Core Molding Technologies Aktie

Good morning, everyone. Welcome to the Core Molding Technologies Fiscal 2026 Second Quarter Financial Results Conference Call. [Operator Instructions] 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.

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 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. 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?

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. 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 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.

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 the first half of 2026 and remaining on track to achieve our full year objective of $50 million in additional new business awards. Over the past 2 years, we have secured more than $112 million in new business wins and 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 time lines.

To support our top line momentum and to capitalize on the growing sales pipeline, we strategically added 2 business development managers, 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 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 9 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.

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 2 additional 4,500-ton machines during the second half of 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. 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 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. 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 the first half of 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. 74% 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.

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.

Thank you, Eric, and good morning, everyone. For the second quarter, production sales declined 1.2% year-over-year as 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 the second half of 2026. Our powersports 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.

We delivered 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. 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. 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 the second quarter compared to $32,000 in the prior year quarter.

During the quarter, we recognized a noncash 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.

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.

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.

Return on capital employed was 5.7% or 6.2%, excluding cash, based on trailing 12-month pretax 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 the first half of 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 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.

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; 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; 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%, although individual quarters may fall above or below that range based on product mix, volume and timing.

Regarding nonrecurring 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. In addition, we incurred $1.4 million of succession-related expenses through the first half 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 long-standing 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. 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.

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 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. 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, lightweighting and performance are important differentiators for consumers. 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. 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 2 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 shipping. 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. 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 the second quarter 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. 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. After 3 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 September 29 and 30. I'm 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?

[Operator Instructions] Our first question today is from Chip Moore with ROTH MKM.

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 back half. 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?

Yes, 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. And if you go to industry forecasts, that's over the next 2.5 years, we'll continue to see increases. And so both from, 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. The second half will be stronger.

Okay. Good to hear. And maybe on the flip side, right, the momentum in non-trucking, non-powersports, you called out some wins there and 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?

Yes, 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, 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% of those are outside of what we call the traditional truck and powersports business or 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 to interconnect boxes. And so we have had a number of years now of success. And again, this quarter, another customer that's trusting us with our composite solution. It's a better replacement than concrete. It's lighter. 2 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.

So the composite solution we have provides a good structure as well as a lighter product that's easier to install. 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.

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 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, sometimes some of them outside, but we'll continue to grow those and diversify.

And finally, I want to add, Chip, you'll remember that we always try to use the assets we have. And so 74% of it being on our U.S. 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. So we're excited about that metric.

Yes. 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? You have powersports 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. Then also in building products, the door skins that we launched in Q2 -- the end of Q2 of last year, we get a full quarter this year. 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. So that was just a demand increase.

Got it. 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. Just walk us through what you're thinking about on the acquisition front.

Yes. Alex and I have had the chance to visit a number of opportunities already. We're averaging about 1 a month, and some of those have been smaller in scale than what we've looked at and some of them been a little bit larger in scale. But 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.

[Operator Instructions] The next question is from Bill Dezellem with Tieton Capital.

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. Is that or was that a leading indicator for this growth? Or are they really unrelated in this case?

Yes. 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 of 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. And so, 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.

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 if it were a normal circumstance and not this one that we're talking about here.

Yes. 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. So we've been ready as far as we being a Tier 1 supplier, a key Tier 1 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. So we would -- we just keep building the old vehicle. But as they transition to the new ones, there's a lot of great quality improvements and operational improvements that come along with that transition. 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 about SMC compounds, we're finding that we can get all of that testing and validation done in the 6-month range. We have done -- we're doing 1 tooling project for, call it, more of a molded ship. There's no assembly, no complicated add-ons, and we're doing that in about 7 months, 6 to 7 months. So 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, watercraft, they're all in the 12 to 24 months from that point of tooling to the point of production revenues and product, what we would call product revenues.

That's very helpful. And then you talked a little bit about the truck market and that the anticipation with -- from an industry perspective is that, there will be growth over the next, say, 2.5 years. 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?

Yes. So truck market recovering second half of this year or improving. Exactly how much that will grow will yet to be determined in the second half, but definitely seeing the second half stronger than the first half. The industry predicts annual volumes for the next 5 years, and they see the next 2.5 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 going to be if somebody changes it, but January 1 of '27, so 5 months away, 6 months away from now, the emissions regulations do change, and that will require powertrain differences for all of the OEMs. So that added cost or added price on a 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 2.5 to 3 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 on to exactly what that is. But as of right now, it goes into effect January 1, '27.

And 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.

That's helpful. And not to get too granular here, but is -- do the regulations apply to trucks produced after January 1, ordered after January 1 or delivered? What's actually the cutoff? And where I'm going with this is, 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 and then we see volume from Core's perspective increasing in the first half of next year. What's the reality?

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. So it's finishing of the engine is where I think the emissions reg happens. So that has to -- when that is produced, relative to December 31 or January 1. So you can still deliver that truck that was built December 15, you can deliver that 2 months later or have it set at a dealership or something like that. It still qualifies as a 2026 emissions regulation versus if it was built, the block stamp and finish the engine into '27. So that was one of your questions.

As far as overall, some of those industry forecasts try to predict how much prebuy is the term given to it. So are you waiting for the last of the year to place your order? 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. And so there could be some of that, that's creating some of the increase in run 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.

And 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 31, have that VIN number on the engine, and at that point, you have a 2026 model year. And then they can actually either sell that truck next year at a lower price or they could actually take some higher margin with basically an umbrella pricing under the '27 regs. Are we thinking about that right?

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. So we would anticipate it to happen again on this emissions change.

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

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. Have a great day.

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

Good morning, everyone. Welcome to the Core Molding Technologies Fiscal 2026 First Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this event is being recorded. I'll now turn the conference over to Sandy Martin, Three Parts 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 fiscal 2026 first quarter results. Joining me on the call are the company's COO and incoming President and CEO, Eric Palomaki; and CFO, Alex Panda. Dave Duvall, current CEO, will also be on the call for the Q&A session, and this call is being recorded.

This call will also be 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. 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 obligation to update or revise any forward-looking statements publicly. Management will refer to non-GAAP measures, including adjusted EPS, adjusted EBITDA, the debt to trailing 12 months EBITDA ratio, 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 Eric Palomaki. Eric?

Thank you, Sandy, and good morning, everyone. Our first quarter of 2026 was a busy one. While product revenue was lighter, our team was hard at work executing our growth strategy, delivering $17 million in additional new wins, relocating 5 of 9 presses into our new facility in the Monterrey and posting our best gross margin quarter in over a decade. The must-win battle focus on our Mexico expansion is on track, and we continue to execute a flawless launch playbook across 50 already won projects.

As this is Dave's last earnings call as CEO, I want to take a moment to recognize and thank him for his tremendous impact on Core Molding Technologies. Working alongside Dave has been a privilege. He has been instrumental in shaping our company culture and in my growth as a leader. His leadership, integrity and steady hand help set the direction of this company and his mentorship through challenges, milestones and countless everyday conversations has left a lasting impression. Dave, thank you for your trust, your support and for setting an example of excellence.

As I fully transition into the CEO role this month, we have taken deliberate steps to reinforce operational leadership and continuity, backfilling my COO responsibilities. We have split the COO role into 2 positions, underscoring our commitment to promoting from within and ensuring organizational readiness. Arnold Alanis now leads our Mexico operations and Mike Gayford oversees the U.S. and Canada operations. Both leaders exemplify Core's 4 values: being a learning organization, having the courage to challenge, showing mutual respect and operating with transparency.

Speaking about operations, I want to once again recognize our teams for their disciplined execution and exceptional service to customers. In the quarter, we achieved 99.1% on-time delivery and a quality performance of 52 parts per million. In our business of making large complex composite assemblies, our ability to be trusted with major product launches is a key value proposition and a major reason why Core wins repeat business or why Core is able to grow our wallet share. These results demonstrate our focus on standard work, consistency and operational excellence. With Arnold and Mike leading our operations, I'm able to spend more time with our commercial and financial leaders or as we like to say, our 2 Alexs: Alex Bance, Core's Chief Commercial Officer; and Alex Panda, our Chief Financial Officer. If you're looking for me, chances are, I'm with one of the Alexs focusing on growing the company.

Turning to first quarter performance. We are very pleased with the continued momentum of our invest for growth initiatives, which generated $17 million in new business wins. We are also pleased to report gross margins exceeding 20%. While this performance reflects strong execution, Alex will provide more color on our full year margin outlook in a few moments. The $17 million in new business awards included a significant multiyear battery energy storage system project. These battery energy storage systems are becoming more widely used for reducing power loads, coupling with renewable power generation and adjusting for grid load changes or disruptions.

Within transportation, we continue to support specialty electric truck platforms serving route-based fleets such as coastal vehicles, trash trucks and electric buses, many of which are owned by municipalities. Some of the newest battery enclosure opportunities we are currently working on are tied to grid reliability applications, including grid hardening and load shedding. While battery adoption has moderated in consumer EVs, demand is expanding rapidly in grid infrastructure, and we're engaged with customers and industry partners to capture that growth. To support our sales pipeline, we've added business development manager during the first quarter and are planning 2 additional hires this quarter.

As part of powersports market, we continue to expand our proprietary skid plate technology, which we developed approximately 2 years ago and launched in the third quarter of 2025. New wins this quarter include a prominent OEM traditionally known for agricultural and farm equipment, further broadening the application of this technology. As previously discussed, we are seeing meaningful signs of industry recovery with major OEMs launching new product features that include additional core molding components across watercraft, skid plates and cargo boxes. The first quarter marked the third consecutive quarter of year-over-year revenue growth in our powersports market with a year-over-year growth of 46%. We remain focused on scaling the adoption of Core's SMC offerings and Topco capabilities, which enable us to serve as a preferred supplier of structural molding compound as well as deliver finished installation-ready systems.

These value-added capabilities allow us to participate more broadly across the supply chain, supporting applications in construction equipment, agricultural machinery, aerial lifts and other industrial markets. Our Topco paint capability differentiates Core by enabling installation-ready systems that reduce total cost and improve manufacturing efficiency for our OEM customers. Together, these investments expand our technical capabilities, deepen customer integration and support durable, higher-value revenue streams that align our long-term growth and margin objectives. All of Core's proprietary compounds and SMC materials remain on track and are expected to be in production during the second half of 2026.

As we previously discussed, we invested $6.5 million in 2025 to expand our operations in Mexico, including a greenfield facility, and we plan to invest an additional $19 million this year. These projects are ahead of schedule with all work in Monterrey is expected to be completed by the end of the second quarter. We view Monterrey region as a long-term secular growth market strategically positioned closer to key customers. Our expansion in Matamoros includes the installation of ultra-large 4,500-ton compression molding presses in Matamoros continuing through the second half of 2026. That is 9 million pounds of pressing force per press or 18 million pounds that will be operational by year-end. We hope you're able to join us in September for our Investor Day, where we'll be able to get up close and see how these massive composite molding systems create 100-plus pound parts for sleeper roof assemblies.

Looking ahead, we expect truck market volumes to begin recovering in the second half of 2026. And when combined with the $63 million in new wins secured in 2025, which will launch throughout '26 and early '27, we maintain visibility into total product revenue that could exceed $300 million in 2027. As a sole supplier on long-term OEM programs, we benefit from long-term customer relationships that provide strong forecasting visibility while recognizing that macro conditions can influence timing.

With that, I'll now turn the call over to Alex to review financials in more detail.

Thank you, Eric, and good morning, everyone. As expected, first quarter revenues declined by 4.7% year-over-year, driven primarily by previously discussed truck cycle dynamics. In Q1, medium- and heavy-duty truck sales represented 34% of Core's total product sales, which is down from 44% in fiscal 2025. As Eric noted, we delivered strong gross margins of 20.4%, an increase of 120 basis points year-over-year and 520 basis points sequentially. This performance was driven by a favorable revenue mix, including a shift away from tooling and toward higher-margin product revenue. While pleased with our first quarter margins, we remain comfortable reaffirming our full year gross margin target range of 17% to 19%, particularly given the elevated tooling revenue expected in the fourth quarter. Our powersports end markets continued to expand during the quarter, delivering 45.7% year-over-year revenue growth. This acceleration likely pulled some volume forward from the second quarter as OEMs prepare for spring demand.

SG&A expense in the first quarter was $11.2 million or 19.1% of sales compared with 14.6% in the prior year period. SG&A this quarter included $2.1 million of Mexico expansion-related expenses and $924,000 of succession-related costs. Excluding these items, normalized SG&A would have been approximately $8.2 million or 14% of sales. Operating income for the quarter was $764,000 compared to $2.8 million in the prior year period, reflecting the SG&A items discussed. Net income was $605,000 or $0.07 per diluted share. Adjusted EBITDA was $7.3 million or 12.5% of sales compared to $7.2 million or 11.7% in the prior year period. Operating cash flow for the quarter was a use of $9.2 million, driven by planned investments in our Mexico growth initiatives, including tooling payments, press relocations and inventory bank builds.

Capital expenditures totaled $3.8 million, resulting in an expected negative free cash flow of $13 million, consistent with our budget and investment plan. For the full year, we continue to expect capital expenditures of approximately $25 million to $30 million with $18 million to $20 million allocated to Mexico organic growth initiatives. These planned investments reflect our confidence in the returns we will earn from our organic growth initiatives and the strong execution delivered by our operating teams.

As of March 31, our balance sheet remains strong with total liquidity of $73.5 million, including $23.5 million in cash and $50 million of availability under our revolver and capital credit lines. Term debt totaled $19.3 million, and our debt-to-EBITDA ratio remains below 1x on a trailing 12-month basis. Return on capital employed was 6.8% or 7.9%, excluding cash, based on trailing 12-month pretax operating income. As new programs launch and asset utilization improves, we expect ROCE to strengthen. Additional details, including GAAP to non-GAAP reconciliations are available in our earnings release. Our capital deployment strategies prioritizes organic growth with continued disciplined debt and working capital management.

During the quarter, we repurchased 24,545 shares at an average price of $18.62 per share for a total of $457,000. In March, we increased our share repurchase authorization by $6.5 million and intend to continue opportunistically offsetting dilution from equity compensation. For fiscal 2026, we continue to expect the following: one, total sales to be flat to up approximately 5% with tooling revenue weighted toward the fourth quarter. Two, the majority of the $63 million new program wins secured in 2025, we expect to contribute to the second half of 2026 and hit full annualized volumes in 2027.

Three, we continue to remain cautiously optimistic as we start seeing order builds for truck cycle recovery in the second half of this year; four, full year gross margins in the range of 17% to 19%. Five, the company incurred $2.1 million of Mexico expansion-related expense during the first quarter and expects to incur approximately $900,000 in the second quarter. Six, during the first quarter, the company incurred $924,000 of succession planning related costs and expects to incur approximately $900,000 more over the balance of 2026, primarily in the second quarter.

Switching to a discussion on tariffs and recent oil prices. Our customers currently benefit from preferential tariff treatment under the USMCA, which is scheduled for a joint governmental review beginning in July 2026. Any changes could affect demand patterns, and we continue to monitor potential impacts on our customers and end markets. With respect to recent increases in oil prices, we have contractual mechanisms in place that will allow us to pass through a majority of these costs.

And with that, I would like to turn it back to Eric.

Thank you, Alex. We are pleased with the progress of our must-win battle this year, particularly the execution of our Mexico expansion, which remains on schedule and aligned with our budgeted projections. We believe these organic investments further differentiate Core as a leader in highly specialized large and ultra-large molded solutions. As we grow, we remain anchored in the fundamentals, operating with the highest standards and discipline around safety, people, quality, delivery and cost while staying closely aligned with the voice of our customer. Our business development pipeline continues to exceed $220 million in high-quality opportunities. With $17 million in new awards secured in the first quarter, we are confident in our target of $50 million in new program awards during 2026.

Importantly, these wins continue to include customers in new and emerging markets for Core and align well with our strategic diversification priorities. Target segments include specialized transportation applications for electric vehicles, inner box panels for electric pickup truck platforms, satellite tracking systems, building products, construction and agriculture, increased demand for SMC compounds and our expanding Topco paint capabilities. We remain highly focused on scaling our execution excellence, leveraging our fixed cost base, optimizing our manufacturing footprint and strengthening operational discipline across the enterprise. Our commercial organization is energized and fully supported by the broader company. As a result, we continue to make progress towards our long-term objective of $500 million in annual revenue while staying intensely focused on profitability, cash flow generation and returns on capital employed. While strong demand in our powersports market benefited from some revenue being pulled into the first quarter, we believe the recovery has momentum.

Combined with continued wallet share expansion and organic sales growth, we are building commercial momentum. We are purposefully targeting large, growing diverse end markets, including construction, energy, industrial, aerospace and medical. We are increasingly engaging customers earlier in the design cycle. These customers are seeking strategic partners like Core that can deliver design, fabrication and finished installation-ready systems under one roof, backed by a proven track record of flawless launch execution and reliability.

I want to thank our dedicated employees. Your commitment, skill and hard work make all of this possible. We are equally grateful to our customers, shareholders and Board for their continued confidence and support as we execute our strategy. As we mentioned last quarter, we will host an Investor Day in Brownsville, Texas on September 29 and 30. As we prepare for our upcoming Investor Day, this event will also serve as a meaningful moment to celebrate a major milestone for our company, Core's 30-year anniversary. Our program will include presentations on the afternoon of day 1 and a tour of our Matamoros facility, including a manufacturing shop floor tour of our manufacturing execution engine on the morning of day 2. The facility tour will highlight Core's ultra-large composite manufacturing capabilities, which include 2 new 4,500-ton presses I spoke about earlier, which we believe are among the strongest in North America.

We plan to distribute a save the date in the next couple of weeks. If you're interested in attending and do not receive the invitation, please reach out to us. In addition, we will participate in the East Coast IDEAS Conference in New York City on June 10, where we will host a presentation and one-on-one meetings. Please contact us if you'd like to schedule time with management.

With that, we'll open the line up for questions. Operator?

[Operator Instructions] And the first question comes from Chip Moore with ROTH.

I wanted to ask powersports very strong. Maybe talk a bit more about -- I think it sounds like there was a little bit of pull forward. Help us size that and some of the seasonal dynamics. Any thoughts on that market with just fuel prices in general? And with that pull forward, just help us think about Q2 impacts given that trucking is more of a back half story for pickup.

Yes. And overall for powersports, Chip, I'd say we definitely see the recovery of powersports. The bust associated with COVID is back. Dealer inventories are back to what they would call moderate and normal levels. If you look at a lot of our customers, they're very happy with that situation. With our watercraft portion of powersports, we got a pretty good first quarter there. You can see that in the numbers. We wouldn't necessarily expect that to maintain through the next few quarters. But the skin plate that we launched last year is now at full run rate. That will continue throughout the year. So, in general, you should see powersports up, Q1 being maybe up a little bit more than what we would expect the rest of the year. But that's not to say a massive decrease in Q2 or anything to expect there, just a really good first quarter.

Got it. That's helpful. And maybe just on new business, you outlined some of the investments there and targets, just what you're excited about and maybe the battery opportunity in general. It sounds like you got a nice win there. Just how large do you think that market can be for you?

Yes. So, I'll start on just specifically the awards for the first quarter. One of those was that battery energy system customer, and that's a $9 million a year, and they committed to 3 years of that volume at a minimum also with us. So very nice. Sometimes we're very excited about the big OEM business that has 5- to 10-year lengths on it, but having a customer like this commit to 3 years of volume additionally is a very nice thing to have when we're in these diversified markets. We're working with a couple of other customers in the same category of battery energy system, but the first one is a pretty sizable one of that $17 million, $9 million of it is made up of that customer. We won another product that leverages, the SkidPlate technology that we developed 2 years ago. That's worth a couple of million in the powersports world.

And we won another aero truck roof deflector that's worth another $5 million. The nice thing about that one is it's with a truck OEM that we don't do a lot of typical business with. So, we're expanding a little bit with some other customers in the truck and transportation space. But really big panels on a roof or an air deflector are perfect for us. So that's another very nice project worth a little under $5 million a year when it launches in 2028.

That's great color. And that battery win, that $9 million per year, is this transport? Or is this on the grid side that you were referencing?

Yes, grid side. So stationary batteries where you build a very large bank and building of batteries to load shed or to cover for different types of energy situations.

Yes. Interesting. Yes, a great market opportunity.

Similar technology to like a maybe battery, but you don't have the same requirements of crash ratings and things like that. So, SMC is a perfect composite solution to build a very large battery pack and then they're just basically stacked in racks, not in the data center, but sometimes are supporting data centers in terms of -- instead of generation, like there are a lot of natural gas generators that are added to data centers everywhere. This is an alternative to that. If you thought you needed to cover for an hour of power shortage or 3 hours of power shortage, you could do it with batteries instead of natural gas generators.

Yes. excellent. To your point, SMC, are you effectively getting sold out there? Or what are you thinking on future capacity?

We're focused on launching the 4 that we talked about at the end of last year that we won. We've got 3 more of those still to launch here over the next 90 to 120 days. So that's really the team's focus. But we continue to find new customers for SMC compounds. So not sold out yet, but continue to be very bullish in terms of our SMC compound offering.

Excellent. Okay. And Mexico, it sounds like you're running ahead of schedule. Anything to call out there to pay attention to or all systems go, it sounds like, for completing here in the near-term?

Yes. All systems go. We were -- our whole executive team and myself spent a week down there 2 weeks ago and just super proud of our team and the work that they have done. It's pretty awesome to stand up a building fill it full of equipment in just a few short months. So, they're on schedule, and we should have the Monterrey facility, basically all moved and consolidated under one roof by the end of the second quarter, and we'll start to get everything consolidated in the third quarter and see those -- the benefits associated with all of that move in the fourth quarter. And the Matamoros team has cleared out the space for the Volvo launch that'll happened in 2027 and all that equipment is being built and will be installed during the third and fourth quarter. So still a lot of work to do there in our Matamoros facility with a lot of that capital investment. And that we'll start to see the returns from that in the second half of '27 -- or first half of '27 as it launches.

Well, we'll look forward to late September again there. I think we're in a great place.

The next question comes from Bill Dezellem with Tieton Capital.

A couple of questions. First of all, relative to the powersports strength, is that tied primarily to the new program wins? Or is it primarily a rebound in purchasing because inventories are now at a more reasonable level?

It's both, Bill, and I'll make sure I add color to that. There's definitely a push for watercraft on an annual cycle. So, they want to get those units out there to dealers in the spring because most of North America has sort of a summer boating season. And so, you get -- we got a pretty good push there on the watercraft side. But then also the overall recovery of powersports has underlined that we see it in all the mix. So, it doesn't matter whether it's an off-road vehicle or a watercraft, we see that base increase. And then I would add one to you as a third portion, a third leg of it.

You'll remember the launch of the skid plate technology in Q3 of '25. We still are on a year-over-year. So, until we get to Q3, year-over-year, we'll have be incrementally adding that skid plate technology. And now having won another one with another OEM that's going to use that same technology on another side-by-side that we'll launch in '27. Very excited to continue to use that -- our ability to make that large and ultra-large part in a single shop.

And so if we're hearing you correctly, the powersports market is feeling like it is back to normal after the boom bust COVID, post-COVID. And now we're into what we just call normal cycle tied to powersports. Is that a fair interpretation of your comments?

Yes. And that's for Core's version of powersports. Being a consumer myself, I can tell you there are some parts of powersports that probably are still weak. But the fact that like our off-road segment is very much on the utility vehicle side, utility vehicles are still selling very well. The stuff that contractors are using, municipalities, school districts that people are doing work with them versus a pure recreation product. Those continue to be very good sellers, and we have a lot of content on those products. So, we have a good mix in the powersports world.

And then I don't want Alex to feel left out here. So, I'm going to ask a couple of balance sheet questions, please. So, accounts receivable were up significantly from the fourth quarter. And then interestingly, the contract liabilities were up a lot also. So, wondering if there's some sort of a deferred revenue phenomenon taking place. But Alex, would you help us out with those 2 items, please?

Yes. Good question. So that's a direct relation to our billing of a progress payment to Volvo. So, the large tolling job that will close in Q4 of 2026. We had a progress billing that went out at the very end of Q1, and so will be paid in Q2 ideally. And then that offset is down in contract liabilities.

Okay. So, they're one and the same essentially.

Correct. Correct.

[Operator Instructions] And the next question comes from Lawrence Baumgartner, a private investor.

First of all, I got to say congratulations to David. If you've been around the stock a long time, the last 2 truck cycles, the stock went down to low-single digits, and we seem to have maneuvered through this one pretty successfully through your watch. So, congratulations on that.

Thank you, Lawrence. We have a good team.

Yes. You've really done a great job through this part of the cycle. Question on the Mexico expansion. I just noticed in the financials, you threw in as addition to the financial statement that you -- looks like you expensed, the expansion down there for, I don't know, $3 million. Would that normally be capitalized? And why would that be an adjustment to earnings?

Yes. So, there is a -- as part of the expansion, we are moving our presses in 2 locations. So, in our current Monterrey facility, we are moving 6 structural foam machines to the new facility in Monterrey. And then our DCPD business that's in Matamoros that is also moving to the new Monterrey facility. And so, as part of just accounting rules, we have to expense those expenses mainly because it doesn't add any new value to the piece of equipment. We do review all of those expenses. And if we are doing improvements or upgrades to those machines as part of the move, we will capitalize those. But the straight rigging costs, uninstallation and reinstallation because there's no true value add, we cannot capitalize those expenses. And so, they're onetime expenses that we add back for -- that won't be reoccurring.

Okay. I guess my second question or last question will be for Eric. When sometimes when you get a new CEO in a company who wants to make a big splash and go out and make a big silly acquisition or and often don't turn out to be very successful. I guess I'd like to know what your thoughts are and strategy is. I know we've talked about acquisitions with David in the past, and he's really kept -- stayed out of that game. And I guess I'd like to know what Eric's thoughts are on that going forward.

Sure, Lawrence. Thanks for the question. I think an interesting part to make sure you're aware of is that Dave and I started roughly the same time 7.5 years ago. So of course, been around the business for all of that time and part of the executive team on Dave's team and been part of building the strategy. And so, I don't come in as an outsider as the new CEO, as you certainly have seen happen in plenty of Fortune 500 right now recently. So no big splash, no major change as far as the strategy, as far as our execution engine and really as far as our customers and our team is concerned. I'm quite proud of our team as well as the Board as well as Dave and the succession work that we've done, we haven't surprised anybody, whether it's internal stakeholders, external stakeholders or our customers, we've done a pretty good job staying consistent.

So, I would leave you with no major changes, just a shift and a continuation of the strategy and continue to grow the business and leverage the execution engine that we've worked so hard to protect. Being able to go through a truck cycle the way we have, as you suggested, is a huge change to the business over the years, and it's putting us in a spot where we can make different decisions and different investments.

I think you may know this, Lawrence, but Dave is an adviser for the next 18 months for us as well. So, he'll continue to be around to be able to advise me, answer questions, support us in an advisory role through all of '27.

Yes. I think one -- as we've talked about in the past, sometimes just buying back your stock when it's trading at a really inexpensive valuation is the best thing to do with your really nice balance sheet that you've accumulated.

We've learned our lesson from not having a strong balance sheet from the beginning.

Yes. If you remember the last cycle, I hope so.

That changes your decision process.

And this concludes the question-and-answer session. I'd now like to turn the conference over to Eric Palomaki for any closing comments.

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

Thank you. This concludes today's teleconference. Thank you for attending today's presentation. You may now disconnect your lines.

Good morning, everyone. Welcome to the Core Molding Technologies Fourth Quarter and Full Year 2025 Financial Results Conference Call.

[Operator Instructions]

As a reminder, this conference call is being recorded.

I will now turn the call over to Sandy Martin, Three Part Advisors. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us for Core Molding Technologies conference call to review our 2025 results.

Joining me on the call today are the company's President and CEO, Dave Duvall; as well as COO and incoming CEO, Eric Palomaki; and CFO, Alex Panda.

This call is being webcast and can be accessed through coremt.com via an audio link on the Investor Relations, Events and Presentations page. Today's conference call, including the Q&A session, will be recorded. Please be advised that any time-sensitive information may no longer be accurate as 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 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. Actual results may differ materially from those expressed or implied. Please refer to today's earnings 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 EBITDA and debt to trailing 12 months EBITDA ratio, free cash flow and return on capital employed. Reconciliations to the nearest GAAP measures are available at the end of our earnings release. Our earnings release has been submitted to the SEC on Form 8-K.

Now I would like to turn the call over to the company's President and CEO, Dave Duvall. Dave?

Thank you, Sandy. Good morning, everyone, and thank you for joining us today. We appreciate your continued interest in Core Molding Technologies. In 2019, we set out to fundamentally transform the organization to create a company with 3 foundational values. Number one, a winning culture that values team success over individual success. Now, a short story here. It's funny how things can make complete sense after some time. You know, I had a leader tell me many years ago, after me working all night long, getting a plant up and running, that winners win. At the time, I thought, whatever, and just wanted to get some sleep. But I learned it really is a truth. You create a team that sees themselves as winners, and they enjoy winning enough to overcome all the challenges that you face as a team.

Number two, disciplined execution, which is even more important than a good strategy. Number three, the team values and expects a daily inner drive from every employee to continually improve, learn, and grow. To me, this is the required basic foundation for any high-achieving organization, and we have purposefully driven these values throughout every system in our business. We are more excited than ever by the progress we made and the robust foundation we built to drive sustained growth. Through this transformation, we've implemented more robust operating systems, expanded margins, strengthened the balance sheet, created a deep and capable leadership team, and established a performance-driven culture. With that foundation firmly in place, as proven by our financial performance, we are now focused on leveraging all that we've created to drive growth.

Over the past 2 years, we have also completed a comprehensive executive leadership transition through a purposeful and structured process. This strategic emphasis on continuity and readiness, supported by extensive training, coaching, and development, will ensure strong alignment, continued financial and operating performance, and ultimately drive long-term success for the company and our shareholders.

As previously shared, I plan to officially retire from Core at the end of May, with Eric succeeding me as CEO. I'm incredibly grateful for the opportunity to continue supporting the organization in an executive advisory role through the end of 2027. In that capacity, I'll continue to work closely with Eric, our board, and the broader leadership team to ensure continuity and a smooth and successful transition as they lead the company forward.

Looking ahead, I'm confident in Core's long-term direction. The momentum we built, the recent wins across the business, and the strength of our leadership team reinforces the path we are on as the company continues to drive growth and long-term value creation.

With that, I would like to turn the call over to Eric and Alex to discuss our fourth quarter and full-year performance. Eric?

Thank you, Dave, and good morning. I'll begin with a few high-level comments on our 2025 performance and strategic progress. Our Invest For Growth initiative generated $63 million in business wins, successfully executing our must-win battle for 2025. Importantly, the majority of these new wins support our strategic diversification strategy, expanding beyond truck and powersports end markets and strengthening the resilience of our portfolio.

Turning to powersports, we are seeing early signs of an industry recovery, which the market now broadly anticipates. Major OEMs launched multiple products with additional Core Molding Technologies content in the form of watercraft, skid plates, and cargo boxes. These new product solutions launched on vehicles in the second half, leading to 2 consecutive quarters of revenue growth in powersports for 2025.

Another area of meaningful progress is our sheet molding compound, or SMC business. Early in 2025, we established SMC compound as a new sales channel to support the growing building products market, which represents an addressable opportunity of more than $200 million. Our sales and marketing team generated $12 million in annual SMC revenue during the fourth quarter and $21 million for the full year. 1/3 of these compounds have already been launched, and all of them are scheduled to be in production by the end of the third quarter of 2026. We remain focused on expanding customers' adoption of Core's SMC offerings as a preferred supplier of molding compound.

Our Voice of the Customer, or VoC initiative, was instrumental in securing new SMC programs in 2025 and expanding our top coat capabilities at the Monterrey facility. This value-added capability enables us to deliver finished installation-ready products for construction and agricultural equipment, as well as aerial lifts and other industrial applications. As we previously discussed, we invested $6.5 million in 2025 for the Mexico expansions and Greenfield plant, with plans to invest an additional $19 million in Mexico this year. Construction is well underway, with press pits completed in Matamoros and significant progress on the fabrication of 2 state-of-the-art 4,500-ton SMC molding presses. Once fully ramped, this capacity is expected to support up to approximately $20 million in annual SMC molded and assembled sleeper roof product revenue.

In addition to Core's capital investment, we are also managing our customers' tooling project, which will result in approximately $35 million in tooling revenue. We anticipate completion of this project in Q4 2026. As planned, we have also begun relocating DCPD presses and low-pressure injection molding operations to Monterrey, positioning these capabilities closer to key growth customers. We continue to view the Monterrey region as a long-term secular growth market with significant strategic potential.

Our top coat paint capability further enhances these offerings and creates competitive differentiation by enabling us to deliver installation-ready components, reducing total system cost for OEM customers, and improving manufacturing efficiency. Collectively, these investments significantly expand our technical capabilities, strengthen customer alignment, and create durable, high-value revenue streams that support our long-term growth and margin objectives.

Looking ahead to the truck and powersports market, we see recovery in volume starting in the second half of 2026. When we combine this with the $63 million new wins from 2025 that will be launched during '26 and into early '27, we have visibility that total product revenue could exceed $300 million in 2027. Large OEM programs are long term, lasting 5 to 10 years, which allows us to better forecast growth further into the future than most companies.

Turning to the fourth quarter results. Revenue was $74.7 million, representing a 27.8% sequential increase and 19.5% top line growth year-over-year. Higher tooling revenue from recent business wins combined with strong product revenue on powersports, building products, and other, more than offset the lower truck volumes during the quarter. Adjusted EBITDA margin of 10.2% increased 100 basis points from a year ago.

Cash flow from operations totaled more than $19 million in 2025, following $35 million generated in fiscal 2024.

For the full year, we delivered stable gross margins within our targeted 17% to 19% range and generated positive year-to-date free cash flow. We also completed our footprint optimization initiative launched at the end of the second quarter. As part of our continued focus on product-level profitability, we consolidated our resin transfer molding, or RTM, operations by selectively relocating programs to other facilities. This action streamlines operations at the originating site and drives further margin improvement.

Finally, I am proud to recognize our operational teams for their outstanding execution again this year. We achieved 99% on-time delivery, 62 parts per million quality performance, which is an industry-leading and a strong part of our value proposition. These results reflect the strength of our team, our operating discipline, and our robust business systems. As part of our strategy, we firmly believe that culture is a competitive advantage here at Core Molding, and this is embedded in how we execute every day.

With that, I'll now turn the call over to Alex to review financials in more detail.

Thank you, Eric, and good morning, everyone. As expected, fiscal 2025 revenues declined 9.5%, driven primarily by the continued weakness in the truck sector, which represented 44% of Core's product sales for the year. As Eric noted, despite lower volumes and pressure on operating leverage, we delivered gross margins of 17.4%, reflecting solid margin stability. We compute roughly 100 basis points higher 2025 gross margins when we adjust for hourly related severance and the impact of tooling margins. By maintaining margins within our target range of 17% to 19% and tightly managing SG&A costs, we generated $19 million of cash flow from operations for the year.

We were encouraged by fourth quarter net sales of $74.7 million, driven by tooling revenue of more than $19 million. While higher tooling revenue was partially offset by lower product sales overall, this was mitigated by strength in powersports, building products, and industrial and utilities, which helped offset continued truck softness. In the fourth quarter, we generated gross margin of $11.3 million, or 15.2% of sales, which is consistent with our historically lightest sales quarter of the year. Hourly severance costs and tooling margins had approximately 230 basis points unfavorable impact on fourth quarter gross margins. Over the past year, we executed several initiatives focused on operational efficiency, raw material cost, footprint optimization, and overall margin improvement, which helped offset headwinds to margins.

SG&A expense in the fourth quarter was $7.7 million or 10.4% of sales, compared with 14.4% in the prior year period. Excluding severance and executive transition costs of $476,000 incurred in fourth quarter of 2025 and $1.066 million incurred in the prior year period, SG&A expenses in the fourth quarter of 2025 was $7.3 million or 9.7% of sales, compared with 12.7% in the prior year period. Operating income for the quarter was $3.6 million or 4.8% of sales, up from $0.9 million or 1.4% of sales in the prior year period.

Net income for the fourth quarter was $3.1 million or $0.36 per diluted share, compared to a loss of $39,000 in the prior year. Adjusted EBITDA was $7.6 million or 10.2% of sales for the quarter. For the full year, we generated $19.2 million in GAAP cash from operations. After capital expenditures of $17.3 million, free cash flow was $1.9 million. Looking ahead, we expect sustaining capital expenditures to be approximately $7 million to $10 million in 2026. Including planned Mexico facility expansion investments of approximately $18 million to $20 million, we estimate total 2026 capital spending to be in the range of $25 million to $30 million. We will also incur operating expenses of approximately $2.5 million associated with these expansion projects in the first half of 2026, which we will continue to outline quarterly.

As of December 31, our balance sheet remains strong with total liquidity of $88.1 million, consisting of $38.1 million in cash and $50 million of availability under our revolver and capital credit lines. Term debt totaled $19.7 million, and our debt to EBITDA ratio remains less than 1x on a trailing 12-month basis. Return on capital employed was 8% or 10.2% excluding cash, calculated using trailing 12-month operating income on a pre-tax basis. As we continue launching new programs, we expect ROCE to improve through stronger top-line leverage and enhanced asset utilization. Additional details, including GAAP to non-GAAP reconciliations, are available in our earnings release.

Our capital allocation strategy remains balanced and flexible, with priority given to organic growth, continued disciplined debt and working capital management, and opportunistic share repurchases. During 2025, the company repurchased 201,999 shares at an average share price of $15.70, with $1.4 million remaining under our authorization.

Looking ahead to fiscal 2026, we currently expect the following. One, total sales to be flat to up approximately 5%, with tooling revenue again weighted more heavily toward the fourth quarter. Two, given our 12- to 18-month quote-to-cash cycle, the majority of the $63 million in new wins will impact results during the second half of 2026 and 2027. Three, we continue to be conservative around the truck recovery and agree with ACT forecasts indicating truck cycle recovery starting in the second half of 2026. Four, gross margin in the range of 17% to 19% for the full year of 2026. And lastly, one-time SG&A costs for the year are estimated to be approximately $2.5 million related to Mexico relocation and non-capital construction activities and $1 million related to succession planning. Most of these costs will be incurred during the first half of the year.

Finally, while tariffs remain a focus for everyone, our products manufactured in Canada and Mexico remain under USMCA compliance and are currently exempt. We will continue to closely monitor trade developments and their potential impact on our customers and end markets.

And with that, I'd like to turn it back to Eric.

Thank you, Alex. We are building a world-class engineering and manufacturing solutions organization with a trusted reputation in highly specialized, large and ultra-large molded solutions. We continue to see a strong and expanding pipeline of opportunities and are encouraged by the breadth of engagements across both new and existing customers and end markets. Today, our business development pipeline represents $220 million of quality opportunities, and we are well on our way to securing an additional $50 million in new program awards during 2026. We look forward to presenting and discussing our Q1 wins in May.

We are particularly excited about the 2025 wins because 65% of those wins are in new and emerging markets for Core and align with our deliberate diversification strategy. These strategically targeted markets include inner-box panels for an electric pickup, satellite tracking systems, building products, and specialized transportation applications.

Operationally, we remain highly focused on scaling our platform of execution excellence, leveraging our fixed cost base, and optimizing our overall manufacturing footprint. We are energized by the progress we've made and by our $102 million in annualized run rate incremental business wins over the past 2 years. This has been an outstanding job executing by our sales team and the entire organization behind them. We will continue taking deliberate actions to enhance our operating capabilities and profitability as we execute all of these new launches.

Looking further ahead, we are confident in our ability to achieve $500 million in annual revenue as part of our long-term objective of [indiscernible]. We will maintain an intense focus on profitability, cash flow, and return on capital employed. Our strategy is rooted in disciplined capital allocation, continuous improvement, operational excellence, and growth. We are confident that this is only the beginning of the continued momentum we are seeing here at Core.

We are targeting large, diverse end markets, including construction, energy, industrial, aerospace, and medical, and are increasingly engaging customers earlier in the design cycle. Customers are seeking strategic partners like Core that can deliver design, fabrication, and finished installation-ready components all under one roof.

I would like to close by thanking our team for their dedication and execution, which have been critical to the progress we've made throughout the transformation. We also want to thank our customers, shareholders, and board for their continued confidence in Core Molding and in what we are building together.

Finally, we are in the planning stages of an investor day scheduled for this fall. We are targeting September 29 for management meetings and September 30 for a facility tour, which will include a half-day visit to our Matamoros facility with secure private group transportation from Brownsville, Texas. This facility will best showcase our capital investments, which make Core's ultra-large composite manufacturing capabilities the best in North America. We are mindful of safety, logistics, and investor preferences, and details for the visit are still being finalized. Please feel free to reach out with any questions or considerations as we continue to refine our plans.

Prior to that, we will be attending the ROTH Conference in California by hosting one-on-one meetings on March 23 and 24. Please contact us if you would like to schedule a meeting or an investor call soon.

With that, let's open the line up for questions. Operator?

[Operator Instructions] And the first question today is coming from Chip Moore from ROTH Capital.

Maybe for me, on the outlook for flat to up 5%, I think you called out you're expecting a decent amount of tooling revenue from the expansion -- or related to the expansion. Is there a way to help us think about the split or the tooling revenue potential in '26 embedded in that outlook?

Yes. So the split will be similar to 2025. Similar split year-over-year, and again, that's mainly due to the Volvo program that we announced in Q2. So we'll be forecasted to closing that tooling revenue in Q4 of 2026. So very similar to 2025.

Got it. And with Q4 being higher.

Correct.

Okay. Okay. And if we look past that -- if you look out to '27, your visibility is getting better, and markets are showing some encouraging signs. Any way to think about margin potential? You know, obviously 17% to 19%, you've been very consistent, but is there ability to, you know, even go beyond that as you get volumes back and with some of the initiatives underway?

Yes. So I think we gave the guidance of 0% to 5%. Right now we're forecasting, and the visibility we have is we would be closer to 5% in '26. Now, that's mainly due to the program wins we had. They're going to launch in the second half of 2026, so we'll get a full run rate in 2027. And then I think you're absolutely correct on the margin. You know, we will start to get leverage back in 2027. I think that could be somewhere between 150 to 200 basis points. You know, we see low 20s as possible.

Great. Very helpful. And calendar '26, we know the truck market, we see that coming back at least through ACT. They're saying up about 5%, mainly in the second half. We're seeing powersports already coming back. That's stronger than we thought in the beginning of the year. I think the real benefit that we all see is that with all the launches from last year and launches getting into this year is how quickly they ramp up. That's usually the -- which -- with a little bit of variability for us relative to how quickly they can ramp up. We can ramp up quick. It's really how quickly can they ramp up.

Yes. Yes. That's great. Okay. And the SMC progress, great to see. You know, I guess on the go forward, you know, the additional potential for additional opportunity there, you know, what are you seeing in that channel and potential for SMC sales?

Yes. Chip, we are very successful in the fourth quarter, as we mentioned, and the $21 million of annual run rate won last year. We have a number of projects in the pipeline. Very bullish and confident that, that is going to be a good opportunity. We started that about a year ago, a little over a year ago, we started that project, and it has been very successful. We're confident in it, and we're happy with that decision. We still have some capacity left for the coming year, although we're getting to the point where in the next 12 to 18 months, we may need to add capacity for compound. That's how successful it's been.

Good problem.

Yes. Good problem.

Yes. And any more update on the expansion? It sounds like everything's tracking well. You know, any big hurdles or permitting or anything yet to get through, or it looks like it's pretty smooth sailing?

No, been pretty smooth. I will compliment our team in Mexico. They have done just a spectacular job at picking up pieces of machinery the size of the foundations and the installation it takes to put in 30-ton cranes and 4,500-ton presses. I mean, it is massive infrastructure, and they work their tails off over the holidays and Christmas season into January. You know, the new plant is now done. Signs are hanging on it. I think we got some pictures of it out there, but Yes, just doing a great job. Already have moved a couple products. We're already shipping product out of the new facility in Monterrey. As of the last couple weeks, a few loads have actually gone out of that building, which is outstanding. So we're looking forward to show that off later this year to anybody that would like to visit.

Yes. Fantastic. I look forward to that in the fall, and we'll see you in a few weeks in California.

The next question is coming from Tom Klugas from Impala Capital.

Impala Capital today. Anyways, the spending was quite large for Mexico this year. I guess my question is, next year, does that ramp down a lot? You also started talking about SMC potential expansion. I was sort of surprised to hear that you guys did $21 million this year. My other question on SMC is, you were very specific in the press release for some reason about it being late Q3 SMC ramp, and I didn't understand. It sounded very specific for some reason. I didn't know if there was any commentary around that.

The reason I'm asking about the CapEx is on the new wins, is most of that going to be in the current plants in the U.S., or are you going to get higher utilization out of the Mexico plants for some of the new business that's being signed?

Yes. Great questions. I'll take the first piece of the CapEx. In 2025, we spent roughly $6.5 million on the Mexico expansion project for capital. We're forecasting $18 million to $20 million in 2026, and that's consistent with what we previously said about $25 million, which I believe we disclosed in Q3 of last year. We're still running at that run rate, and we're looking at $18 million to $20 million in '26.

In '27, though, the Volvo project is implemented.

Yes. And that will be specifically for the Volvo roof program in Matamoros, which will start production in Q1 of 2027.

And I'll take the second half of your question on SMC compound. So very specifically, we won $21 million of annual run rate wins, not all of those have launched. About 1/3 have launched, they're in production. I'd say over the last quarter to two, we've been running at a 7 million pounds a year run rate of that product line. There is still testing on some of those, Tom, like we've talked about with some of the large OEMs where product gets validated, and it can take 12 to 18 months for a project to go into full production. SMC compound is definitely shorter than that. Some of these are 1 to 3 month type tests, we believe we'll be up in production by Q3 of this year for all of them. So that whole $21 million will be in production by the end of Q3.

Some of those tests are like UV tests, where the part has to have 2,000 hours of ultraviolet, you know, sun exposure on it, and there's just no way to speed that up. You just have to wait for that testing to be complete.

The third question I think you asked was, from a CapEx perspective, we're working on improving our utilization of our current assets so that we don't need to buy another compounding lines. We have 2 of those in Columbus, Ohio, as I think you remember. We're definitely not going to be doing that in '26 as we finish all the rest of the CapEx for Volvo that Alex talked about. But by '27, '28, we might need to add more additional capacity to do compounding. More to come there as we're successful in compounding, that could be a problem where we do want to add capacity.

Okay. So my follow-up is, how much SMC did you guys sell in 2025? And then again, the question was utilization of -- all that CapEx in Mexico is 100% Volvo related. I guess what I was trying to understand is it seems like a big number, so I didn't know if any of the new programs would be in Mexico or all the new programs mainly in North America plants.

Of the $25 million in CapEx, $20 million of it is, I would say, related to that roof program. $5 million of it is related to the new greenfield plant, the 200,000 square foot plant in Monterrey, our additional capabilities that we've talked about like top coat paint that we have added to that facility. Those are things that will absolutely give us more capacity and for other customers outside of that. So there's room to grow there in that facility.

I think optimizing the footprint in Mexico as well to benefit customers.

Yes. We relocated the product family to Monterrey. So instead of shipping 180 miles, it will ship 1 mile.

Yes. And I think the other thing, Tom, and I know we've talked about this in previous conversations is the -- our Volvo contract, we put some protection in there on our capital spend. So if volumes don't hit certain levels, our capital spend is protected through our contract with Volvo.

Reimbursed.

Okay. And the SMC for 2025, do you guys have a number on that or no?

So of that $63 million of new wins, $21 million of the new wins were SMC compound.

No, I was asking how much of the revenue for this year? Was there any revenue from SMC in 2025?

Yes. So we don't specifically disclose that. It's trying to think how to answer that. Of the -- so what Eric just -- yes -- what Eric said is 1/3. So 1/3 of it is already launched and was recognized in our 2025 numbers. And the other customer that we sell to, Tom, is Yamaha. So you could go look at the major customer footnote and some of that is SMC sales. Not all of it, but a good chunk of SMC sales.

The next question will be from Bill Dezellem from Tieton Capital.

Two different questions. First of all, relative to SG&A, would you please talk about the drivers that led to you being able to lower your SG&A as much as you did in Q4 versus Q4 a year ago, please?

Yes. So last year, during Q4, we did a pretty big layoff. That was part of it. And then the other piece, and it's in the -- our earnings release is our year-over-year severance costs in Q4. In the previous year, we had $1 million and in the current period, it was only $0.5 million.

And then in addition to that, was there any meaningful structural adjustment to SG&A? I guess, to some degree, there would have been with the layoffs that would have been a function of potentially impacted, but I'll let you answer the question.

Yes. So moving forward, our SG&A run rate, we're looking at is somewhere between $30 million and $32 million. Now in 2026, you will need to add in the onetime costs that we're disclosing in our press release. So the $2.5 million related to the Monterrey facility that we won't be able to capitalize and then an additional $1 million related to succession planning costs.

And then secondarily, would you please talk in some more detail about what's happening with powersports and that uptick? I know that you had said there was an SMC win there. You referenced powersports coming back, but hoping that you can provide more details around the dynamics behind the powersports market rebounding and maybe more on that Yamaha SMC win.

Yes. So start at the highest level, the general powersports market. There was that COVID boom back in '21, '22, then a lull into, let's say, '24, '25. We're starting to see that come back. So just the total quantity of vehicles being produced, that inventory at dealerships that has to get sold and sort of that used market being -- having some pent-up demand for vehicles, that has kind of gotten through the pipeline, I'll say, right? And so it's back to a normal run rate. So the assembly plants are building more personal watercraft, more side-by-side, more ATVs than they were a year ago. So we get that macroeconomic support.

And then on a very acute scale, we launched a number of platforms over the last year. Some of those were in some of our investor decks and platforms like a skid plate. You might remember, Bill, we talked about that's now in full production and running as well as a new cargo box and another ATV with a cargo box and the SMC for the Yamaha Watercraft. So all of those launched last year. All of those are incremental brand-new wins because they're on a new vehicle or a new part on a vehicle that we already had a part on. And so all of that supports our powersports growth. Kind of that grow wallet share that we always talk about. We go back to those customers that we've won product with before and sell them another product. We're good at that, and they're good at buying parts from us, and we're good at working with their engineers and getting early in that design phase.

That's really helpful, Eric. And as you look at those design wins, tied to a more supportive market backdrop, would you anticipate that each and every quarter in '26 that powersports will be up from the corresponding quarter in '25?

'26 over '25, my guess is yes, incremental over the prior 12 months, but I'm looking at Alex to make sure.

Yes. I mean, for the full year, we would forecast that it will be up, especially given what we've seen so far in 2026. To sit here and tell you, hey, every single quarter is going to be up. I don't know that off the top of my head. But yes, for the full year.

And then just taking that one step further, then, you don't know of anything specific in terms of customer plans, et cetera, that would lead to a quarter to be down, but you're just wanting to be practical in answering the question. Is that what I'm hearing?

Correct. Correct.

Good definition of how we answer questions.

And Q1 and Q2 should be up because of the skid plates. So the skid plates launched in Q3 of 2025. So Q1 and Q2 should be up, and then we'll just see where the powersports demand is in the second half of the year.

We still see strong sales in the -- more of the industrial side of the ATVs with the Rangers and things like that, side-by-sides and work trucks.

Congratulations on solid quarter.

And there were no other questions at this time. I would now like to hand the call to Eric Palomaki for closing remarks.

Thank you for your continued interest in our company. We look forward to providing an update on our progress when we report our first quarter results in a couple of months. Have a great day.

Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good morning, everyone. Welcome to the Core Molding Technologies Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I will turn the call over to Sandy Martin, Three 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 third quarter 2025 results.

Joining me on the call today are company's President and CEO, Dave Duvall; as well as COO, Eric Palomaki; and CFO, Alex Panda. This call is being webcast and can be accessed through coremt.com via an audio link on the Investor Relations Events and Presentation 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, 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. Actual results may differ materially from those expressed or implied. Please refer to today's earnings release for our disclosures on forward-looking statements. These factors and other risks and uncertainties 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 EBITDA, the debt to trailing 12 months EBITDA ratio, free cash flow and return on capital employed. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Our earnings release has been submitted to the SEC on Form 8-K.

And now I would like to turn the call over to the company's President and CEO, Dave Duvall.

Thank you, Sandy, and thank you all for joining us today. The positive momentum we've highlighted last quarter has continued to build and remains firmly in place. The only change from our change from our Q2 update relates to the timing of our tooling revenue, which has shifted into the fourth quarter. As a reminder, tooling is an inter process involving fabrication, testing and ultimately, customer final sign-off, making it inherently challenging to predict the exact timing of revenue recognition.

With the vendor trucking industry, several projects remain on hold, pending greater clarity around the administration's policy direction. That said, we have continued to make significant progress this year and this quarter, across our next largest verticals.

During the third quarter, sales in our power sports, building products and industrial and utilities markets grew year-over-year, reflecting the continued traction of our investor growth initiatives and the gradual improvement in market conditions.

Power sports, a major sales category for Core achieved its first year-over-year growth in 8 quarters, marking a return to growth after two full years of declines. We believe this momentum is being fueled by a combination of new product introductions and our continual wallet share growth. As an example, we are now in full production for the UTV Skid plates.

In the third quarter, we successfully launched the UTV skid plate program we've discussed on prior calls. We're seeing signs of recovery in demand for power sports helped by expectations for continued lower interest rates and new launches. That combination is creating a more active demand environment across both water and land power sports as we head into 2026.

Regarding the skid plate program specifically, we expect it to generate approximately $8 million in annual run rate revenue once fully ramped. While this category remains somewhat seasonal, we believe power sports is positioned for a stronger rebound in 2026, particularly in a more favorable interest rate environment following recent cuts and new program launches. Last quarter, we highlighted $46.7 million in new business wins this year, 99% of which is incremental. This builds on the $45 million in wins from last year.

We are pleased with the momentum and excited about our known future growth and continue to see additional opportunities and a robust sales pipeline of over $250 million. But we know we still have many opportunities to leverage the execution improvements we have made. And therefore, we are continuing to invest and aggressively refine our sales systems. This has always been the last phase of the Core Molding transformation, and it is our current must-win bat as we drive to leverage all the business execution improvements and unlock the earnings potential of our improved capabilities.

To accelerate growth further, we have implemented a value selling program, and we're adding three new business development roles that are focused on and incentivized to expand wallet share with key partners and drive lead development for our new sheet molding compound opportunities.

On last quarter's call, we discussed the completion of a market analysis to determine the total addressable market for SMC in North America. During the third quarter, we partnered with four potential customers who completed molding trials of our material and provided positive feedback. Based on the successful product trials with the initial customers, we are optimistic about our current market potential, as we've stated.

Earlier, we see the quote-to-cash cycle for this product in the 6-month range versus our fully designed product being in the 12- to 18-month range. We're pleased with the level of end market diversification represented in these trials, which includes electrical boxes, multifamily commercial doors, buses and [indiscernible] truck customers.

We were focused on broadening our sales and marketing work to promote Core's proprietary SMC product as raw material for key customers. We estimate the total addressable market for this product exceeds about $200 million -- our focus on operational improvements and key investments in our SMC operations has significantly improved our capacity, consistency and performance, which we are seeing as key value propositions as we engage with customers in this market.

We have always viewed advanced formulations as a deep competitive differentiator for Core and now working directly with Etsy customers we clearly see our product and service advantages versus their current suppliers. Specifically, Core has more consistent material, expertise in modifying SMC formulations to meet civic molded part requirements and core is significantly shorter lead times.

All of these factors create significant value for our customers particularly for customers whose end products are built around Core's sheet molding compound as is always the case with SMC.

Work continues on our strategic $25 million investment and layouts are complete for the Matamoros expansion and the new greenfield build in Monterrey, Mexico. Monterrey has been designed to provide additional capacity for future growth in low pressure injection molding and DCPD processes.

Additionally, we are adding top code paint capabilities to this facility as customers specifically ask for this capability, especially in the construction and agricultural machine market. We believe the Monterrey region will continue to grow and has significant long-term potential for us. We have also ordered two new start, 4,500-ton compression molding prices and we have completed the automation design and plant layout for a sleeper root program in our Matamoros facility.

The tooling revenue from these programs is anticipated to be approximately $35 million and is expected to be recognized in 2027.

Organic growth remains our top priority in our capital allocation strategy, and this investment not only supports the launch of a major truck program, but also adds DCPD molding and [indiscernible] capabilities to our Monterrey business, serving growing industries, including the con ag market.

The addition of DCPD molding positions us closer to key customers that highly value this process. Additionally, our new topcoat paint capabilities enables us to deliver final topcoat paint products that are ready to install by our customers. This is a significant value add for our customers, which reduces overall cost and makes the process from order to finish product more efficient.

Together, these investments expand our technical capabilities and create new durable revenue streams. We have good visibility into the truck and power sports industry recovery, which gives us confidence in the potential for over $300 million in total revenue in 2027. These long-term programs are expected to generate approximately $150 million in revenue over the next 7 to 10 years.

Based on our current projections across truck power sports and other growing end markets, we expect annual product revenue to exceed $325 million within the next 2 years.

Turning to our Q3 financial results. Revenue was $58.4 million, which is down 19.9% from the prior year, with over half of the sales decline coming from the known Volvo transition and the remaining due to declines in other truck demand.

Gross margin was 17.4%, which is within our targeted range of 17% to 19%. EBITDA margin of 11%, that's up 70 basis points from a year ago. Cash flow from operations for the first 9 months of the year of over $14 million, which continues to exceed our year-to-date net earnings.

We again delivered stable gross margins this quarter within our projected range and positive year-to-date free cash flow. Sales declines in the third quarter were more than we expected, but the new business wins are there. And we continue to ramp up our investor growth efforts.

We expect fourth quarter sales to be up year-over-year primarily due to significant increase in tooling sales. Regarding the ongoing succession plan execution, Eric and I are working closely in all facets of the role as we continue to progress towards the CEO succession plan for May of 2026.

As I've discussed in the past, we have robust systems for organizational development and succession planning throughout all levels of our organization. In conjunction with our succession plan for Eric, we have developed a strong bench under Eric, including an Executive President of Mexico Operations, Arnold Alanis, who has worked for Core for over 13 years, and our Executive President of U.S. and Canada Operations, Mike Gayford.

Arnold and Mike had been a part of the entire leadership transition over the last year, and I appreciate their increased engagement in our business allowing Eric time to focus on transitioning to CEO. I believe that our culture is a competitive advantage and a key benefit of that strategy is our ability to develop and grow leaders from within Core Molding as demonstrated by our ability to promote new executive leaders from within the organization. They get a testament to the effectiveness of our organizational development and succession process.

Now I'll hand the call over to Eric to share comments on our new production and operational efficiency efforts.

Thank you, Dave, and good morning. One of our newest program opportunities is a large Canadian rail infrastructure project. The cable railway containment trough system replaces concrete systems and its installations were labor-intensive, slow and costly. Under the traditional installation process, crews excavate a shallow trench and use a crane to lift and position each concrete section.

The benefits of our proprietary polymer and composite troughing are that they are lightweight, non-conductive, easier to install and meat from recycled materials, reducing both installation labor and lifetime maintenance costs.

I'd also like to share an update on footprint optimization initiative launched at the end of the second quarter, which we expect to be completed 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 RTM or resin transfer molding process by purposefully relocating select programs to another one of our facilities. This strategic move will streamline operations at the originating site and is expected to deliver further margin improvement.

Lastly, I wanted to call out our operational teams for their 99% on-time deliveries and 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 below 0.01% indicates a level of quality and demonstrates the precision of our quality processes. We have also gained 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 our people and our plants.

With that, I would like to turn the call over to Alex to run through the financials.

Thank you, Eric, and good morning, everyone.

For the third quarter, net sales totaled $58.4 million. As Dave stated, product sales were primarily down due to the known Volvo transition. Excluding the Volvo transition, sales were down 8.7% from prior year due to lower demand primarily in the medium and heavy-duty truck verticals. This was partially offset by new product sales to customers in power sports, building products and industrial and utilities markets.

Despite the operating leverage experienced in the third quarter, we maintained a gross margin of $10.1 million or 17.4% of sales. Over the past 12 months, we have executed a series of initiatives focused on improving operational efficiency, optimizing raw material costs and enhancing overall margin performance. These efforts have helped offset the fixed cost deleveraging associated with the planned Volvo transition. We continue to expect our gross margin to remain within our targeted range of 17% to 19% for the year.

SG&A expenses for the third quarter were $7.6 million or 13% of sales compared to 12% in our prior year period. Excluding the $220,000 in footprint optimization costs, our SG&A rate would have been 12.6% for the quarter.

As Eric discussed, our footprint optimization project is underway. We have invested $500,000 so far and plan to invest $1.5 million by the end of 2025. Again, this project involves relocating production to a different plant to generate cost savings of over $1 million each year, beginning in January of 2026.

Operating income for the quarter was $2.6 million or 4.4% of sales, down from $3.6 million or 4.9% of sales in the same period in the prior year. The third quarter's interim effective tax rate was 29.3% compared to 18.7% in the prior year quarter. The increase was due to taxable income being generated in higher tax rate jurisdictions this quarter.

Net income for the third quarter was $1.9 million or diluted income per share of $0.22 compared to net income of $3.2 million or diluted EPS of $0.36 in the comparable year period. Excluding the impact of footprint optimization costs, our third quarter diluted EPS would have been $0.24.

Third quarter adjusted EBITDA was $6.4 million or 11% of sales. We generated $14.2 million in GAAP cash from operations. And after capital expenditures of $9.3 million. Our free cash flow was $4.9 million for the first 9 months of 2025. We continue to expect the 2025 capital expenditures to be approximately $18 million to $22 million, including investments for the Mexico expansion. As we previously announced with the award of the Volvo Mexico business, the company will invest approximately $25 million over the next 18 months.

As of September 30, our balance sheet was strong with a total liquidity position of $92.4 million, comprising of $42.4 million in cash plus $50 million available under the revolver and capital credit lines. The company's term debt was $20.3 million at the end of the quarter, and our debt-to-EBITDA ratio for the trailing 12 months remains less than 1x.

Our return on capital employed was 6.5%. And excluding cash, the rate was 8.7%. As we continue to launch new business, we expect this metric to improve by better leveraging top line performance and driving better asset utilization. Both ROCE metrics are computed using 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 a significant focus on organic growth as well as disciplined management of debt and working capital and share repurchases.

Year-to-date, we have spent $2.5 million on Mexico expansion projects and expect to spend a total of $7.5 million by the end of 2025 and $17.5 million in 2026. For the 3 months ended September 30, no shares were repurchased. And to date this year, we have repurchased 151,584 shares at an average price of $14.80.

Our full year sales expectations are down 10% to 12%. However, we have forecasted fourth quarter sales to increase driven by new program launches and significantly higher tooling sales. As a reminder, regarding tariffs, our products in both Canada and Mexico are USMCA compliant and are currently exempt from tariffs. We will continue to closely monitor how changes in trade policies affect our customers and their end markets.

And with that, I would like to turn it back to Dave.

Thank you, Alex. We are excited about new and existing customers and end markets. As Eric mentioned, we are finalizing negotiations on a large Canadian project for the rail data line transmission troughs called TroTrough, which is worth about $15 million in annual revenue starting in the second half of 2026.

We continue to see a strong pipeline of opportunities with over $250 million in business development potential in our pipeline. We believe we can add over $40 million in new wins that would be awarded in the next 3 to 6 months. We're also excited about this year's wins because they are in new and emerging markets for Core. These new markets, which we strategically targeted include new pickup box panels for small EV trucks, satellite tracking systems and the truck applications.

We plan to expand our DCPD molding process for large OEMs in the areas we already serve and have added topcoat paint to our full-service partner model. We continue to invest in our sales organization, and we're driving like hell to develop new customers who trust us with their long-term business. Eric and I are highly focused on further scaling operations leveraging our fixed cost base and optimizing our portfolio footprint.

Our commitment to continuous performance improvement, especially with the lower current demand, positions us to translate top line growth into bottom line results. We are excited about the future and look forward to leveraging all the improvements with the addition of the $65 million in incremental wins we have achieved in the last 20 months.

We will continue to strengthen our operations and take the necessary actions to drive long-term business capability and profitability. We are pursuing the most promising opportunities in new markets and growing wallet share with our current long-term customers. We are confident this is only beginning.

New areas are emerging and we will continue to evolve in the construction such as commercial windows and doors market. We focus on large, diverse sectors such as construction, energy, industrial, aerospace and medical markets, and we have proven we will win.

We are driving to engage our sales and technical teams earlier in the design cycle to a wallet share and educate customers of our full range of value-added capabilities. including SMC formulation, large promoting and topcoat painting.

Customers desire a strategic partner like core molding to handle design, fabrication and completion with the topcoat paint.

Our teams are committed to maintaining our must-win battle excellence by: one, driving incremental sales growth into new markets; two, improving our margin profile through operational excellence and our innovation pipeline; and three, continually investing in growing a business that has proven it can execute well.

Although the truck industry forecasts continue to look soft for Q4, ACT and customer forecasts indicate a truck build increase in the second half of 2026. As we discussed last quarter, the great pause as one customer put it continues with delayed decisions and major markets still serving in a lower-than-expected demand environment.

Tariff concerns have caused companies to pause and we've seen delays in demand and even more so in the decisions of launching new programs. However, recently, we have seen signs of stabilization and rebounding demand in several of our key end markets. We are finding ways to attract new customers and increase wallet share with current customers. Our must-win battle of invest for growth continues, which is reflected in our confidence to make significant investments in future growth. Developing a world-class engineering and manufacturing solutions partner for large and ultra-large molded solutions is our goal.

Again, I want to thank our team for their hard work and dedication to excellence which has enabled us to achieve successes throughout our transformation journey.

I also want to thank our customers, investors and Board for their belief in what we do every day at Core Molding.

Finally, we will present our investment story and host one-to-one meetings at the Southwest IDEAS Conference in Dallas on Wednesday, November 19. Please reach out if you would like to see us there in person or set up an investor call soon.

With that, let's open up the line for questions. Operator?

[Operator Instructions] Your first question for today is from Chip Moore with ROTH.

I wanted to -- a lot of noise around tariffs for trucking specifically. I think, right there were some actions get pushed October to November, just your updated thoughts around those tariffs specifically, any potential impacts or what you're seeing from customers in regards to those?

Yes. I mean, all of our products are USMCA compliance. So right now, we still -- our understanding is we are exempt. Our bigger concern is the impact that it could have on customer demand down the road. But right now, we're not seeing the impact on tariffs just yet.

Got it. Okay. No, that's helpful. And I guess...

I think overall, too, from an operational standpoint, we have both operations in U.S. and Canada, and it need be. It's not a short change to move, but it's always possible to move.

Yes. And then the only other thing I would add is, we have already raw material adjusters in our -- all of our contracts. And so, if we do get hit with the tariff and increased costs, we can't pass that through to customers.

Got it. That's helpful. And maybe to follow up on -- as you look out, it sounds like you to $300 million plus is quite strong. Just if you think about '27, I guess, biggest risks to that or upside to that? And then what do you have built in around trucking as we look out maybe to 2027?

That's a great question. So -- when I look at it from a high level, as we said, our quote-to-cash cycle time is 12 to 18 months. So as we know, the Volvo program won't launch until 2027, and we have $45 million was in prior year and $47 million of incremental wins this year that we see layering in over the next 18 months. So, that's where we're seeing it. As they ramp up, you start out with a ramp and maybe you're ramping for 6 to 7 months until you get into full volume. So, that's where we start seeing the sales coming together. So we're pretty excited about that.

When we talk with truck customers right now, -- there is -- and looking at ACT, we're seeing that we believe truck would -- or they believe truck would start coming back to the second half of next year, probably the biggest concern. We were talking with one customer yesterday and the rate of increase that they had going into the second half next year was significant.

So, I would say after yesterday, our biggest concern was really how fast will the truck market come up because they can come up pretty quick, and being able to hire and meet all those demands on the upswing. As it goes up as fast as it comes down. And the further it goes down, probably more likely the more it's going to go up.

Perfect. If I could ask another one just around sort of more near term, the tooling revenues getting bumped to Q4. Any any sense of how to think about tooling revenues maybe for Q4 and even over the next couple of quarters just with all the new programs you've got on the horizon?

Yes. So for the full year of 2025, we anticipate tooling sales to be roughly 15% of our total sales in 2025. And -- and then keep in mind, Chip, those sales will be at a lower margin than our product sales. And then in the future year, '26, I mean we're not really giving any guidance from a number perspective for '26, but the Volvo Mexico tooling job will will close. It will be close at the end of '26 maybe slips into '27, but it'd be December '26, maybe January '27.

Got it. Okay. So, a little negative mix impact Q4 on higher tooling revenues. Any way to think about -- yes, sorry.

Yes. So margins will take a little bit of a hit, but we still are providing guidance that we'll be within that 17% to 19% target that we've put out there each quarter and for the full year.

Yes. That's what I was going to ask. And I was going to follow up just sort of longer term as the tooling normalizes, is 17% to 19% still the right way to think about it? Or do you think there's upside potential at some point on higher volumes?

Yes. I think, when we start getting back into the $300 million, there's going to definitely be some upside. I mean, we'll start getting back some fixed leverage will reverse favorably. And so, I think that will be worth anywhere, I would say, right around 200 basis points. If you go back and look at our previous quarters, and see the lost leverage each quarter. I think, if we go back 2 years, we're losing right around 200 basis points. So you could add 200 basis points, I think, is a good way to look at it. also the part that we beat is that on the new programs, the systems that we put in place and how we're quoting business, it's going incremental on the margin side.

Excellent. Okay.

I don't want to give you a number on how much yet, though.

[Operator Instructions] You have a follow-up question coming from Chip.

I just want to make sure I wasn't hogging the line. I guess, just one more for me on the new business opportunities. The Canadian rail project, that's a nice win. Opportunity for similar type projects and then SMC, how is the traction there? It sounds like it's going pretty well, but any more detail you can provide?

Yes. Two parts to that, Chip. So the first one on the rail Trojan troughs. We actually had that business in '22, '23. It tends to be a project-based when a city or a municipality does a section of rail. It's a big project for us for a couple of years. So, we've had a couple of years without any, and we have another one of those currently building a test track for next summer and that will turn into that bigger multiyear program. So, we're excited about it.

I can't say that that we've 100% want it, but we were certainly there in the test track and believe that we are in a good position to win the whole installation.

Your second question was around SMC. We put some comments in there. We have -- since last quarter 4 very specific customers that are trialing actually molding parts, had some of our engineering teams working with them. And so, we made a lot of progress with 4 of the 10 customers that we had focused on. And so we believe in the next quarter or so, we'll be having awards or agreements with some of those customers to announce in our next earnings.

Perfect. Okay. And maybe just last on the buyback. You didn't do any this quarter, but can you just remind us what your authorization is there?

Yes. We have roughly about just over $2 million left. The -- in the buyback is still in place as of today. And so -- but yes, we plan on still utilizing that as a way to use our capital.

Your next question is from Bill Dezellem with Tieton Capital.

A couple of questions. Would you please start by walking us through the tooling business that shifted to Q4 from the Q3, what the dynamics were behind that?

So tooling in general, Dave kind of walked through this on the call, but for us to recognize revenue, the customer has to accept tooling. So there is all kinds of different tests. You have to do full production run test, you have to do quality tests. There's different specifications. And so working with a customer at times, those tests get delayed for one reason or another. One could be because the customer decided to do engineering changes. And so, in this case, one of our bigger tooling jobs that we originally thought was going to close in Q3 and got delayed into Q4. We are currently in the process of doing those tests, I don't see that job specifically being pushed out any further at this moment. But that -- it's just -- that's kind of the nature of the tooling. We don't have a ton of control. We can push our customers as hard as we can and work with them. But there is still a risk from a job being delayed from a quarter to a quarter. But at the end of the day, it's not lost revenue. It's just a timing issue.

Bill, kind of way that we look at it as well. Usually, if it's -- a lot of times, it's not us. It's the entire product level is really what they're dealing with. And they're trying to really put everything together, what the ideal case for them would be every supplier, every validation test, everything works, and then they get full approval. When one of those things doesn't work, the entire supply base is not PPAP approved. So once we get PPAP approved, we recognize the revenue, which is a signed off document.

Now, if that PPAP is going to be pushed for a long period of time, we would certainly be in there talking with the customer saying, "Hey, we can't wait a quarter for this to be done." but if it's weeks, it's probably not worth pushing that hard.

That's helpful. And then you referenced the footprint optimization that you were doing and that was going to have a nice cost savings. Would you please walk us through physically what's what's moving from where to where and why that's taking place besides just the money aspect and maybe it's just straightforward as the cost savings.

Sure, Bill. If you remember the term resin transfer molding or RTM parts, we used to have a business in Batavia, Ohio a number of years ago that built almost only resin transfer products. We ultimately closed that plant and moved that product into our Matamoros facility and our Columbus facility. And ultimately, what we've decided is to move what was left in our Columbus facility down to our Matamoros facility.

And our facility down there has employees with 20 and 30 years of experience doing resin transfer molding, -- over 300 of our employees in Mexico are part of that business unit down there. And so they are just -- they're skilled, capable and engaged, and we've struggled in Ohio to produce those, I'll say, heavy manual labor, difficult parts, very hand working with fiberglass. And so ultimately, we're just leaning into where our strength and skills are, and there's some labor savings associated with it. But really, it's about the technical expertise and the employee base that we have is capable of it.

That is very helpful. And the math behind this, you said was you were going to spend about $1 million on the transfer, and it will save you about $1 million a year. Did I hear that correct earlier?

It will be about $1.5 million total investment, so cost side and then $1 million a year annual run rate ongoing. So...

We have reached the end of the question-and-answer session, and I will now turn the call over to Dave Deval for closing remarks.

Thank you for your continued interest in our company. We look forward to providing an update on our progress when we report our fourth quarter results. Have a great day. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.