Q2 2026 Core Molding Technologies Inc Earnings Call

August 4, 2026

Speaker #1: Good morning, everyone. Welcome to the CORE MOLDING TECHNOLOGIES fiscal 2026, second quarter, financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Operator: Good morning, everyone. Welcome to the Core Molding Technologies Fiscal 2026 Q2 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. As a reminder, this conference call is being recorded. I want to now turn the call over to Sandy Martin, Three Part Advisors. Please go ahead.

Operator: Good morning, everyone. Welcome to the Core Molding Technologies Fiscal 2026 Q2 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. As a reminder, this conference call is being recorded. I want to now turn the call over to Sandy Martin, Three Part Advisors. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad.

Speaker #1: To withdraw your question, please press star, then 2. As a reminder, this conference call is being recorded. I will now turn the call over to Sandy Martin, Three Part Advisors.

Speaker #1: Please go ahead.

Speaker #2: Good morning, everyone. Thank you for joining us for the CORE MOLDING TECHNOLOGIES conference call to review our fiscal 2026 second quarter results. Joining me on the call today are the companies' president and CEO, Eric Palomaki, and CFO, Alex Panda.

Sandy Martin: Good morning, everyone. Thank you for joining us for the Core Molding Technologies conference call to review our Fiscal 2026 Q2 results. Joining me on the call today are the company's President and CEO, Eric Palomaki, and CFO, Alex Panda. This call is also being webcast and can be accessed through coremt.com via an audio link on the investor relations events and presentations page. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. Statements made in today's discussion that are not historical facts, including statements or 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. Forward-looking statements are uncertain and outside the company's control.

Speaker #2: This call is also being webcast and can be accessed through COREMT.com via an audio link on the investor relations events and presentations page. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading.

Speaker #2: Statements made in today's discussion that are not historical facts, including statements or expectations of 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.

Speaker #2: Forward-looking statements are uncertain and outside the company's control. Actual results may differ materially from those expressed or implied, and today's earnings release includes our forward-looking disclosures.

Sandy Martin: Actual results may differ materially from those expressed or implied, and today's earnings release includes our forward-looking disclosures. Risk factors and other uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Core Molding Technologies assumes no obligations to update or revise any forward-looking statements publicly. Management will refer to non-GAAP measures, including adjusted EPS, adjusted EBITDA, free cash flow, and return on capital employed. Reconciliations to the nearest GAAP measures are available at the end of our earnings release, which has been submitted to the SEC on Form 8-K. Now, I would like to turn the call over to President and CEO, Eric Palomaki. Eric?

Speaker #2: Risk factors and other uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. CORE MOLDING TECHNOLOGIES assumes no obligations to update or revise any forward-looking statements publicly.

Speaker #2: Management will refer to non-GAAP measures, including adjusted EPS, adjusted EBITDA, free cash flow, and return on capital employed, reconciliations to the nearest GAAP measures, or available at the end of our earnings release, which has been submitted to the SEC on Form 8K.

Speaker #2: Now, I would like to turn the call over to President and CEO, Eric Palomaki. Eric.

Speaker #3: Thank you, Sandy. Good morning, everyone. Before we cover progress on our initiatives and second-quarter results, I'd like to share that CORE's story is being featured this month in the American Executive Magazine.

Eric Palomaki: Thank you, Sandy. Good morning, everyone. Before we cover progress on our initiatives and second quarter results, I'd like to share that Core's story is being featured this month in The American Executive. The article highlights our transformation from a turnaround story into a growing, execution-driven enterprise. As we reflect on more than 30 years of operational progress in a cyclical industry, we see how the foundation we built positions us for continued success. Looking ahead, we do so with confidence, excitement, and momentum as we pursue the opportunities before us. Additionally, I want to remind everyone that we are hosting an investor day in September. We look forward to welcoming both our longstanding shareholders and prospective investors to see firsthand the value we create every day. Yes, they'll also get a chance to look close at the scale of our operation, including some truly impressive manufacturing equipment.

Speaker #3: The article highlights our transformation from a turnaround story into a growing, execution-driven enterprise. As we reflect on more than 30 years of operational progress in a cyclical industry, we see how the foundation we built positions us for continued success.

Speaker #3: Looking ahead, we do so with confidence, excitement, and momentum, as we pursue the opportunities before us. Additionally, I want to remind everyone that we are hosting an investor day in September.

Speaker #3: We look forward to welcoming both our long-standing shareholders and prospective investors to see firsthand the value we create every day. And yes, they'll also get a chance to look close at the scale of our operation, including some truly impressive manufacturing equipment.

Eric Palomaki: We look forward to welcoming both our longstanding shareholders and prospective investors to see firsthand the value we create every day. Yes, they'll also get a chance to look close at the scale of our operation, including some truly impressive manufacturing equipment. Now, turning to our second quarter results, we delivered solid performance that reflects the continued resilience of our diversified portfolio and the ongoing execution of our Invest for Growth strategy. We continue to build on our commercial momentum, securing nearly $26 million of net wins in H1 2026, remaining on track to achieve our full-year objective of $50 million in additional new business awards.

Speaker #3: Now, turning to our second quarter results, we delivered solid performance that reflects the continued resilience of our diversified portfolio and the ongoing execution of our investor growth strategy.

Eric Palomaki: Now, turning to our second quarter results, we delivered solid performance that reflects the continued resilience of our diversified portfolio and the ongoing execution of our Invest for Growth strategy. We continue to build on our commercial momentum, securing nearly $26 million of net wins in H1 2026, remaining on track to achieve our full-year objective of $50 million in additional new business awards. Over the past two years, we have secured more than $112 million in new business wins. A growing number of these awards are now moving into production across a number of end markets. While many of our programs have longer quote to cash cycles, we continue to gain traction with customers seeking our SMC compound as their proprietary advanced composite materials. Producing this raw material compound typically offers shorter commercialization timelines.

Speaker #3: We continue to build on our commercial momentum, securing nearly $26 million of net wins in the first half of 2026. And remaining on track to achieve our full-year objective of $50 million in additional new business awards.

Speaker #3: Over the past two years, we have secured more than $112 million in new business wins, a growing number of these awards are now moving into production across a number of end markets.

Eric Palomaki: Over the past two years, we have secured more than $112 million in new business wins. A growing number of these awards are now moving into production across a number of end markets. While many of our programs have longer quote to cash cycles, we continue to gain traction with customers seeking our SMC compound as their proprietary advanced composite materials. Producing this raw material compound typically offers shorter commercialization timelines.

Speaker #3: While many of our programs have longer quote-to-cash cycles, we continue to gain traction with customers seeking our SMC compound as their proprietary advanced composite materials.

Speaker #3: Producing this raw material compound typically offers shorter commercialization timelines. To support our top-line momentum and capitalize on the growing sales pipeline, we strategically added two business development managers.

Eric Palomaki: To support our top-line momentum and to capitalize on the growing sales pipeline, we strategically added two business development managers, one dedicated to the construction and agricultural markets, another focused exclusively on expanding relationships with customers seeking proprietary SMC compounds. We remain focused on broadening our presence in attractive, new, and addressable markets, and our team continues to identify and engage new customer opportunities every day. This year's must-win battle includes our greenfield build in Monterrey, Mexico, where construction was completed in less than nine months, both on time and on budget. Our Monterrey facility is now in production of structural foam, structural web, and DCPD products, including installed prime paint and top coat paint application systems.

Speaker #3: One dedicated to the construction and agricultural markets, and another focused exclusively on expanding relationships with customers seeking proprietary SMC compounds. We remain focused on broadening our presence and attractive new and addressable markets and our team continues to identify and engage new customer opportunities every day.

Speaker #3: This year's must-win battle includes our Greenfield build in Monterey, Mexico, where construction was completed in less than nine months, both on time and on budget.

Speaker #3: Our Monterey facility is now in production of structural foam, structural web, and DCPD products, including installed prime paint and topcoat paint application systems. Turning to our facility in Matamoros, which will be on full display at our Investor Day in September, the planned expansion continues to make impressive progress and will increase our large molding capacity with two additional 4,500-ton machines during the second half of 2026.

Eric Palomaki: Turning to our facility in Matamoros, which will be on full display at our investor day in September, the plant expansion continues to make impressive progress and will increase our large molding capacity with two additional 4,500-ton machines during H2 2026. Importantly, our Mexico project installations and footprint optimization have not disrupted our existing operations and progress. Throughout this process, we have maintained flawless customer delivery and quality performance, demonstrating our team's ability to successfully execute significant growth initiatives without compromising operational excellence. I am incredibly proud of and grateful for our team's hard work, long hours, and unwavering commitment to making this achievement possible. Together, these strategic investments totaling $25 million across our Mexico operations, position us closer to our customers and align our business to capitalize on long-term growth opportunities. Operationally, our focus on disciplined execution continues to deliver results.

Speaker #3: Importantly, our Mexico project installations and footprint optimization have not disrupted our existing operations and progress. Throughout this process, we have maintained flawless customer delivery and quality performance.

Speaker #3: Demonstrating our team's ability to successfully execute significant growth initiatives without compromising operational excellence. I am incredibly proud of, and grateful for, our team's hard work, long hours, and unwavering commitment to making this achievement possible.

Speaker #3: Together, these strategic investments totaling $25 million across our Mexico operations position us closer to our customers and align our business to capitalize on long-term growth opportunities.

Eric Palomaki: Together, these strategic investments totaling $25 million across our Mexico operations, position us closer to our customers and align our business to capitalize on long-term growth opportunities. Operationally, our focus on disciplined execution continues to deliver results. During the quarter, we achieved 99.2% on-time delivery and a quality performance of 49 parts per million. Our quality performance was 49 PPM, meaning fewer than 50 defective parts for every one million parts produced. This level of performance is considered top-tier within the automotive supply chain and compares favorably with the quality expectations of leading OEM customers.

Speaker #3: Operationally, our focus on disciplined execution continues to deliver results. During the quarter, we achieved 99.2% on-time delivery and a quality performance of 49 parts per million.

Eric Palomaki: During the quarter, we achieved 99.2% on-time delivery and a quality performance of 49 parts per million. Our quality performance was 49 PPM, meaning fewer than 50 defective parts for every one million parts produced. This level of performance is considered top-tier within the automotive supply chain and compares favorably with the quality expectations of leading OEM customers. Simply put, more than 99.995% of the products we ship meet customer requirements. These results reflect a strong focus on repeatable operational excellence, a culture of continuous improvement, and the dedication of teams across all our facilities. This operational discipline has enabled us to improve profitability, diversify our business, expand into new markets, and continue investing in productivity, capacity, and continuous improvement innovations. New business wins totaling nearly $26 million in H1 2026, continue to transform and diversify Core Molding sales profile.

Speaker #3: Our quality performance was 49 PPM, meaning fewer than 50 defective parts for every 1 million parts produced. This level of performance is considered top-tier within the automotive supply chain, and compares favorably with the quality expectations of leading OEM customers.

Speaker #3: Simply put, more than 99.995% of the products we ship meet customer requirements. These results reflect a strong focus on repeatable operational excellence, a culture of continuous improvement, and the dedication of teams across all our facilities.

Eric Palomaki: Simply put, more than 99.995% of the products we ship meet customer requirements. These results reflect a strong focus on repeatable operational excellence, a culture of continuous improvement, and the dedication of teams across all our facilities. This operational discipline has enabled us to improve profitability, diversify our business, expand into new markets, and continue investing in productivity, capacity, and continuous improvement innovations. New business wins totaling nearly $26 million in H1 2026, continue to transform and diversify Core Molding sales profile. These awards further broaden our revenue base, reducing our exposure to historically cyclical end markets such as trucking and powersports, which improves our consistency of earnings. Importantly, 100% of our new business awards this year represent new opportunities rather than replacement programs, and approximately 65% originated outside of our traditional truck and powersports markets.

Speaker #3: This operational discipline has enabled us to improve profitability diversify our business, expand into new markets, and continue investing in productivity, capacity, and continuous improvement innovations.

Speaker #3: New business wins totaling nearly $26 million in the first half of 2026 continue to transform and diversify Core Molding's sales profile. These awards further broaden our revenue base, reducing our exposure to historically cyclical end markets such as trucking and power sports.

Eric Palomaki: These awards further broaden our revenue base, reducing our exposure to historically cyclical end markets such as trucking and powersports, which improves our consistency of earnings. Importantly, 100% of our new business awards this year represent new opportunities rather than replacement programs, and approximately 65% originated outside of our traditional truck and powersports markets. 74% of this business will be produced with our existing US manufacturing footprint, allowing us to leverage installed capacity, improve returns on invested capital, drive profitable growth, and generate stronger cash flow. As we have previously discussed, our team has secured approximately $112 million in incremental new business awards over the past 24 months, providing a clear line of sight to production revenue opportunities that could exceed $300 million in 2027. Just as importantly, many of these programs are supported by long-term customer relationships and sole source production of highly engineered components.

Speaker #3: This improves our consistency of earnings. Importantly, 100% of our new business awards this year represent new opportunities rather than replacement programs, and approximately 65% originated outside of our traditional truck and power sports markets.

Speaker #3: Seventy-four percent of this business will be produced with our existing U.S. manufacturing footprint, allowing us to leverage installed capacity, improve returns on invested capital, drive profitable growth, and generate stronger cash flow.

Eric Palomaki: 74% of this business will be produced with our existing US manufacturing footprint, allowing us to leverage installed capacity, improve returns on invested capital, drive profitable growth, and generate stronger cash flow. As we have previously discussed, our team has secured approximately $112 million in incremental new business awards over the past 24 months, providing a clear line of sight to production revenue opportunities that could exceed $300 million in 2027. Just as importantly, many of these programs are supported by long-term customer relationships and sole source production of highly engineered components. This gives us visibility into demand, confidence in our growth trajectory, and a strong foundation for creating sustainable long-term value for our shareholders. With that, I'll now turn the call over to Alex to review the financials in more details.

Speaker #3: As we have previously discussed, our team has secured approximately $112 million in incremental new business awards over the past 24 months. Providing a clear line of sight to production revenue opportunities that could exceed $300 million in 2027.

Speaker #3: Just as importantly, many of these programs are supported by long-term customer relationships and sole-source production of highly engineered components. This gives us visibility into demand, confidence in our growth trajectory, and a strong foundation for creating sustainable, long-term value for our shareholders.

Eric Palomaki: This gives us visibility into demand, confidence in our growth trajectory, and a strong foundation for creating sustainable long-term value for our shareholders. With that, I'll now turn the call over to Alex to review the financials in more details.

Speaker #3: With that, I'll now turn the call over to Alex to review the financials in more details.

Speaker #4: Thank you, Eric, and good morning, everyone. For the second quarter, production sales declined 1.2% year over year, a strong growth across power sports, building products, and industrial and utilities end markets, largely offset the current softness in medium and heavy-duty truck.

Alex Panda: Thank you, Eric, and good morning, everyone. For Q2, production sales declined 1.2% year-over-year. A strong growth across powersports, building products, and industrial and utilities end markets largely offset the current softness in medium and heavy-duty truck. Excluding truck, production sales across our remaining end markets increased significantly, up 20.8%, reflecting the diversification efforts Eric discussed and the strength of our commercial execution. To provide additional context, truck represented 40% of total product sales during the quarter, and this significant market declined by 23% compared with the prior year period. While truck remained a headwind to consolidated growth, we are beginning to see production volumes improve and expect sales to continue ramping through H2 2026. Our powersports end markets continued to perform well, generating 7% year-over-year revenue growth.

Speaker #4: Excluding truck, production sales across our remaining end markets increased significantly, up 20.8%, reflecting the diversification efforts Eric discussed and the strength of our commercial execution.

Speaker #4: To provide additional context, truck represented 40% of total product sales during the quarter. This significant market declined by 23% compared with the prior-year period.

Speaker #4: While truck remained a headwind to consolidated growth, we are beginning to see production volumes improve and expect sales to continue ramping through the second half of 2026.

Speaker #4: Our power sports end markets continue to perform well, generating 7% year-over-year revenue growth. Building products, while still a smaller portion of our overall portfolio, delivered exceptional growth of 36% compared with the prior year period, driven by the successful launch of previously awarded programs and increasing customer demand.

Alex Panda: Building products, while still a smaller portion of our overall portfolio, delivered exceptional growth of 36% compared with the prior year period, driven by the successful launch of previously awarded programs and increasing customer demand. We delivered meaningful gross margin of 20.3% in Q2, an improvement of 220 basis points compared with the prior year period. Gross margin benefited from a capacity charge received from a customer during the quarter. Excluding this item, gross margin was 19.4%, which remains at the high end of our targeted full year range of 17% to 19% and reflects the strength of our operational execution, product mix, and manufacturing performance. SG&A expense was $10.4 million or 16.6% of sales. Excluding $1.8 million of Mexico expansion and succession related expenses, SG&A was 13.8% of sales compared to 11.5% in the prior year period.

Speaker #4: We delivered a meaningful gross margin of 20.3% in the second quarter, an improvement of 220 basis points compared with the prior year period. Gross margin benefited from a capacity charge received from a customer during the quarter.

Speaker #4: Excluding this item, gross margin was 19.4%, which remains at the high end of our targeted full-year range of 17 to 19 percent and reflects the strength of our operational execution product mix and manufacturing performance.

Speaker #4: As GNA Expense was 10.4 million or 16.6% of sales. Excluding 1.8 million of Mexico expansion and secession-related expenses, SG&A was 13.8% of sales compared to 11.5% in the prior year period.

Speaker #4: These investments support our long-term growth initiatives and leadership succession planning while we continue to maintain disciplined cost management. Operating income for the quarter was 2.3 million compared to 5.2 million in the prior year period, reflecting the elevated SG&A investments discussed above.

Alex Panda: These investments support our long-term growth initiatives and leadership succession planning while we continue to maintain disciplined cost management. Operating income for the quarter was $2.3 million, compared to $5.2 million in the prior year period, reflecting the elevated SG&A investments discussed above. Net interest expense was $60,000 in Q2, compared to $32,000 in the prior year quarter. During the quarter, we recognized a non-cash loss of $88,000 related to the extinguishment of term loan debt and a gain of $170,000 associated with the termination of our interest rate swap. Net income was $1.8 million or $0.21 per diluted share. adjusted EBITDA was $7.6 million, representing 12.2% of sales, compared with the 12% in the prior year period. Despite the continued softness in truck, our adjusted EBITDA margin remained stable, reflecting the resiliency of our diversified portfolio and ongoing operational discipline.

Speaker #4: Net interest expense was $60,000 in the second quarter compared to $32,000 in the prior year quarter. During the quarter, we recognized a non-cash loss of $88,000 related to the extinguishment of term loan debt and a gain of $170,000 associated with the termination of our interest rate swap.

Speaker #4: Net income was $1.8 million or 21 cents per diluted share, adjusted EBITDA was 7.6 million representing 12.2% of sales, compared with the 12% in the prior year period.

Speaker #4: Despite the continued softness in truck, our adjusted EBITDA margin remained stable. Reflecting the resiliency of our diversified portfolio and ongoing operational discipline. Net cash provided by operating activities was $7.1 million during the first half, while capital expenditures to date totaled $12.1 million primarily related to our Mexico expansion initiatives.

Alex Panda: Despite the continued softness in truck, our adjusted EBITDA margin remained stable, reflecting the resiliency of our diversified portfolio and ongoing operational discipline. Net cash provided by operating activities was $7.1 million during H1, while capital expenditures to date totaled $12.1 million, primarily related to our Mexico expansion initiatives. For full year 2026, we continue to expect capital expenditures of approximately $25 million to $30 million, with $18 million to $20 million dedicated to our strategic investments in Mexico.

Alex Panda: Net cash provided by operating activities was $7.1 million during H1, while capital expenditures to date totaled $12.1 million, primarily related to our Mexico expansion initiatives. For full year 2026, we continue to expect capital expenditures of approximately $25 million to $30 million, with $18 million to $20 million dedicated to our strategic investments in Mexico. Our balance sheet remains a significant competitive advantage. We ended the quarter with $12.1 million in cash and no outstanding debt. In early July, we amended and extended our credit facility. The amendment increased our debt capacity to $100 million, consisting of a $50 million revolving credit facility and a $50 million delayed draw term loan, both maturing in 2031. This refinancing enhances our financial flexibility, lowers our cost of capital, and provides substantial capacity to fund future organic and inorganic growth opportunities while maintaining a conservative balance sheet.

Speaker #4: For the full year 2026, we continue to expect capital expenditures of approximately $25 million to $30 million, with $18 million to $20 million dedicated to our strategic investments in Mexico.

Speaker #4: Our balance sheet remains a significant competitive advantage we ended the quarter with 12.1 million in cash and no outstanding debt. In early July, we amended an extended our credit facility.

Alex Panda: Our balance sheet remains a significant competitive advantage. We ended the quarter with $12.1 million in cash and no outstanding debt. In early July, we amended and extended our credit facility. The amendment increased our debt capacity to $100 million, consisting of a $50 million revolving credit facility and a $50 million delayed draw term loan, both maturing in 2031. This refinancing enhances our financial flexibility, lowers our cost of capital, and provides substantial capacity to fund future organic and inorganic growth opportunities while maintaining a conservative balance sheet.

Speaker #4: The amendment increased our debt capacity to $100 million. Consisting of a $50 million revolving credit facility and a $50 million delayed draw term loan.

Speaker #4: Both maturing in 2031. This refinancing enhances our financial flexibility, lowers our cost of capital, and provides substantial capacity to fund future organic and inorganic growth opportunities while maintaining a conservative balance sheet.

Speaker #4: Return on capital employed was 5.7% or 6.2% excluding cash. Based on trailing 12-month pre-tax recently, awarded programs launched, production volumes increased and asset utilization improves we expect return on capital employed to strengthen to our long-term goal of 14%.

Alex Panda: Return on capital employed was 5.7%, or 6.2% excluding cash, based on trailing 12-month pre-tax operating income. As recently awarded programs launch, production volumes increase, and asset utilization improves, we expect return on capital employed to strengthen to our long-term goal of 14%. Additional details, including GAAP to non-GAAP reconciliations, are available in our earnings release. During H1 2026, we repurchased 24,545 shares at an average price of $18.62 per share, representing approximately $457,000 of capital return to shareholders. No shares were repurchased in Q2. Earlier this year, we increased our share repurchase authorization by $6.5 million and intend to continue deploying capital strategically to invest in future growth and offset share dilution. Today, we are reiterating our fiscal 2026 guidance and continue to expect the following.

Speaker #4: Additional details, including GAAP to non-GAAP reconciliations, are available in our earnings release. During the first half of 2026, we repurchased 24,545 shares at an average price of $18.62 per share.

Speaker #4: Representing approximately $457,000 of capital returned to shareholders. No shares were repurchased in the second quarter. Earlier this year, we increased our share repurchase authorization by 6.5 million and intend to continue deploying capital strategically to invest in future growth and offset share dilution.

Speaker #4: Today, we are reiterating our fiscal 2026 guidance and continue to expect the following. One, total sales to be flat to up approximately 5% year-over-year with project-based tooling revenue weighted toward the fourth quarter.

Alex Panda: One, total sales to be flat to up approximately 5% year over year, with project-based tooling revenue weighted toward Q4. Two, the majority of the 63 million new program awards secured in 2025 begin contributing meaningfully in H2 2026 and reach full annualized run rates during 2027. Three, truck production volumes continue improving through H2 this year. Four, full year gross margin in the range of 17% to 19%, although individual quarters may fall above or below that range based on product mix, volume, and timing. Regarding non-recurring costs, Mexico expansion costs were $3.4 million through H1 the year, and with the majority of the work now complete, we do not expect a material increase to those costs during the balance of 2026.

Speaker #4: Two, the majority of the $63 million new program awards secured in 2025 begin contributing meaningfully in the second half of 2026 and reach full annualized run rates during 2027.

Speaker #4: Three, truck production volumes continue improving through the second half of this year. Four, full-year gross margin in the range of 17 to 19 percent, although individual quarters may fall above or below that range based on product mix, volume, and timing.

Speaker #4: Regarding non-recurring costs, Mexico expansion costs were 3.4 million through the first half of the year and with the majority of the work now complete, we do not expect a material increase to those costs during the balance of 2026.

Speaker #4: In addition, we incurred $1.4 million of secession-related expenses through the first half and do not anticipate significant additional costs for the remainder of the year.

Alex Panda: In addition, we incurred $1.4 million of succession-related expenses through H1 and do not anticipate significant additional costs for the remainder of the year. Turning to regulatory and macroeconomic developments. While the policy environment remains dynamic, we continue to work closely with customers across North America and have not experienced any material disruption to production schedules related to ongoing USMCA discussions. Our focus remains on managing the factors within our control, and we believe our diversified manufacturing footprint, strong balance sheet, and longstanding customer relationships position us well as trade policies evolve. Looking further ahead, discussions surrounding the USMCA review have increasingly centered on strengthening North American manufacturing and expanding regional sourcing. Regarding recent increases in oil prices, we maintain contractual raw material pass-through mechanisms that are expected to substantially mitigate the related cost impacts.

Speaker #4: Turning to regulatory and macroeconomic developments, while the policy environment remains dynamic, we continue to work closely with customers across North America and have not experienced any material disruption to production schedules related to ongoing USMCA discussions.

Speaker #4: Our focus remains on managing the factors within our control and we believe our diversified manufacturing footprint, strong balance sheet, and long-standing customer relationships position us well as trade policies evolve.

Speaker #4: Looking further ahead, discussions surrounding the USMCA review have increasingly centered on strengthening North American manufacturing and expanding regional sourcing. Regarding recent increases in oil prices, we maintain contractual raw material pass-through mechanisms that are expected to substantially mitigate the related cost impacts.

Speaker #4: Overall, we remain confident in our outlook. Significant available capacity and a balance sheet that provides flexibility to continue investing in long-term growth. With that, I will turn the call back over to Eric.

Alex Panda: Overall, we remain confident in our outlook, significant available capacity, and a balance sheet that provides flexibility to continue investing in long-term growth. With that, I will turn the call back over to Eric.

Speaker #4: Thank you, Alex. As we look ahead, we are increasingly aligned with some of the most compelling growth opportunities in North America. Our customers and their customers are making critical investments in utility, modernization, communications infrastructure, grid resiliency, and energy transition initiatives.

Eric Palomaki: Thank you, Alex. As we look ahead, we are increasingly aligned with some of the most compelling growth opportunities in North America. Our customers and their customers are making critical investments in utility modernization, communications infrastructure, grid resiliency, and energy transition initiatives. We have secured programs supporting projects funded by the Build America, Buy America Act and other Infrastructure Investment and Jobs Act initiatives, while the ongoing expansion of high-speed broadband networks continues to create opportunities for our advanced composite solutions. During the quarter, we secured a significant award for battery energy storage systems and continue to pursue opportunities tied to accelerating power demand, due in part to AI data center development, utility infrastructure modernization, grid reliability, and load shedding solutions. These markets require durable, lightweight, and highly engineered composite products, areas where CORE has set the standard in differentiated capabilities with longstanding customer relationships.

Speaker #4: We have secured programs supporting projects funded by the Build America Buy America Act and other infrastructure investment and jobs act initiatives. While the ongoing expansion of high-speed broadband networks continues to create opportunities for our advanced composite solutions, during the quarter we secured a significant award for battery energy storage systems and continue to pursue opportunities tied to accelerating power demand due in part to AI data center development, utility infrastructure modernization, grid reliability, and load shedding solutions.

Eric Palomaki: During the quarter, we secured a significant award for battery energy storage systems and continue to pursue opportunities tied to accelerating power demand, due in part to AI data center development, utility infrastructure modernization, grid reliability, and load shedding solutions. These markets require durable, lightweight, and highly engineered composite products, areas where CORE has set the standard in differentiated capabilities with longstanding customer relationships.

Speaker #4: These markets require durable, lightweight, and highly engineered composite products areas where CORE has set the standard in differentiated capabilities with long-standing customer relationships. Many of these opportunities are concentrated within our industrial and utilities end markets, where we continue to scale adoption of our proprietary SMC technologies.

Eric Palomaki: Many of these opportunities are concentrated within our industrial and utilities end markets, where we continue to scale adoption of our proprietary SMC technologies. We are particularly encouraged when customers design our proprietary components and materials into their branded products, serving both consumers and critical infrastructure markets. Once engineered into an application, our solution often becomes integral to the performance and value proposition of the end product, creating long-term customer relationships and opportunities to partner and grow alongside them. Our powersports and utilities markets provide strong examples of this strategy in action. In powersports, our OEM customers incorporate proprietary advanced composite materials into their watercraft, where durability, light weighting, and performance are important differentiators for consumers. These attributes help our customers strengthen their brands and distinguish their products in highly competitive markets.

Speaker #4: We are particularly encouraged when customers design our proprietary components and materials into their branded products, serving both consumer and critical infrastructure markets. Once engineered into an application, our solution often becomes integral to the performance and value proposition of the end product, creating long-term customer relationships and opportunities to partner and grow alongside them.

Speaker #4: Our power sports and utilities markets provide strong examples of this strategy in action. In power sports, our OEM customers incorporate proprietary advanced composite materials into their watercraft, where durability, lightweighting, and performance are important differentiators for consumers.

Speaker #4: These attributes help our customers strengthen their brands and distinguish their products in highly competitive markets. In utilities and industrial applications, customers increasingly utilize composite solutions as an alternative to traditional materials such as concrete.

Eric Palomaki: In utilities and industrial applications, customers increasingly utilize composite solutions as an alternative to traditional materials such as concrete. The benefits include enhanced durability, lower transportation and installation costs, reduced storage requirements, and improved worker safety. For example, composite enclosures for underground transmission can often be installed by two technicians without a crane, simplifying deployment while reducing the risk of injury. Equally important, these products are increasingly being marketed around sustainability and performance benefits, including long-term resistance to chemicals, water, and chipping. Whether serving retail customers or supporting large-scale infrastructure and hyperscale construction projects, these applications demonstrate how our proprietary materials create value for customers while expanding our opportunities for long-term growth. As Alex discussed on building products, we secured significant customer wins in 2025 that have now entered production and are generating revenue.

Speaker #4: The benefits include enhanced durability, lower transportation and installation costs, reduced storage requirements, and improved worker safety. For example, composite enclosures for underground transmission can often be installed by two technicians without a crane, simplifying deployment while reducing the risk of injury.

Speaker #4: Equally important, these products are increasingly being marketed around sustainability and performance benefits, including long-term resistance to chemicals, water, and chipping. Whether serving retail customers or sporting large-scale infrastructure and hyperscale construction projects, these applications demonstrate how our proprietary materials create value for customers while expanding our opportunities for long-term growth.

Speaker #4: As Alex discussed on building products, we secured significant customer wins in 2025 that have now entered production and are generating revenue. We win programs well before revenue is realized.

Eric Palomaki: We win programs well before revenue is realized, as design, tooling, validation testing, and production launch occur over multiple phases. Our building products revenue in Q2 grew more than 35% year-over-year, reflecting the successful conversion of commercial efforts into meaningful revenue and earnings growth. At the same time, we are beginning to see improved demand trends in the truck market and expect production volumes to continue to strengthen through 2026 and are forecasted to increase into 2028. Combined with the growth of our newer end markets, these activities create a broader and more balanced platform for future performance. Looking ahead, we remain confident in the long-term strength of our business and the significant opportunities ahead. Our disciplined capital allocation strategy continues to balance investment in organic growth initiatives with a thoughtful approach to acquisitions that can enhance our scale, capabilities, and market reach.

Speaker #4: As design, tooling, validation testing, and production launch occur over multiple phases, our building products revenue in the second quarter grew more than 35 percent year over year, reflecting the successful conversion of commercial efforts into meaningful revenue and earnings growth.

Speaker #4: At the same time, we are beginning to see improved demand trends in the truck market and expect production volumes to continue to strengthen through 2026.

Speaker #4: And our forecasted to increase into 2028. Combined with the growth of our newer end markets, these activities create a broader and more balanced platform for future performance.

Eric Palomaki: Combined with the growth of our newer end markets, these activities create a broader and more balanced platform for future performance. Looking ahead, we remain confident in the long-term strength of our business and the significant opportunities ahead. Our disciplined capital allocation strategy continues to balance investment in organic growth initiatives with a thoughtful approach to acquisitions that can enhance our scale, capabilities, and market reach.

Speaker #4: Looking ahead, we remain confident in the long-term strength of our business and the significant opportunities ahead. Our disciplined capital allocation strategy continues to balance investment and organic growth initiatives with a thoughtful approach to acquisitions that can enhance our scale, capabilities, and market reach.

Speaker #4: While we are broadening our evaluation of potential transactions, our financial and strategic criteria remain unchanged. We are committed to pursuing opportunities that are accretive, strategically aligned, and capable of creating long-term shareholder value.

Eric Palomaki: While we are broadening our evaluation of potential M&A opportunities, including larger transactions, our financial and strategic criteria remain unchanged. We are committed to pursuing opportunities that are accretive, strategically aligned, and capable of creating long-term shareholder value. Supported by a motivated commercial organization, a strong operational foundation, and our reputation as a trusted partner delivering comprehensive design, fabrication, and finished assembled solutions, we continue to make progress towards our long-term revenue objective of $500 million. At the same time, we remain focused on profitability, cash flow generation, return on capital employed, and serving customers across attractive end markets, including truck, powersports, construction, energy, industrial, aerospace, and medical. I want to thank our dedicated employees for their hard work, commitment, and unwavering focus on excellence. We are celebrating our 30-year anniversary this year.

Speaker #4: Supported by a motivated commercial organization, a strong operational foundation, and our reputation as a trusted partner, delivering comprehensive design, fabrication, and finish assembled solutions, we continue to make progress towards our long-term revenue objective of $500 million.

Speaker #4: At the same time, we remain focused on profitability, cash flow generation, return on capital employed, and serving customers across attractive end markets, including truck, power sports, construction, energy, industrial, aerospace, and medical.

Speaker #4: I want to thank our dedicated employees for their hard work, commitment, and unwavering focus on excellence. We are celebrating our 30-year anniversary this year.

Speaker #4: After three decades of continuous operations, we know that people are our greatest competitive advantage, and the driving force behind our success. I also want to thank our customers, shareholders, and board for their continued confidence and support as we execute our long-term strategy.

Eric Palomaki: After three decades of continuous operations, we know that people are our greatest competitive advantage and the driving force behind our success. I also want to thank our customers, shareholders, and board for their continued confidence and support as we execute our long-term strategy. Before I close, I want to mention our upcoming Investor Day and plant tour in Brownsville, Texas, on 29 September and 30 September. I am excited for investors to see firsthand what makes Core unique: our people, our culture, our manufacturing capabilities, and the operational discipline that drives our performance. We have received tremendous interest and already have a strong group of investors registered. Capacity is limited, but a small number of openings remain, and we would welcome the opportunity to showcase our business to anyone interested in learning more about our long-term value creation story. With that, we'll open the line for questions. Operator?

Speaker #4: Before I close, I want to mention our upcoming Investor Day and plant tour in Brownsville, Texas, on September 29 and 30. I am excited for investors to see firsthand what makes CORE unique: our people, our culture, our manufacturing capabilities, and the operational discipline that drives our performance.

Eric Palomaki: I am excited for investors to see firsthand what makes Core unique: our people, our culture, our manufacturing capabilities, and the operational discipline that drives our performance. We have received tremendous interest and already have a strong group of investors registered. Capacity is limited, but a small number of openings remain, and we would welcome the opportunity to showcase our business to anyone interested in learning more about our long-term value creation story. With that, we'll open the line for questions. Operator?

Speaker #4: We have received tremendous interest and already have a strong group of investors registered. Capacity is limited, but a small number of openings remain, and we would welcome the opportunity to showcase our business to anyone interested in learning more about our long-term value creation story.

Speaker #4: With that, we'll open the line for questions. Operator?

Speaker #1: 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.

Operator: 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. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today is from Chip Moore with ROTH MKM. Please go ahead.

Speaker #1: To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today is from Chip Moore with Roth MKM.

Speaker #1: Please go ahead.

Chip Moore: Hi. Good morning. Thanks for taking the question.

Speaker #5: Hi, good morning. Thanks for taking the question.

Speaker #2: Morning, Chip.

Eric Palomaki: Morning, Chip.

Speaker #5: Hey, good morning. I wanted to ask about trucking. It sounds like you're starting to see some encouraging signs, and you expect that to continue here in the back half.

Chip Moore: Hey, morning. I wanted to ask on trucking. It sounds like you're starting to see some encouraging signs, and you expect that to continue here in the H2. Just maybe you can expand on that and provide a little color on sort of what you're seeing and what your expectations are for go forward.

Speaker #5: Just maybe you can expand on that and provide a little color on sort of what you're seeing and what your expectations are for go forward.

Speaker #2: Yeah, sure. On the truck side, certainly the first half would have been on the lower side for us, and we see that recovering second half of this year.

Eric Palomaki: Yeah, sure. On the truck side, certainly the H1 would have been on the lower side for us, and we see that recovering H2 of this year. If you go to industry forecasts, that's over the next two and a half years, we'll continue to see increases. Both from a, I would say, very specifically from that forecasting and industry knowledge perspective, we see that increasing, as well as in the order books and the day-to-day action that's happening today. We see that across all of our truck customers that the H2 will be stronger.

Speaker #2: And if you go to industry forecasts, that's over the next two and a half years. We'll continue to see increases. And so, both from a—I would say, very specifically from that forecasting and industry knowledge perspective—we see that increasing.

Speaker #2: As well as in the order books and the day-to-day action that's happening today, we see that across all of our truck customers that the second half will be stronger.

Speaker #5: Okay, good to hear. And maybe on the flip side, right, the momentum in non-trucking, non-power sports, you called out some wins there and how you're broadening and diversifying.

Chip Moore: Okay. Good to hear. Maybe on the flip side, the momentum in non-trucking, non-powersports, you called out some wins there.

Chip Moore: Okay. Good to hear. Maybe on the flip side, the momentum in non-trucking, non-powersports, you called out some wins there. How you're broadening and diversifying? Just any more color around some of those markets, how they're trending, and what's the opportunity over the next couple of years?

Chip Moore: how you're broadening and diversifying. Just any more color around some of those markets, how they're trending, and what's the opportunity over the next couple of years?

Speaker #5: Just any more color around some of those markets? How they're trending and what's the opportunity over the next couple of years?

Speaker #2: Yeah, I'll touch on some of the new wins, and then I'll let Alex touch on the quarter-over-quarter and improvements in some of those other industries on the new wins.

Eric Palomaki: Yeah. I'll touch on some of the new wins, then I'll let Alex touch on the quarter-over-quarter and improvements in some of those other industries. On the new wins, we're up to $25.8 million, just shy of $26 million for the H1. Those are, I think I mentioned in the script, 65% of those are outside of what we call the traditional truck and powersports business, so in new industries. Some of those are in the utilities market, where we're trying to move underground data cables, infrastructure, networking, things like that, into neighborhoods, residentials, moving all of this data that has got to be transmitted to AI data centers, and all of the modernization of those internet connections. All of those need interconnect boxes. So we have had a number of years now of success.

Speaker #2: We're up to 25 million—25.8 million, just shy of 26 million—for the first half. And those are, I think I mentioned in the script, 65 percent of those are outside of what we call the traditional truck and power sports business.

Speaker #2: So in new industries, some of those are in the utilities market where we're trying to move underground data cables, infrastructure networking, things like that into neighborhoods, residentials, moving all of this data that has got to be transmitted to AI data centers and all of the modernization of those internet connections all of those need interconnect boxes.

Speaker #2: And so, we have had a number of years now of success. And again this quarter, another customer is trusting us with our composite solution.

Eric Palomaki: Again, this quarter, another customer that's trusting us with our composite solution. It's a better replacement than concrete. It's lighter. Two people can put it in without a crane. You don't have any kind of corrosion or cracking problems like you do with wood or wood rotting, or metals corroding. The composite solution we have provides a good structure, as well as a lighter product that's easier to install. So it's really kind of taking off with multiple customers that are building composite solutions for anything that requires underground data cables being buried. On top of that, we had another SMC compound win this quarter. That one is inside the trucking business, so we're excited for that one, as well as an electric vehicle tailgate cover that we also won this quarter.

Speaker #2: It's a better replacement than concrete. It's lighter, two people can put it in without a crane. You don't have any kind of corrosion or cracking problems.

Speaker #2: Like you do with wood or wood rotting, or metals, corroding. So the composite solution we have provides a good structure as well as a lighter product that's easier to install.

Speaker #2: And so it's really kind of taking off with multiple customers that are building composite solutions for anything that requires underground data cables being buried.

Speaker #2: On top of that, we had another SMC compound win this quarter, and that one is inside the trucking business. So we're excited for that one.

Speaker #2: As well as an electric vehicle tailgate cover that we also won this quarter. So a number of good products—some of them inside that traditional business, some of them outside.

Eric Palomaki: A number of good products, some of them inside that traditional business, some of them outside. We'll continue to grow those and diversify. Finally, I'd want to add, Chip, you'll remember that we always try to use the assets we have. 74% of it being on our US facilities that have existing presses where we don't need to buy or make a large capital investment, we just run those products on an existing asset, is a very good win for us this year. We're excited about that metric.

Speaker #2: But we'll continue to grow those and diversify, and finally, I'd want to add, Chip, you'll remember that we've always tried to use the assets we have. So, 74% of it is on our U.S. facilities that have existing presses, where we don't need to buy or make a large capital investment.

Speaker #2: We just run those products on an existing asset; it is a very good win for us this year, so we're excited about that metric.

Speaker #3: Yeah, and I think the growth it's exciting to see the wins that we've talked about over the last couple of years are starting to come through on the P&L, right?

Chip Moore: Yeah.

Eric Palomaki: Yeah. Thanks, Chip.

Alex Panda: It's exciting to see the wins that we've talked about over the last couple of years are starting to come through on the P&L, right? You have powersports year-over-year. We have the skid plates launch that launched in Q3 of the previous year. Year-over-year, that's an increase. Also in building products, the door skins that we launched in the end of Q2 of last year. We get a full quarter this year. You see an increase in building products. The last one I'll mention is in the other category, automotive. We've run an automotive program for a while now, and we saw some pretty significant increases on that program in Q2. That was just a demand increase. Got it. Very helpful and good to hear. Great color.

Speaker #3: You have power sports year-over-year. We have the skid plates launch that launched in Q3 of the previous year. So, year-over-year, that's an increase.

Speaker #3: Then, also in building products, the door skins that we launched in Q2, at the end of Q2 last year, we get a full quarter this year.

Speaker #3: And so you see an increase in building products. And then the last one I'll mention is in the other category, automotive. We've run an automotive program for a while now, and we saw some pretty significant increases on that program in Q2.

Speaker #3: So that was just a demand increase.

Speaker #5: You got a very, very helpful and good to hear, great color. And maybe just my last one, guys, just around, I think you called out M&A scope, sort of broadening or maybe even looking at some larger stuff out there.

Chip Moore: Maybe just my last one, guys, just around, I think you called out M&A scope sort of broadening or maybe even looking at some larger stuff out there. Just walk us through what you're thinking about on the acquisition front.

Speaker #5: Just walk us through what you're thinking about on the acquisition front.

Speaker #2: Yeah. Alex and I have had the chance to visit a number of opportunities already. We're averaging about one a month and some of those have been smaller in scale than what we've looked at and some of them have been a little bit larger in scale.

Eric Palomaki: Yeah. Alex and I have had the chance to visit a number of opportunities already. We're averaging about one a month, and some of those have been smaller in scale than what we've looked at, and some of them have been a little bit larger in scale. Really, the focus isn't necessarily on specifically the size. It's how it can be accretive, how it can add diversification to our portfolio, how we can make it a very good return on capital employed opportunity that fits with Core Molding. I think that's the most important thing, is that we stay disciplined to something that fits our culture, our processes, our sort of DNA.

Speaker #2: But really, the focus isn't necessarily specifically on the size. It's how we can be accretive, how we can add diversification to our portfolio, and how we can make it a very good return on capital employed opportunity that fits with Core Molding.

Speaker #2: I think that's the most important thing is that we stay disciplined to something that fits our culture, our processes, our sort of DNA.

Speaker #5: Very good. Appreciate it. Thanks very much.

Chip Moore: Very good. Appreciate it. Thanks very much.

Speaker #3: Thanks, Chip.

Eric Palomaki: Thanks, Chip.

Speaker #1: Again, if you have a question, please press star then one. The next question is from Bill Dieselham with Tyeton Capital. Please go ahead.

Operator: Again, if you have a question, please press star then one. The next question is from Bill Dezellem with Tieton Capital. Please go ahead.

Bill Dezellem: Thank you. A couple of questions. First of all, relative to the growth that you've experienced this quarter and in H1, I'd like you to tie that back to the year-ago Q2 having nearly $18 million of tooling. Is that or was that a leading indicator for this growth, or are they really unrelated in this case?

Speaker #4: Thank you. A couple of questions. First of all, relative to the growth that you've experienced this quarter and in the first half, and I'd like you to tie that back to the year ago Q2 having nearly 18 million of tooling.

Speaker #4: Is that or was that a leading indicator for this growth? Or are they really unrelated in this case?

Eric Palomaki: Yeah. Bill, thanks for the question. In this specific case, no, they are not connected. The large tooling project that we closed in Q2 last year and in Q4 of last year related to an International Truck job. That job will be launching here in the beginning of 2027, and it's a replacement program. I would say normally, yes, right? If we're recognizing revenue, tooling revenue, project revenue, that product sales revenue will follow. In this case, though, specifically, they're not connected.

Speaker #2: Yeah. So Bill, thanks for the question. So in this specific case, no, they are not connected. The large tooling project that we closed in Q2 last year and in Q4 of last year related to an international truck job.

Speaker #2: That job will be launching here in the beginning of 2027. And it is a replacement program. And so I would say normally yes, right?

Speaker #2: If we're recognizing tooling revenue, project revenue, then product sales revenue will follow. In this case, though, specifically, they're not connected.

Speaker #4: Okay. That's helpful. And maybe you can use this to educate me. What would be the normal lag in time between the tooling revenue and having production revenue?

Operator 2: Okay. That's helpful. Maybe you can use this to educate me. What would be the normal lag in time between the tooling revenue and having production revenue, if it were a normal circumstance and not this one that we're talking about here.

Bill Dezellem: Okay. That's helpful. Maybe you can use this to educate me. What would be the normal lag in time between the tooling revenue and having production revenue, if it were a normal circumstance and not this one that we're talking about here.

Speaker #4: If it were a normal circumstance, and not this one that we're talking about here.

Speaker #2: Yeah. Bill, I would say on average it's 12 to 24 months. That's a pretty big range for you. But even a big program like the one Alex just talked about, an international truck program, that's probably close to a year delayed as far as the truck launch.

Eric Palomaki: Yeah. Bill, I would say on average, it's 12 to 24 months. That's a pretty big range for you, but even a big program like the one Alex just talked about, an International Truck program, that's probably close to 1 year delayed as far as the truck launch. We've been ready as far as we being a tier 1 supplier, a key tier 1 to the truck OEM. If they're not ready with all of their suppliers and don't launch the vehicle, in this case, it's not a big impact to revenue for us because it's replacement, so we just keep building the old vehicle. As they transition to the new one, there's a lot of great quality improvements and operational improvements that come along with that transition. We're looking forward to that launch coming up at the end of this year to early next year.

Speaker #2: So we've been ready as far as we being a tier one supplier, a key tier one to the truck OEM. But if they're not ready with all of their suppliers and don't launch the vehicle, in this case, it's not a big impact to revenue for us because it's replacement.

Speaker #2: So we just keep building the old vehicle. But as they transition to the new one, there's a lot of great quality improvements and operational improvements that come along with that transition.

Eric Palomaki: As they transition to the new one, there's a lot of great quality improvements and operational improvements that come along with that transition. We're looking forward to that launch coming up at the end of this year to early next year. When we talk about that lag, it's why we sometimes note about SMC compounds. We're finding that we can get all of that testing and validation done in the six-month range. We're doing one tooling project for, call it more of a mold and ship.

Speaker #2: So we're looking forward to that launch, coming up at the end of this year to early next year. When we talk about that lag, it's why we sometimes note SMC compounds.

Eric Palomaki: When we talk about that lag, it's why we sometimes note about SMC compounds. We're finding that we can get all of that testing and validation done in the six-month range. We're doing one tooling project for, call it more of a mold and ship. There's no assembly, no complicated add-ons, and we're doing that in about seven months, six to seven months. We've had a few wins that we've gotten well under that 12 months, but when you think of the bigger assembled products, a hood, a roof, a watercraft, they're all in the 12 to 24 month from that point of tooling to the point of production revenues and what we would call product revenues.

Speaker #2: We're finding that we can get all of that testing and validation done in the six-month range. We have done we're doing one tooling project for more of a mold and ship.

Speaker #2: There's no assembly, no complicated add-ons. And we're doing that in about seven months, six to seven months. So we've had a few wins that we've gotten well under that 12-month.

Eric Palomaki: There's no assembly, no complicated add-ons, and we're doing that in about seven months, six to seven months. We've had a few wins that we've gotten well under that 12 months, but when you think of the bigger assembled products, a hood, a roof, a watercraft, they're all in the 12 to 24 month from that point of tooling to the point of production revenues and what we would call product revenues.

Speaker #2: But when you think of the bigger assembled products, a hood, a roof, a watercraft, they're all in the 12 to 24-month from that point of tooling to the point of production revenues and product, what we would call product revenues.

Operator 2: That's very helpful. Thank you. Then, you talked a little bit about the truck market, and that the anticipation from an industry perspective is that there will be growth over the next, say, two and a half years. Would you please tie that into the current new regulations that are or are not coming in? Just what are the moving pieces here, and how do you see that regulatory environment affecting the moves to new models?

Bill Dezellem: That's very helpful. Thank you. Then, you talked a little bit about the truck market, and that the anticipation from an industry perspective is that there will be growth over the next, say, two and a half years. Would you please tie that into the current new regulations that are or are not coming in? Just what are the moving pieces here, and how do you see that regulatory environment affecting the moves to new models?

Speaker #4: That's very helpful. Thank you. And then you talked a little bit about the truck market and that the anticipation from an industry perspective is that there will be growth over the next, say, two and a half years.

Speaker #4: Would you please tie that into the current new regulations that are or are not coming in? And just what are the moving pieces here and how do you see that regulatory environment affecting the moves to new models?

Speaker #2: Yeah, so the truck market is recovering in the second half of this year, or improving. Exactly how much that will grow remains to be determined in the second half.

Eric Palomaki: Yeah. Truck market recovering H2 of this year or improving. Exactly how much that will grow, we have to be determined in the H2, but definitely seeing the H2 stronger than the H1. The industry predicts annual volumes for the next five years, and they see the next two and a half years of continued growth of both Class 8 and medium-duty trucks. You do touch correctly on the wildcard that is out there that maybe none of us know what that wildcard is exactly gonna be if somebody changes it. 1 January 2027, so, five months away, six months away from now, the emissions regulations do change, and that will require powertrains differences for all of the OEMs.

Speaker #2: But definitely seeing the second half stronger than the first half. The industry predicts annual volumes for the next five years, and they see the next two and a half years of continued growth of both Class 8 and medium-duty trucks.

Speaker #2: You do touch correctly on the wild card that is out there that maybe none of us know what that wild card is exactly going to be.

Speaker #2: If somebody changes it, but January 1st of '27—so five or six months away from now—the emissions regulations do change, and that will require powertrain differences for all of the OEMs.

Speaker #2: So that added cost, or added price, on the sale of a truck could create a, I would call it, short-term, quarter-over-quarter impact to volume, but likely not change that overall annual trend over the next two and a half to three years.

Eric Palomaki: That added cost or added price on the sale of a truck could create a, I would call, short-term, quarter-over-quarter impact to volume, but likely not change that overall annual trend over the next two and a half to three years. There's lots of conversations out in the industry about whether that emissions regulation will have slight changes to it, tweaks to it. It likely won't change drastically, but it could change its timing, could change some of the details around it. We don't have any formal insight onto exactly what that is. As of right now, it goes into effect 1 January 2027.

Speaker #2: There's lots of conversations out in the industry about whether that emissions regulation will have slight changes to it—tweaks to it. It likely won't change drastically, but it could change its timing or some of the details around it.

Speaker #2: We don't have any formal insight into exactly what that is, but as of right now, it goes into effect January 1st of '27.

Speaker #3: And even if the they were to roll back some of the standards the hardware changes are already done in the design. The OEMs won't be changing any hardware because of it.

Alex Panda: Even if they were to roll back some of the standards, the hardware changes are already done in the design. The OEMs won't be changing any hardware because of it.

Speaker #4: That's helpful. And not to get too granular here, but do the regulations apply to trucks produced after January 1, ordered after January 1, or delivered?

Operator 2: That's helpful. Not to get too granular here, but do the regulations apply to trucks produced after 1 January, ordered after 1 January, or delivered? What's actually the cutoff? Where I'm going with this is there currently, given the regulations potentially being in flux and the rumors out there, does that create an incentive for the buyers literally to wait as late in December as possible, place their order, then we see volume from a Core's perspective increasing in the first half of next year? What's the reality?

Bill Dezellem: That's helpful. Not to get too granular here, but do the regulations apply to trucks produced after 1 January, ordered after 1 January, or delivered? What's actually the cutoff? Where I'm going with this is there currently, given the regulations potentially being in flux and the rumors out there, does that create an incentive for the buyers literally to wait as late in December as possible, place their order, then we see volume from a Core's perspective increasing in the first half of next year? What's the reality?

Speaker #4: What's actually the cutoff? And where I'm going with this is, given the regulations potentially being in flux and the rumors out there, does that create an incentive for the buyers to literally wait as late in December as possible?

Speaker #4: They place their order, and then we see volume from a quarter's perspective increasing in the first half of next year. What's the reality?

Eric Palomaki: That's a great question, I will tell you what I think to be the case, Bill, but important that somebody validate this. I think it is when they issue the VIN number onto the engine, not even just the chassis. It's finishing of the engine is where I think the emissions reg happens. When that is produced relative to 31 December or 1 January. You can still deliver that truck that was built 15 December, you can deliver that two months later or have it sit at a dealership or something like that. It still qualifies as a 2026 emissions regulation versus if it was built, the block stamped, and finished the engine into 2027. That was one of your questions. As far as overall, some of those industry forecasts try to predict how much pre-buy is the term given to it.

Speaker #2: That's a great question. And I will tell you what I think to be the case, Bill, but important that somebody validate this. I think it is when they issue the VIN number onto the engine, not even just the chassis.

Speaker #2: So, it's the finishing of the engine where I think the emissions reg happens. So that has to be when that is produced, relative to December 31st or January 1st.

Speaker #2: So you can still deliver that truck that was built December 15th. You can deliver that two months later or have it sit at a dealership or something like that.

Speaker #2: It's still qualifies as a 2026 emissions regulation versus if it was built the block stamped and finished the engine into 27. So that was one of your questions.

Speaker #2: Overall, some of those industry forecasts try to predict how much pre-buy— that's the term given to it— is going on. So, are you waiting until the end of the year to place your order, or are you willing to take orders earlier?

Eric Palomaki: Are you waiting till the end last of the year to place your order, or are you willing to take orders earlier? What happens is the build slots start to fill up, and that will force a buyer into ordering a truck even as early as November or October, or back into September. There could be some of that that's creating some of the increase in line rates right now today, that people are actually starting to build more trucks in August right now because of those build slots filling up at the end of the year.

Speaker #2: What happens is the build slots start to fill up, and that will force a buyer into ordering a truck even as early as November or October, or back into September.

Speaker #2: And so there could be some of that that's creating some of the increase in line rates right now, today, that people are actually starting to build more trucks in August right now because of those year.

Operator 2: Apologies for taking a little extra time here, but if we heard you correctly and if your understanding is correct, that the incentive then would be for the manufacturers to produce as many trucks as possible prior to December 31st, have that VIN number on the engine, and at that point, you have a 2026 model year. Then they can actually either sell that truck next year at the lower price, or they can actually take some higher margin with basically an umbrella pricing under the 2027 regs. Are we thinking about that right?

Speaker #4: And apologies for taking a little extra time here, but if we heard you correctly, and if our understanding is correct, the incentive then would be for the manufacturers to produce as many trucks as possible prior to December 31st, have that VIN number on the engine, and at that point, you have a 2026 model year.

Bill Dezellem: Apologies for taking a little extra time here, but if we heard you correctly and if your understanding is correct, that the incentive then would be for the manufacturers to produce as many trucks as possible prior to December 31st, have that VIN number on the engine, and at that point, you have a 2026 model year. Then they can actually either sell that truck next year at the lower price, or they can actually take some higher margin with basically an umbrella pricing under the 2027 regs. Are we thinking about that right?

Speaker #4: And then they can actually either sell that truck next year at the lower price or they can actually take some higher margin with basically an umbrella pricing under the 27 regs.

Speaker #4: Are we thinking about that right?

Speaker #2: Yes, I would tell you there is data that, on the prior emissions changes, suggest exactly what you just suggested. That behavior exists and has existed in the past.

Eric Palomaki: Yes. I would tell you there is data that on the prior emissions changes suggest exactly what you just suggested. That behavior exists and has existed in the past. We would anticipate it to happen again on this emissions change.

Speaker #2: So we would anticipate it to happen again on this emissions change.

Operator 2: Great. Thank you for taking the questions.

Bill Dezellem: Great. Thank you for taking the questions.

Speaker #4: Great, thank you for taking the questions.

Speaker #2: Perfect. Thanks, Bill.

Eric Palomaki: Perfect. Thanks, Bill.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Eric Palomaki for any closing remarks.

Speaker #1: This concludes our question-and-answer session. I would like to turn the conference back over to Eric Palomaki for any closing remarks.

Speaker #2: 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 in a few months.

Eric Palomaki: Thank you for your continued interest in our company. We look forward to providing an update on our progress when we report our Q3 results in a few months. Have a great day.

Speaker #2: Have a great day.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Q2 2026 Core Molding Technologies Inc Earnings Call

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