Q2 2025 Core Molding Technologies Inc Earnings Call
Good morning, everyone. Welcome to the Core Molding Technologies Q2 2025 Financial Results Conference Call.
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A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded, I will now turn the call over to Sandy Martin 3-part advisors. Please go ahead.
Thank you and good morning everyone. We appreciate you joining us for the core molding Technologies. Conference call to review our second quarter 20125 results.
Joining me on the call today, are the company's president and CEO. Dave. Duval, as well as coo, Eric palomaki and CFO Alex panda.
This call is being webcast and can be accessed through 4ML 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 of the date of any replay or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements, or expectations, or future events or future. Financial performance, our forward-looking statements and are made pursuant to the safe harbor, provisions of the private Securities. Litigation Reform, Act of 1995.
We're looking statements are uncertain and outside the company's control actual results May differ materially from those Express 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 core molding Technologies assumes. No.
Obligation to update or revise, any forward-looking statements publicly management will refer to non-gaap measures including adjusted. EPS adjusted Eva. The debt trailing 12 months of Eva ratio free cash flow and return on Capital employed. Reconciliations to the nearest Gap measures. Can be found at the end of our earnings release.
Our earnings release has been submitted to the SEC on Form 8K and now would like to turn the call over to the company's president and CEO Dave wall.
Thank you Sandy and thank you all for joining us today. Today. I'm excited to share that. We've made major steps forward in our invest for growth strategy. With respect to exceeding our targets for new business wins, and a major organic growth investment as part of our Capital allocation strategy.
first, we successfully won 47 million of new business in the first 6 Months of the Year with 99% of that being incremental
this exceeds our 2024 full year, new wins of 45 million
I'm incredibly proud of our team for their hard work, multi-functional collaboration and full organizational engagement around driving this significant investor growth milestone.
We continue to add resources to our sales and marketing function, to attack new markets, with wins and Aerospace. Like satellite receiver bases and both EV cars and buses.
We are seeing success with our campaign to Market and sell our SMC or sheet molding compound. As we stated earlier, this has a short quote to cash cycle, and we've developed the available capacity.
Utilizing AI programs for lead generation. We have identified immediately addressable opportunities of over 200 million dollars in SMC alone. And we're currently in discussions with many of those potential customers today.
We are seeing that all the advancements we've made in our SMC operations to improve our capacity, consistency, and performance of our SMC formulations are providing a competitive advantage in the market.
This is an exciting, new Revenue stream for our business that is already providing new revenues.
And our investor go strategy and is truly exciting to see the entire organization engage and supporting our many customer focused initiatives.
Our new wins this year include being awarded the Volvo Mexico truck business. I'm proud of our team's success and our ongoing ability to deliver on what we commit.
Winning this program and partnering with a Volvo on their new Mexican. Facility is a rewarding accomplishment for all of us.
We are proud to be a trusted partner as they launched production from their new manufacturing site in Mexico and I think it demonstrates. The continued Evolution and development of our organization's ability to continually improve which is at the heart of our business goals.
Secondly, to support the new business and anticipated additional future business. We are investing 25 million, including an expansion of our Matamoras plant and a new plant and equipment in Monterey Mexico.
Organic growth has been our highest priority for our Capital, allocation strategy and making this investment. Not only launches, a major truck program, but adds dcpd, molding or reaction injection molding and top coat, paint capabilities to our Monterey facility. We're excited about making these investments in our organic growth by adding capacity and capabilities to our Madame Morris and Monterey locations. As we have known incremental wins that support the investment model.
The launch of dcpd molding in Monterey, puts us closer to other large customers that value this process. And with the addition of top coat paint, we are able to provide a customer, a fully molded assembled and top-coated painted product. Our voice of the customer program has clearly shown us the need for top coat paint, especially in Industries like construction and agricultural Machining, machinery and aerial lifts.
This is a major step in our Capital allocation strategy and we look forward to continuing to grow our business with Volvo and other customers as we increase our capabilities and develop new revenue streams.
These are long-term programs, which we anticipate will provide revenues of 150 million over the next 7 to 10 years.
I'm truly excited to share these new wins and expansion Investments. As they embody, the significant progress, we've made in our sales and marketing function, and across our entire organization with the new wins from this year. And prior year, we expect that we would be back over 300 million of annual product revenues in the next few years. Even at the current truck in Powersports demand levels. When you factor in the magnitude of new wins, on top of our continued margin expansion initiatives. It makes our future business model, very exciting.
All of our work in the operations pricing, customer focus and sales. Development is absolutely showing in our results and our future business Outlook.
So in summary, we will continue to 1 successfully Drive our sales growth into new markets 2, improve our margin profile, through operational excellence and our Innovation Pipeline and 3 invest in growing a business that has proven. It can execute well.
Developing a world-class engineered material and Manufacturing Solutions, partner is what it's all about.
now, turning to our Q2, Financial results Revenue was 79.2 million with gross margins at 18.1%
Adjusted even, but our margin grew to 12%, up 30 basis points from Q1. Cash flow from operations is over $9 million for the first half of the year, which exceeds our year-to-date net earnings.
As expected tooling Revenue increased by almost 13 million between q1 and Q2 and we're projecting further growth in tooling this year from our new business wins secured last year.
We again, delivered strong, gross margins. This quarter within our projected range with sequentially, improving profitability compared to the first quarter as well as positive. Year-to-date free, cash flows.
As expected sales declined in the second quarter when compared to the prior year period by low, double digits, representing a sequential improvement from the first quarter.
Sustaining strong, gross, margins, profitability and positive free cash flow on year-to-date double-digit Revenue declines. In the first half is strong evidence that our must-win battle initiatives over the last 4 years have been successful and more importantly, we have demonstrated consistently good execution.
Now, before I turn it over to Alex to give a detailed financial report, I've asked Eric to share comments on some Q2 highlights.
Ments and accolades for our company and select employees.
Our director of Material Science, Bono Aurora, won the American Composites, manufacturing association, or acma Pioneer award honoring him for playing a pivotal role in advancing the Composites industry through Innovation and Technical expertise.
I personally have had the privilege of working with monod over the last 7 years, his vast experience and 40 years in the industry is an incredible asset to core molding. We are proud of anode in the entire Material Science team for industry advancements and competitive for proprietary Innovations. They have brought to our customers.
Recently, our leader and my mentor. Dave Duval was nominated for a 2025 smart 50 award for leading the implementation of a smart organization.
And building an enduring organization of products and lot with long-term sustainability. This is an honor for both, Dave, and the company. And we look forward to attending this event. Later this month,
I'd like to also share an update on our footprint optimization initiative launched at the end of the second quarter, which we expect to complete by year end, as part of our ongoing focus on product level profitability.
The current softness in the truck demand created an opportunity to consolidate our resin transfer molding or RTM process by relocating select programs to another 1 of our facilities. This strategic move will streamline operations at the originating site and is expected to deliver margin Improvement. Alex, will provide more detail on this shortly.
Lastly I want to call out our operational teams for their 99%. On-time delivery is an excellent 62 PPM performance PPM which measures the number of defective parts. Per million produced is used by our customers to measure quality performance, a rate of under 0.01% indicates, a high level of quality and is a testament to the Precision of our quality processes.
We have also maintained industry, low safety incident rates. And employee turnover rates, which we take pride in these favorably, trending metrics, reflect well, on our culture and commitment to Excellence across all of our plans.
With that I would now like to turn the call over to Alex to run through the financials.
Thank you Eric and good morning everyone. For the second quarter, net sales totaled 79.42 million representing a 10.7% decrease from the same period a year ago.
Similar to last quarter product sales, were down due to lower demand for Powersports building products. And in the medium, in heavy duty truck verticals.
This was offset slightly by new product sales to customers in the building products and Industrial and utilities markets.
As expected, tolling, revenues grew by over 3 and a half times compared to the prior year due to customer launches, primarily resulting from our 2024 Business Development activities.
Despite Q2 operating leverage pressure, we maintained our gross margin of 14.3 million or 18.1% of sales.
We are pleased with the stability of our gross margin rate, particularly given the significant shift in sales, mix with increased tooling Revenue.
We continue to partially offset lower, leverage with operational efficiencies, lower raw material costs and margin optimization.
We are maintaining our targeted gross margin range of 17 to 19% for this year.
Sgna expenses for the second quarter were 9.1 million or 11.5% of sales flat as a percentage of sales versus the year ago. Period, excluding Q2 Severance in footprint, optimization costs of 479,000 and 200,000 respectively, adjusted sgna costs would have been 8.4 million
That's Eric disgust we plan to invest 1.5 million this year in a footprint optimization project which involves relocating the production of RTM products to an alternative plant.
We anticipate that this project will generate direct cost Savings of over 1 million annually. Commencing in January of 2026.
For the second quarter of 2025 adjusted sgna expenses, decreased compared to the same period last year, due to lower labor, and related benefits costs as well as bonus acres and favorable foreign currency translation.
Operating income for the quarter was 5.2 million or 6.6% of sales down from 7.5 million or 8.4% of sales in the same period in the prior year.
Net income for the second quarter was 4.1 million or diluted income per share of 47 cents compared to net. Income of 6.4 million or diluted EPS of 73 cents in the comparable year period, excluding the impact of severance in footprint. Optimization costs are second quarter diluted EPS would have been 53 cents.
Second quarter adjusted Eva was 6.5 million or 12% of sales, we generated 9.6 million in, gaap cash from operations. And after Capital expenditures of 4.4 million, our free cash, flow was 5.2 million for the first half of 2025.
We continue to expect our pre-planned, physical 2025, Capital expenditures to be approximately, 10 to 12 million.
In addition to the pre-planned capital expenditures, the company expects to invest approximately $25 million related to the award of the Volvo Mexico business over the next 18 months.
With 8 to 10 million anticipated to be spent by the end of physical 2025.
As of June 30th, our balance sheet was strong with the total liquidity position of 93.2 million, comprising of 43.2 million in cash plus 50 million available under the revolver and Capital credit lines.
The company's term debt was 20.6 Million at the end of the quarter and our debt to ibida ratio for the trilling 12 months remains less than 1 times.
Our return on Capital employed was 7.2% and excluding cash. The rate was 9.6%
As we continue to launch new business, we expect this metric to improve by better leveraging. Topline performance and driving better asset utilization. Both Rosie metrics are computed using the trailing 12 months of operating income and total Capital. Employed, a pre-tax metric. Please see our earnings release for the gaap to non-gaap reconciliation tables, our Capital allocation strategy remains flexible with the significant focus on organic growth as well as discipline management of debt and working capital and share repurchases.
Throughout the first half of the calendar year, we repurchased 151,584 shares at an average price of 14.82 and we have 2.5 million remaining in our board, authorized share buyback program.
We expect sales to decline in the second half of the Year by 4 to 6% when compared to the same period in the prior year as discussed earlier. This year, we expect tooling revenues to comprise a higher percentage of our total sales when compared to Prior year.
As a reminder 1 time, tolling sales are recognized upon the customer's acceptance of the tools, which can shift between quarters.
Regarding tariffs, our products in both Canada and Mexico are USMCA compliant and are currently exempt from tariffs. However, we will continue to closely monitor how changes in trade policies affect our customers and their end markets. We will continue to rebate land expenses to better align them with customer demand.
And with that, I would like to turn it back to David Duvall.
Thank you, Alex.
Our 2025 first half performance, demonstrates that we are systematically driving. Continuous operational improvements, which is simply part of who core molding is.
We are also highly focused on further scaling operations, leveraging. Our fixed cost base and optimizing our portfolio footprint.
As foundational to these endeavors, our sales and marketing team continues to prioritize sectors where our proprietary materials and our technical differentiation provide core molding with a distinctive competitive moat.
We focus on large diverse sectors, including construction, energy industrial Aerospace and medical markets.
Our sales teams are engaged early in the design cycle. To expand wallet, share and inform customers. Our full range of value added capabilities, including SMC formulation, large part molding and top coat painting. We're excited about the winds. We're seeing this year in newer, markets such as the new pickup box panels for small EV trucks, the satellite tracking systems and winning the Volvo Mexico business which are all data points demonstrating positive results,
We are investing in the relocation and optimization of specific large presses and launching a new plant near our existing plant in Monterey Mexico to accommodate new business wins in the region.
And we'll add top coat paint to a neighbor of full service partner model.
We will expand on this more on our next earnings call. But overall, we are ready to invest when customers trust us with their long-term business. We're also proud that we have maintained gross margins in the 18% range, despite significant Topline headwinds, this year, our focus on continuously, improving our performance positions core. So that, as our Topline growth, the positive operating leverage will drop to the bottom line.
We will continue to strengthen our operations and take the necessary action. To drive long-term business capability and profitability.
We are seeing the most promising opportunities in construction and transportation, but we are confident. This is only the beginning.
New areas are emerging and will continue to evolve in the construction sector such as the windows market and more in the industrial sector for customers. Seeking composite mats.
As stated earlier, we estimate that the combination of new program launches from existing customer wins over the next few years will return us to the annual product revenues exceeding 300 million.
Furthermore our portfolio capacity, including presses processes and automation is capable of supporting Topline growth to 450 million.
Despite our first half business wins, we are staying humble. We continue to see the major markets we serve in a lower than expected demand environment.
tariff uncertainties are causing some delays in a market, both in demand and in the awarding of new programs,
we have 1, major truck, customer described this year as the great pause
But we do see things starting to move towards stabilization and we are preparing for the eventual Revenue rebound.
We continue to move forward with our investor growth initiatives this year and we are finding ways to attract new customers. And increase wallet share with current customers. Our must-win battle profitability improvements. Allow us to invest in future growth and significantly reduce the variations in our margins.
so on another topic, I'd like to address the announcement of my planned succession, which was uh, shared shortly after our earnings release this morning,
at the end of May 2026, I plan to retire as the company's president and CEO as part of our succession plan, I will remain fully evolved with the strategy as an executive adviser to the board in leadership, team until December of 2027 the following 19 months.
We've been working on the Strategic transition for over 2 years, and the board, and I fully support. Eric palomaki as my successor. Eric possesses the right passion, skill set, and Leadership abilities for the position.
Eric has been an integral part of developing core's Business Systems and his institutional knowledge of our systems will allow a seamless transition.
Eric is a talented professional who has a keen ability to develop and drive innovations and product development, as seen with some of our new wins.
Eric and I have partnered throughout the business transformation and he has earned the respect of the entire organization and our customers, which will enable him to succeed in driving the company forward, upholding correspondent values, and ensuring a disciplined execution of our investor growth strategy.
During Eric's 7-year tenure working. He is consistently, demonstrated exceptional leadership qualities, incredible Innovation and new products, and a deep understanding of our industry.
Like other executive transitions. At core molding Eric is undergoing, a rigorous executive training process, both internal and external to the company and collaborated with the entire management team every step of the way.
His promotion last year to Chief Operating Officer, allowed him to lead and collaborate with all levels of the organization and preparation for this next step.
Now, I want to thank our team for their continued dedication and Excellence, our customers, and shareholders, for their trust, and our board for its ongoing support.
Lastly, I'd like to share that Eric, Alex, and I are planning to attend the Midwest ideas conference in Chicago on August 26th.
We look forward to connecting with many of you for further discussions. While we are there.
With that. Let's open the line for disc questions, operator.
Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
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Set, before pressing the star Keys 1 moment, please while we pull for questions.
Your first question for today is from Chip Moore with worth.
Morning. Hey everybody. Thanks for taking the question.
Hey Dave, I guess, first off, you know, congratulations are in order, uh, Dave, for you and Eric for you as well. So, uh,
Congrats. Um, no. Thank you. All right, thanks. Yeah. I I wanted to start uh, Dave. You you sounded uh, you know, pretty bullish on on the growth Outlook but particularly, you know, getting back to 300 million.
Plus of, of product revenues. I think you said, within the next 2 years and was that did I hear you say, even if truck and power stays sort of, at, uh, depressed levels, how should we be thinking about that? And with Volvo ramping in 27, I assume, you know, any thoughts on product revenues next year?
Yeah, I mean we we we would expect that the truck Market would start coming back. Um we see in Act was that sometime in 26, we're not really we're not banking on that, but with the new winds from prior year end this year, launching this year, and into next year and then with the Volvo program, uh, we see clear line of sight being back at product, revenue is a 300
Gotcha and and capacity 450. So you're you're in good shape there. Um, maybe just yeah, the only challenge that we ever have with capacity similar to what we said is sometimes we don't have the right size press and the right location.
Yeah, yeah, okay, no, that's great. Um and and just in Pipeline and those new winds are impressive for like 47 million more than last year and I think it was 30 million, just just a couple months ago, so
Yeah, where are you seeing those those incremental wins and what's the, what's the outlook for the back half of the year on on Pipeline?
Yeah. I mean we're real excited to continue to be excited in the industrial for the mass. We still still continue to work on that, we have other opportunities there. Um, we are working with some of our customers, like, in the construction area, like USB on some really unique projects that have opportunities coming up. But I think in the winds, it's really, we look at the EV and the municipal buses and the, uh, small truck, uh, programs as far as being able to use our composite processes for the, uh, beds and tailgates for the truck. So that's some pretty high volume, as well as the, uh, uh, panels and the, uh, Volvo Mexico.
I think the uh, satellite dishes is a new market for us where we see that, uh,
Potential to take off, and we've got some wins in that already, um, that we already declared in the 47 million.
Got it was helpful. Um and Dave it's a big 1 that we're really driving. When we talk about the shorter term wins is really promoting our SMC. We've done a lot of work in our facility as far as cold storage and how to mature, where the SMC and investments in the capital to really stabilize, improve the output and consistency and the, uh, speed at which we're able to make that. Uh, so we've significantly increased our capacity and consistency in that, and now using the AI lead generation, we it was actually a lot more than I thought.
I thought I knew, but I didn't.
Yeah, the AI is amazing. And you said Dave I think you're tracking, you know, a 200 million plus uh you know lead it's more than that. Yeah, it's more than that. But we took out what we call captive. So if you look at the SMC Market those who mold SMC like a caller, they would be your largest SMC maker but they're captive into their own industry.
Um SMC is usually a big part of the value proposition. So you either need to make it as part of your value proposition or make sure that you're buying consistently good SMC that you can mold and has the features you need. So we subtract it out what we call the non-aggression.
Got you. So that's, yeah, that's immediately accessible. And, and you have capacity in place to to serve that, and doesn't have to be trucked with. Like,
Uh, you know, certain temperature, and those type of things is just walk me through that.
Yeah, we had talked about that quite a bit. We have the capacity to get maybe 3/4 of that and but in that time frame, we would be able to install more capacity uh as needed.
Got it, okay, very helpful. Um maybe I got asked 1 more. Um,
What about that? A Json opportunity with with some of your customers? I think you talked about the paint top coat and yeah, absolutely. I think. Yeah.
Yeah, as part of our strategy, you hit it right on the head. Is, that's how we're looking at it. So it's a 25 million. We have to expand our metamoris facility. We're going to move dcpd, or reaction injection. Molding out of that, we're going to move that into a Monterey facility that's close to our current Monterey. And if you're a member, our Monterey facility is only 50,000 square feet. It's least and it's uh, landlocked. So we really can't do more with it. So we're moving, uh, to a facility fairly close to where we are at. 150,000 square feet, we'll be putting uh, top coat paint dcpd structural foam, and we're also looking at large part, high pressure injection, molding
And that location puts us with DCPD close to one of our other major customers. So it significantly reduces their logistics costs and opens up opportunities to grow more business with them.
Mhm. Mhm. Okay, great. No, I appreciate uh, taking all the questions. I'll uh, hop back in. Thanks.
No, appreciate you.
Once again, if you would like to ask a question, please press star 1.
Okay, all right. So, I don't know if we have any other questions. It doesn't.
It doesn't seem to have any coming up. Thank you.
Okay. So uh, thank you for your continued interest in our company. We look forward to providing an update on our progress. When we report our third quarter results, thank you and have a great day.
This concludes
today's conference, and you may disconnect your lines at