trading at a you know four or five times EBITDA.
Speaker Change: I mean, you could do a Dutch auction you could just use $20 million of your excess cash.
Speaker Change: To repurchase shares I guess I'm wondering how you're looking at that.
Yes.
Speaker Change: The way, we look at as we kind of look at the short term, we look at the long term of the company.
Speaker Change: We think that we need to take our capital and allocated amongst several different areas.
Speaker Change: Share repurchases is one of them.
Speaker Change: Say that would be the sole purpose.
Speaker Change: We are still a company that's heavily capital intensive.
Speaker Change: And when we look at acquisitions or organic growth that can take a lot of capital pretty quick.
I agree with you that acquisitions always come with some some risk probably more risks and just share buybacks, but it's also the future growth of the company where in the industrial businesses a long.
Speaker Change: Long term, we're going to grow consistent with GDP those types of things and so.
Speaker Change: We see that the company's growth is really critical at the same time as doing a share repurchase so doing both is really critical to us.
Speaker Change: That's the reason I will tell you, we probably are a little bit cautious on acquisitions, we do a lot of homework.
Speaker Change: And where our EBITDA ratios, we understand what type of acquisition, we need to do.
Speaker Change: And so we think we need to do both.
Speaker Change: So we don't look at laterally, let's do one or the other and when I say, both and we need to do organic growth, we need to be ready when the customer walks in and says Hey, you guys can put $5 billion of capital and we have a $20 million program for you and that's critical that we have capital to do that also and so.
Speaker Change: I think we set ourselves up for that and we're very disciplined on how we do the capital allocation, but yes, I think you guys still continue to see share repurchases, but we'll be also looking to use the capital for the other areas also.
Speaker Change: Yeah, I mean, you guys have been terrific at not buying in a couple of years ago. When you first started talking about acquisitions and now as profitability has come down across the industry you're in a much better position to do it but your stock's down a lot as well. So I guess you gotta Yeah. This balanced that's also really.
Speaker Change: Relative to what you said, Larry when we were doing the stock repurchase the shares were $17 a share now.
Speaker Change: Obviously, the finance has changed a little bit one year $12 50 a share.
Speaker Change: Yeah, I mean discount to tangible book $40 million in cash $20 million of debt I mean, we just said that.
Speaker Change: So I'm pretty sure.
Speaker Change: <unk>.
Speaker Change: [laughter], okay, well keep generating the cash and everything will be fine. Thanks, guys alright. Thanks, Larry.
Speaker Change: Your next question today will come from Bill to Xylem with Titan capital. Please go ahead.
Bill: Thank you relative to the to the new map contract.
Speaker Change: So if your end customer or with your customer in this equation because one of the existing map players that are just using you in blue.
Bill: Their own.
Bill: Capital expansion or are you actually.
Bill: We're selling the match to the end.
Bill: The end user of the match.
Bill: Yeah. So.
Bill: Really the end customer for us as violently as like Sun belt that are renting those out when they ran out of the equipment and also these large construction companies usually get them from Sun belt, and then they do long term rentals, while the parts are in the field or the construction is going on.
Bill: Yes.
Bill: Great.
Bill: That's very helpful and then realm.
Bill: Relative to Q.
Bill: <unk> asked all year, how much of that uptick in revenue are you anticipating deep from the truck business rebounded versus from.
Bill: The new business, that's starting to kick in non truck related.
Bill: I'd say that most of the decrease in the first half of the year is actually the truck related truck sales last year Acte truck sales last year.
Bill: Uh huh.
Bill: We're in the 80000 90000 unit level and in this year first half their thinking there kind of in the mid seventy's or a little bit higher and then theyre going to ramp back up and so youll see a little bit of that I think it's really a combination of it's going to be the truck. It is going to be some of the Newport business I think it's going to be truly truly just going to you know.
Bill: Really start probably ramping up in Q2, but that it is.
Bill: Have you ever in Q3 and Q4.
Bill: And then the last part would be that the new revenue from new launches from our products and the reason for that is it's just really from a timing standpoint, even if you get it up and running by June 30.
Bill: It usually doesn't start at 100% it usually starts to slow ramp.
Bill: Ramp up throughout the year. So yeah, I would say that that is the the kind of the tail. The last piece of it it would be the ramp up of product sales from new business.
Bill: Tooling sales would probably be even stronger than that in the product sales right now so that new business.
Speaker Change: John picking up on that that truly payoffs are larger and they are going to be that large in the second half.
Speaker Change: Is that should we read that as a really strong indications for 'twenty six if we're talking about pushing 40 million of tooling.
Speaker Change: In the second half of the year.
Speaker Change: Yeah, I mean, we obviously haven't given any guidance for 'twenty six but between the truck market and the launch of these new programs.
Speaker Change: I think going into 'twenty six that would be really.
Speaker Change: I think right now the way we see the world today 26 should be a really good year.
Speaker Change: And so.
Speaker Change: Yeah, I think you've seen a transition year. This year, it's nice to have that much dual yourselves to tell you the truth because it really is an indicator of some future sales coming our way.
Speaker Change: And usually when you're viewing sales are that high for very large programs.
Speaker Change: So that's how we're looking at I mean, we usually look at the ramp of the programs with the new business. So you can get a third to a half of that in your ear that you launched as it ramps up and then we're also looking at the ACP, where 2026 is the peak year of about 350000 trucks as compared to.
Speaker Change: 2025, it's a 310 316.
Speaker Change: It's ramping up at the end of the year.
John Zimmer: Great. Thank you both and John Congratulations.
Bill: So I don't have onsite thanks Bill.
Speaker Change: Yes.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Dave do ball for any closing remarks.
Speaker Change: Thank you for your continued interest in our company and we look forward to providing an update on our progress when we report our first quarter results in May have a great day. Thank you.
Speaker Change: The conference has now concluded.
Speaker Change: You for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Yes.
Speaker Change: [music].