CORE MOLDING TECHNOLOGIES INC — Call Transcript 2025

Good morning, everyone. Welcome to the Core Molding Technologies third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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 your joining us for the Core Molding Technologies conference call to review our third quarter 2025 results. Joining me on the call today are the 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 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 are not historical facts, including statements or expectations or future events or future financial performance or 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, the debt to trailing 12-month EBITDA ratio, free cash flow, and return on capital employed. Reconciliations to the nearest GAAP measure are available 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 Q2 update relates to the timing of our tooling revenue, which has shifted into the fourth quarter. As a reminder, tooling is an iterative process involving fabrication, testing, and ultimately customer final sign-off, making it inherently challenging to predict the exact timing of revenue recognition. Within the 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 investment 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 eight 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 in 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 battle 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 six-month range versus our fully designed product being in the 12-18 months range. We're pleased with the level of end-market diversification represented in these trials, which includes electrical boxes, multifamily commercial doors, buses, and roof and hoods for truck customers. We remain 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 our advanced formulations as a deep competitive differentiator for Core, and now working directly with SMC 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 specific molded part requirements, and Core has 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-coat paint capabilities to this facility as customers have specifically asked 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 state-of-the-art 4,500-ton compression molding presses, and we have completed the automation design and plant layout for a sleeper roof 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 top-coat paint 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 top-coat paint capabilities enable us to deliver final top-coat 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 7-10 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 two 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%-19%. Adjusted EBITDA margin of 11%. It's up 70 basis points from a year ago. Cash flow from operations for the first nine 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 Vice President of Mexico operations, Arnold Alanis, who has worked for Core for over 13 years, and our Executive Vice President of U.S. and Canada operations, Mike Gayford. Arnold and Mike have 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. I think it's 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 made from recycled materials, reducing both installation labor and lifetime maintenance costs. I'd also like to share an update on the 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 high level of quality and demonstrates the precision of our quality processes. We have also maintained industry-low safety incident rates and employee turnover rates, which we take pride in. These favorably trending metrics reflect well on our culture and commitment to excellence across all 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. Including 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 deleverage 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%-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 nine months of 2025. We continue to expect the 2025 capital expenditures to be approximately $18-$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 30th, our balance sheet was strong with a total liquidity position of $92.4 million, comprising $42.4 million in cash plus $50 million available under the revolver and capital credit lines. The company's long-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 one times. 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 the trailing 12 months of operating income and total capital employed, a pre-tax metric. Please see our earnings release for the GAAP to non-GAAP reconciliation tables. Our capital allocation strategy remains flexible, with 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 three months ended September 30th, 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%-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're excited about new and existing customers and end markets. As Eric mentioned, we are finalizing negotiations on a large Canadian project for the cable railway containment trough system, 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 three to six 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 top-coat 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 space, 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 the beginning. New areas are emerging, and we will continue to evolve in the construction sector, 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 expand wallet share and educate customers of our full range of value-added capabilities, including SMC formulation, large-part molding, and top-coat painting. Customers desire a strategic partner like Core Molding to handle design, fabrication, and completion with the top-coat 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 19th. 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? Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Chip Moore with ROTH. Good morning. Thanks for taking the question. Hey, everybody. Hi there, Chip. Hey, Chip. Good. Hey, I wanted to—a lot of noise around tariffs for trucking specifically. I think right there were some actions that got 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? Yeah. I mean, all of our products are USMCA compliant. 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 to your point. I think overall too, Chip, from an operational standpoint, we have both operations in the U.S. and Canada, and if need be, it's not a short change to move, but it's always possible to move. Yeah, and then the only other thing I would add is we have RMA, raw material adjusters in all of our contracts, and so if we do get hit with a tariff and increased costs, we can pass that through to customers. Got it. That's helpful. And maybe to follow up on. As you look out, it sounds like your line of sight to $300 million plus is quite strong. Just. If we think about 2027, 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? Yeah. 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 12-18 months. So as we know, the Volvo program won't launch until 2027, and we have $45 million of wins in the 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 saying it. As they ramp up, you start out with a ramp and maybe you're ramping for six to seven 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. And looking at ACT, we're seeing that we believe truck or they believe truck will start coming back 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. Because 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 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? Yeah. So for the full year of 2025, we anticipate tooling sales to be roughly 15% of our total sales in 2025. And then keep in mind, Chip, those sales will be at a lower margin than our product sales. And then in the future year, so 2026, I mean, we're not really given any guidance from a number perspective for 2026, but the Volvo Mexico tooling job will close. It'll be close at the end of 2026, maybe slips into 2027, but it'd be December of 2026, maybe January of 2027. Got it. Okay. So a little negative mix impact Q4 on higher tooling revenues. Any way to think about gross margins? Hey, Chip, but just. Yeah, sorry. Yeah. So margins will take a little bit of a hit, but we still are providing guidance that we'll be within that 17%-19% target that we've put out there each quarter and for the full year. Yeah. 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%-19% still the right way to think about it, or do you think there's upside potential at some point on higher volumes? Yeah. 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. We'll reverse it favorably. And so I think that'll 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, yeah, I think if we go back two 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. Yeah. Also, the part that we believe is that on the new programs, the systems that we put in place and how we're quoting business. It's definitely incremental on the margin side. Excellent. Okay. I don't want to give you a number on how much yet, though. Yeah. Understood. Yeah. I'll hop in queue. And let others ask. Thanks. Once again, if you would like to ask a question, please press star one on your telephone keypad. You have a follow-up question coming from Chip. Your line is live. Thanks. I just wanted 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? Yeah. Two parts to that, Chip. So the first one on the rail Trojan troughs. We actually had that business in 2022, 2023. 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 would turn into that bigger multi-year program. So we're excited about it. Can't say that we've 100% won it, but we're 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, four very specific customers that are trialing, actually molding parts, had some of our engineering teams working with them. And so 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 then just last on the buyback. You didn't do any in this quarter, but can you just remind us what your authorization is there? Thank you. Yeah. We have roughly about just over $2 million left in the buyback. It's still in place as of today. But yeah, we plan on still utilizing that as a way to use our capital. Great. Okay. Thanks for all the color. Appreciate it. Thanks, Chip. Thanks, Chip. Your next question is from Bill Dezellem with Tieton Capital. Thank you. 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's all kinds of different tests. You have to do full production run tests. 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 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'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. Hey, Bill, kind of a 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. 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. Thank you. And then you referenced the footprint optimization. That you were doing, and that was going to have nice cost savings. Would you please walk us through physically 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 a 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 a part of that business unit down there, and so they are skilled, capable, and engaged, and we've struggled in Ohio to produce those, I'll say, heavy manual labor, difficult parts, very hands-on 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 that's capable of it. That is very helpful, and the math behind this, you said you were going to spend about $1 million on the transfer, and it'll save you about $1 million a year. Did I hear that correct earlier? Yeah. It'll be about $1.5 million total investment. So, cost side, and then $1 million a year annual run rate ongoing, so. Excellent. Okay. Thank you both. You're welcome. We have reached the end of the question-and-answer session, and I will now turn the call over to Dave Duvall 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.

Speaker 5: Good morning, everyone. Welcome to the Core Molding Technologies third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I will turn the call over to Sandy Martin, Three Part Advisors. Please go ahead. Good morning, everyone. good morning everyone Welcome to the Core Molding Technologies third quarter 2025 financial results conference call. welcome to the core molding technologies third quarter 2025 financial results conference call At this time, all participants are in a listen-only mode. at this time all participants are in a listen-only mode A question-and-answer session will follow the formal presentation. a question-and-answer session will follow the formal presentation If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. if anyone should require operator assistance during the conference please press star zero on your telephone keypad As a reminder, this conference call is being recorded. as a reminder this conference call is being recorded I will turn the call over to Sandy Martin, Three Part Advisors. i will turn the call over to sandy martin, three part advisors Please go ahead. please go ahead

Speaker 4: Thank you and good morning, everyone. We appreciate your joining us for the Core Molding Technologies conference call to review our third quarter 2025 results. Joining me on the call today are the 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 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. Thank you and good morning, everyone. thank you and good morning everyone We appreciate your joining us for the Core Molding Technologies conference call to review our third quarter 2025 results. we appreciate your joining us for the core molding technologies conference call to review our third quarter 2025 results Joining me on the call today are the company's president and CEO, Dave Duvall, as well as COO, Eric Palomaki, and CFO, Alex Panda. joining me on the call today are the 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 presentations page. 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. 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. 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 are not historical facts, including statements or expectations or future events or future financial performance or 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, the debt to trailing 12-month EBITDA ratio, free cash flow, and return on capital employed. I would also like to remind you that the statements made in today's discussion are not historical facts, including statements or expectations or future events or future financial performance or forward-looking statements, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. i would also like to remind you that the statements made in today's discussion are not historical facts including statements or expectations or future events or future financial performance or 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. forward-looking statements are uncertain and outside the company's control Actual results may differ materially from those expressed or implied. actual results may differ materially from those expressed or implied Please refer to today's earnings release for our disclosures on forward-looking statements. 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. 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. 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-month EBITDA ratio, free cash flow, and return on capital employed. management will refer to non-gaap measures including adjusted eps adjusted ebitda the debt to trailing 12-month ebitda ratio free cash flow and return on capital employed Reconciliations to the nearest GAAP measure are available 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. Reconciliations to the nearest GAAP measure are available at the end of our earnings release. reconciliations to the nearest gaap measure are available 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. 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

Speaker 6: 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 Q2 update relates to the timing of our tooling revenue, which has shifted into the fourth quarter. As a reminder, tooling is an iterative process involving fabrication, testing, and ultimately customer final sign-off, making it inherently challenging to predict the exact timing of revenue recognition. Within the 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 investment growth initiatives and the gradual improvement in market conditions. Thank you, Sandy, and thank you all for joining us today. 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 positive momentum we've highlighted last quarter has continued to build and remains firmly in place The only change from our Q2 update relates to the timing of our tooling revenue, which has shifted into the fourth quarter. the only 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 iterative process involving fabrication, testing, and ultimately customer final sign-off, making it inherently challenging to predict the exact timing of revenue recognition. as a reminder tooling is an iterative process involving fabrication testing and ultimately customer final sign-off making it inherently challenging to predict the exact timing of revenue recognition Within the trucking industry, several projects remain on hold pending greater clarity around the administration's policy direction. within the 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. 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 investment growth initiatives and the gradual improvement in market conditions. 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 investment 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 eight 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. Power sports, a major sales category for Core, achieved its first year-over-year growth in eight quarters, marking a return to growth after two full years of declines. power sports a major sales category for core achieved its first year-over-year growth in eight 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. 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. 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. 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. 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. 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. 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 in 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. 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. 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. 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. 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 in a robust sales pipeline of over $250 million. we are pleased with the momentum and excited about our known future growth and continue to see additional opportunities in 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. 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 battle 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. This has always been the last phase of the Core Molding transformation, and it is our current must-win battle as we drive to leverage all the business execution improvements and unlock the earnings potential of our improved capabilities. this has always been the last phase of the core molding transformation and it is our current must-win battle 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. 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. 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. 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. 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 six-month range versus our fully designed product being in the 12-18 months range. We're pleased with the level of end-market diversification represented in these trials, which includes electrical boxes, multifamily commercial doors, buses, and roof and hoods for truck customers. We remain 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. As we've stated earlier, we see the quote-to-cash cycle for this product in the six-month range versus our fully designed product being in the 12- 18 months range. as we've stated earlier we see the quote-to-cash cycle for this product in the six-month range versus our fully designed product being in the 12- 18 months range We're pleased with the level of end-market diversification represented in these trials, which includes electrical boxes, multifamily commercial doors, buses, and roof and hoods for truck customers. we're pleased with the level of end-market diversification represented in these trials which includes electrical boxes multifamily commercial doors buses and roof and hoods for truck customers We remain focused on broadening our sales and marketing work to promote Core's proprietary SMC product as raw material for key customers. we remain 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. 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. 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 our advanced formulations as a deep competitive differentiator for Core, and now working directly with SMC 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 specific molded part requirements, and Core has 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. We have always viewed our advanced formulations as a deep competitive differentiator for Core, and now working directly with SMC customers, we clearly see our product and service advantages versus their current suppliers. we have always viewed our advanced formulations as a deep competitive differentiator for core and now working directly with smc 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 specific molded part requirements, and Core has significantly shorter lead times. specifically core has more consistent material expertise in modifying smc formulations to meet specific molded part requirements and core has 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. 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. 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. 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. monterrey has been designed to provide additional capacity for future growth in low-pressure injection molding and dcpd processes Additionally, we are adding top-coat paint capabilities to this facility as customers have specifically asked 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 state-of-the-art 4,500-ton compression molding presses, and we have completed the automation design and plant layout for a sleeper roof 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 top-coat paint capabilities to our Monterrey business. Serving growing industries, including the Con Ag market. Additionally, we are adding top-coat paint capabilities to this facility as customers have specifically asked for this capability, especially in the construction and agricultural machine market. additionally we are adding top-coat paint capabilities to this facility as customers have specifically asked 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 believe the monterrey region will continue to grow and has significant long-term potential for us We have also ordered two new state-of-the-art 4,500-ton compression molding presses, and we have completed the automation design and plant layout for a sleeper roof program in our Matamoros facility. we have also ordered two new state-of-the-art 4,500-ton compression molding presses and we have completed the automation design and plant layout for a sleeper roof 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. 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 top-coat paint capabilities to our Monterrey business. 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 top-coat paint capabilities to our monterrey business Serving growing industries, including the Con Ag market. 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 top-coat paint capabilities enable us to deliver final top-coat 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 7-10 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 two years. The addition of DCPD molding positions us closer to key customers that highly value this process. the addition of dcpd molding positions us closer to key customers that highly value this process Additionally, our new top-coat paint capabilities enable us to deliver final top-coat paint products that are ready to install by our customers. additionally our new top-coat paint capabilities enable us to deliver final top-coat 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. 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. 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. 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 7-10 years. these long-term programs are expected to generate approximately $150 million in revenue over the next 7-10 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 two 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 two 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%-19%. Adjusted EBITDA margin of 11%. It's up 70 basis points from a year ago. Cash flow from operations for the first nine 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. 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. 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%-19%. gross margin was 17.4% which is within our targeted range of 17%-19% Adjusted EBITDA margin of 11%. adjusted ebitda margin of 11% It's up 70 basis points from a year ago. it's up 70 basis points from a year ago Cash flow from operations for the first nine months of the year of over $14 million, which continues to exceed our year-to-date net earnings. cash flow from operations for the first nine 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. 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. 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 Vice President of Mexico operations, Arnold Alanis, who has worked for Core for over 13 years, and our Executive Vice President of U.S. and Canada operations, Mike Gayford. We expect fourth-quarter sales to be up year over year, primarily due to significant increase in tooling sales. 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. 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. 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 Vice President of Mexico operations, Arnold Alanis, who has worked for Core for over 13 years, and our Executive Vice President of U.S. and Canada operations, Mike Gayford. in conjunction with our succession plan for eric we have developed a strong bench under eric including an executive vice president of mexico operations arnold alanis who has worked for core for over 13 years and our executive vice president of u.s and canada operations mike gayford Arnold and Mike have 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. I think it's a testament to the effectiveness of our organizational development and succession process. Arnold and Mike have 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. arnold and mike have 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. 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 I think it's a testament to the effectiveness of our organizational development and succession pro cess. i think it's a testament to the effectiveness of our organizational development and succession pro cess Now I'll hand the call over to Eric to share comments on our new production and operational efficiency efforts. Now I'll hand the call over to Eric to share comments on our new production and operational efficiency efforts. now i'll hand the call over to eric to share comments on our new production and operational efficiency efforts

Speaker 7: 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 made from recycled materials, reducing both installation labor and lifetime maintenance costs. I'd also like to share an update on the footprint optimization initiative launched at the end of the second quarter, which we expect to be completed by year-end. Thank you, Dave, and good morning. thank you dave and good morning One of our newest program opportunities is a large Canadian rail infrastructure project. 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. 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. 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 made from recycled materials, reducing both installation labor and lifetime maintenance costs. the benefits of our proprietary polymer and composite troughing are that they are lightweight non-conductive easier to install and made from recycled materials reducing both installation labor and lifetime maintenance costs I'd also like to share an update on the footprint optimization initiative launched at the end of the second quarter, which we expect to be completed by year-end. i'd also like to share an update on the 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 high level of quality and demonstrates the precision of our quality processes. We have also maintained industry-low safety incident rates and employee turnover rates, which we take pride in. These favorably trending metrics reflect well on our culture and commitment to excellence across all our people and our plants. 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. 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. 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. 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. 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 high level of quality and demonstrates the precision of our quality processes. a rate below 0.01% indicates a high level of quality and demonstrates the precision of our quality processes We have also maintained industry-low safety incident rates and employee turnover rates, which we take pride in. we have also maintained industry-low safety incident rates and employee turnover rates which we take pride in These favorably trending metrics reflect well on our culture and commitment to excellence across all our people and our plants. 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. With that, I would like to turn the call over to Alex to run through the financials. with that i would like to turn the call over to alex to run through the financials

Speaker 2: 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. Including 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 deleverage 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. Thank you, Eric, and good morning, everyone. thank you eric and good morning everyone For the third quarter, net sales totaled $58.4 million. for the third quarter net sales totaled $58.4 million As Dave stated, product sales were primarily down due to the known Volvo transition. as dave stated product sales were primarily down due to the known volvo transition Including the Volvo transition, sales were down 8.7% from prior year due to lower demand primarily in the medium and heavy-duty truck verticals. including 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. this was partially offset by new product sales to customers in power sports building products and industrial and utilities markets Despite the operating deleverage experienced in the third quarter, we maintained a gross margin of $10.1 million, or 17.4% of sales. despite the operating deleverage 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. 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. 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%-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. We continue to expect our gross margin to remain within our targeted range of 17%-19% for the year. we continue to expect our gross margin to remain within our targeted range of 17%-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. 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. 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. 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. 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. 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. 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 nine months of 2025. We continue to expect the 2025 capital expenditures to be approximately $18-$22 million, including investments for the Mexico expansion. The third quarter's interim effective tax rate was 29.3%, compared to 18.7% in the prior year quarter. 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. 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. 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. 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. 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. 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 nine months of 2025. our free cash flow was $4.9 million for the first nine months of 2025 We continue to expect the 2025 capital expenditures to be approximately $18-$22 million, including investments for the Mexico expansion. we continue to expect the 2025 capital expenditures to be approximately $18-$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 30th, our balance sheet was strong with a total liquidity position of $92.4 million, comprising $42.4 million in cash plus $50 million available under the revolver and capital credit lines. The company's long-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 one times. 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 the trailing 12 months of operating income and total capital employed, a pre-tax metric. 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 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 30th, our balance sheet was strong with a total liquidity position of $92.4 million, comprising $42.4 million in cash plus $50 million available under the revolver and capital credit lines. as of september 30th our balance sheet was strong with a total liquidity position of $92.4 million comprising $42.4 million in cash plus $50 million available under the revolver and capital credit lines The company's long-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 one times. the company's long-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 one times Our return on capital employed was 6.5%, and excluding cash, the rate was 8.7%. 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. 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 the trailing 12 months of operating income and total capital employed, a pre-tax metric. both roce metrics are computed using the trailing 12 months of operating income and total capital employed a pre-tax metric Please see our earnings release for the GAAP to non-GAAP reconciliation tables. Our capital allocation strategy remains flexible, with 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 three months ended September 30th, 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%-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. Please see our earnings release for the GAAP to non-GAAP reconciliation tables. 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. 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. 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 three months ended September 30th, no shares were repurchased, and to date this year, we have repurchased 151,584 shares at an average price of $14.80. for the three months ended september 30th 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%-12%. our full-year sales expectations are down 10%-12% However, we have forecasted fourth-quarter sales to increase, driven by new program launches and significantly higher tooling sales. 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. 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. 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. 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

Speaker 6: Thank you, Alex. We're excited about new and existing customers and end markets. As Eric mentioned, we are finalizing negotiations on a large Canadian project for the cable railway containment trough system, 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 three to six 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. Thank you, Alex. thank you alex We're excited about new and existing customers and end markets. we're excited about new and existing customers and end markets As Eric mentioned, we are finalizing negotiations on a large Canadian project for the cable railway containment trough system, which is worth about $15 million in annual revenue starting in the second half of 2026. as eric mentioned we are finalizing negotiations on a large canadian project for the cable railway containment trough system 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 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 three to six months. we believe we can add over $40 million in new wins that would be awarded in the next three to six months We're also excited about this year's wins because they are in new and emerging markets for Core. 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. 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 top-coat 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 space, 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 plan to expand our DCPD molding process for large OEMs in the areas we already serve and have added top-coat paint to our full-service partner model. we plan to expand our dcpd molding process for large oems in the areas we already serve and have added top-coat 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. 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 space, and optimizing our portfolio footprint. eric and i are highly focused on further scaling operations leveraging our fixed cost space 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. 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 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 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 the beginning. New areas are emerging, and we will continue to evolve in the construction sector, 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 expand wallet share and educate customers of our full range of value-added capabilities, including SMC formulation, large-part molding, and top-coat painting. Customers desire a strategic partner like Core Molding to handle design, fabrication, and completion with the top-coat paint. We are pursuing the most promising opportunities in new markets and growing wallet share with our current long-term customers. 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 the beginning. we are confident this is only the beginning New areas are emerging, and we will continue to evolve in the construction sector, such as commercial windows and doors market. new areas are emerging and we will continue to evolve in the construction sector 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 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 expand wallet share and educate customers of our full range of value-added capabilities, including SMC formulation, large-part molding, and top-coat painting. we are driving to engage our sales and technical teams earlier in the design cycle to expand wallet share and educate customers of our full range of value-added capabilities including smc formulation large-part molding and top-coat painting Customers desire a strategic partner like Core Molding to handle design, fabrication, and completion with the top-coat paint. customers desire a strategic partner like core molding to handle design fabrication and completion with the top-coat 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. 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. 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. 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. 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. 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. 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. 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 19th. Please reach out if you would like to see us there in person or set up an investor call soon. We are finding ways to attract new customers and increase wallet share with current customers. 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. 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. 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. 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. 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 19th. finally we will present our investment story and host one-to-one meetings at the southwest ideas conference in dallas on wednesday november 19th Please reach out if you would like to see us there in person or set up an investor call soon. 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? With that, let's open up the line for questions. with that let's open up the line for questions Operator? operator

Speaker 5: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Certainly. certainly At this time, we will be conducting a question-and-answer session. at this time we will be conducting a question-and-answer session If you would like to ask a question, please press star one on your telephone keypad. if you would like to ask a question please press star one on your telephone keypad A confirmation tone will indicate your line is in the question queue. a confirmation tone will indicate your line is in the question queue You may press star two if you would like to remove your question from the queue. you may press star two if you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys One moment, please, while we poll for questions. one moment please while we poll for questions Your first question for today is from Chip Moore with ROTH. Your first question for today is from Chip Moore with ROTH. your first question for today is from chip moore with roth

Speaker 1: Good morning. Thanks for taking the question. Hey, everybody. Good morning. good morning Thanks for taking the question. thanks for taking the question Hey, everybody. hey everybody

Speaker 2: Hi there, Chip. Hi there, Chip. hi there chip

Speaker 7: Hey, Chip. Hey, Chip. hey chip

Speaker 1: Good. Hey, I wanted to—a lot of noise around tariffs for trucking specifically. I think right there were some actions that got 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? Good. good Hey, I wanted to—a lot of noise around tariffs for trucking specifically. hey i wanted to—a lot of noise around tariffs for trucking specifically I think right there were some actions that got pushed October to November. i think right there were some actions that got 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? just your updated thoughts around those tariffs specifically any potential impacts or what you're seeing from customers in regards to those

Speaker 2: Yeah. I mean, all of our products are USMCA compliant. 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. Yeah. yeah I mean, all of our products are USMCA compliant. i mean all of our products are usmca compliant So right now, we still, our understanding is we are exempt. 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. 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. but right now we're not seeing the impact on tariffs just yet

Speaker 1: Got it. Okay. No, that's helpful, and I guess to your point. Got it. got it Okay. okay No, that's helpful, and I guess to your point. no that's helpful and i guess to your point

Speaker 2: I think overall too, Chip, from an operational standpoint, we have both operations in the U.S. and Canada, and if need be, it's not a short change to move, but it's always possible to move. Yeah, and then the only other thing I would add is we have RMA, raw material adjusters in all of our contracts, and so if we do get hit with a tariff and increased costs, we can pass that through to customers. I think overall too, Chip, from an operational standpoint, we have both operations in the U.S. and Canada, and if need be, it's not a short change to move, but it's always possible to move. i think overall too chip from an operational standpoint we have both operations in the u.s and canada and if need be it's not a short change to move but it's always possible to move Yeah, and then the only other thing I would add is we have RMA, raw material adjusters in all of our contracts, and so if we do get hit with a tariff and increased costs, we can pass that through to customers. yeah and then the only other thing i would add is we have rma raw material adjusters in all of our contracts and so if we do get hit with a tariff and increased costs we can pass that through to customers

Speaker 1: Got it. That's helpful. And maybe to follow up on. As you look out, it sounds like your line of sight to $300 million plus is quite strong. Just. If we think about 2027, 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? Got it. got it That's helpful. that's helpful And maybe to follow up on. and maybe to follow up on As you look out, it sounds like your line of sight to $300 million plus is quite strong. as you look out it sounds like your line of sight to $300 million plus is quite strong Just. just If we think about 2027, I guess. if we think about 2027 i guess Biggest risks to that or. biggest risks to that or Upside to that? upside to that And then what do you have built in around trucking as we look out maybe to 2027? and then what do you have built in around trucking as we look out maybe to 2027

Speaker 6: Yeah. 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 12-18 months. So as we know, the Volvo program won't launch until 2027, and we have $45 million of wins in the 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 saying it. As they ramp up, you start out with a ramp and maybe you're ramping for six to seven 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. And looking at ACT, we're seeing that we believe truck or they believe truck will start coming back the second half of next year. Yeah. yeah That's a great question. that's a great question So. so When I look at it from a high level, as we said, our quote-to-cash cycle time is 12 - 18 months. when i look at it from a high level as we said our quote-to-cash cycle time is 12 - 18 months So as we know, the Volvo program won't launch until 2027, and we have $45 million of wins in the prior year and $47 million of incremental wins this year that we see layering in over the next 18 months. so as we know the volvo program won't launch until 2027 and we have $45 million of wins in the 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 saying it. so that's where we're saying it as As they ramp up, you start out with a ramp and maybe you're ramping for six to seven months until you get into full volume. as they ramp up you start out with a ramp and maybe you're ramping for six to seven months until you get into full volume So that's where we start seeing the sales coming together. so that's where we start seeing the sales coming together So we're pretty excited about that. so we're pretty excited about that When we talk with truck customers right now. when we talk with truck customers right now And looking at ACT, we're seeing that we believe truck or they believe truck will start coming back the second half of next year. and looking at act we're seeing that we believe truck or they believe truck will start coming back 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. Because 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. 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. 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. 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. and being able to hire and meet all those demands on the upswing Because it goes up as fast as it comes down. because 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. and the further it goes down probably more likely the more it's going to go up

Speaker 1: Perfect. If I could ask another one. Just around sort of more near-term, the tooling revenues getting bumped to Q4. 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? Perfect. perfect If I could ask another one. if i could ask another one Just around sort of more near-term, the tooling revenues getting bumped to Q4. just around sort of more near-term the tooling revenues getting bumped to q4 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? 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

Speaker 2: Yeah. So for the full year of 2025, we anticipate tooling sales to be roughly 15% of our total sales in 2025. And then keep in mind, Chip, those sales will be at a lower margin than our product sales. And then in the future year, so 2026, I mean, we're not really given any guidance from a number perspective for 2026, but the Volvo Mexico tooling job will close. It'll be close at the end of 2026, maybe slips into 2027, but it'd be December of 2026, maybe January of 2027. Yeah. yeah So for the full year of 2025, we anticipate tooling sales to be roughly 15% of our total sales in 2025. so for the full year of 2025 we anticipate tooling sales to be roughly 15% of our total sales in 2025 And then keep in mind, Chip, those sales will be at a lower margin than our product sales. and then keep in mind chip those sales will be at a lower margin than our product sales And then in the future year, so 2026, I mean, we're not really given any guidance from a number perspective for 2026, but the Volvo Mexico tooling job will close. and then in the future year so 2026 i mean we're not really given any guidance from a number perspective for 2026 but the volvo mexico tooling job will close It'll be close at the end of 2026, maybe slips into 2027, but it'd be December of 2026, maybe January of 2027. it'll be close at the end of 2026 maybe slips into 2027 but it'd be december of 2026 maybe january of 2027

Speaker 1: Got it. Okay. So a little negative mix impact Q4 on higher tooling revenues. Any way to think about gross margins? Got it. got it Okay. okay So a little negative mix impact Q4 on higher tooling revenues. so a little negative mix impact q4 on higher tooling revenues Any way to think about gross margins? any way to think about gross margins

Speaker 2: Hey, Chip, but just. Hey, Chip, but just. hey chip but just

Speaker 1: Yeah, sorry. Yeah, sorry. yeah sorry

Speaker 2: Yeah. So margins will take a little bit of a hit, but we still are providing guidance that we'll be within that 17%-19% target that we've put out there each quarter and for the full year. Yeah. yeah So margins will take a little bit of a hit, but we still are providing guidance that we'll be within that 17%-19% target that we've put out there each quarter and for the full year. so margins will take a little bit of a hit but we still are providing guidance that we'll be within that 17%-19% target that we've put out there each quarter and for the full year

Speaker 1: Yeah. 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%-19% still the right way to think about it, or do you think there's upside potential at some point on higher volumes? Yeah. yeah That's what I was going to ask, and I was going to follow up just sort of longer term as the tooling normalizes. 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%-19% still the right way to think about it, or do you think there's upside potential at some point on higher volumes? is 17%-19% still the right way to think about it or do you think there's upside potential at some point on higher volumes

Speaker 2: Yeah. 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. We'll reverse it favorably. And so I think that'll 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, yeah, I think if we go back two 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. Yeah. yeah I think when we start getting back into the $300 million, there's going to definitely be some upside. 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. i mean we'll start getting back some fixed leverage We'll reverse it favorably. we'll reverse it favorably And so I think that'll be worth anywhere, I would say, right around 200 basis points. and so i think that'll 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, yeah, I think if we go back two years, we're losing right around 200 basis points. if you go back and look at our previous quarters and see the lost leverage each quarter yeah i think if we go back two 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. so you could add 200 basis points i think is a good way to look at it

Speaker 6: Yeah. Also, the part that we believe is that on the new programs, the systems that we put in place and how we're quoting business. It's definitely incremental on the margin side. Yeah. yeah Also, the part that we believe is that on the new programs, the systems that we put in place and how we're quoting business. also the part that we believe is that on the new programs the systems that we put in place and how we're quoting business It's definitely incremental on the margin side. it's definitely incremental on the margin side

Speaker 1: Excellent. Okay. Excellent. excellent Okay. okay

Speaker 6: I don't want to give you a number on how much yet, though. I don't want to give you a number on how much yet, though. i don't want to give you a number on how much yet though

Speaker 1: Yeah. Understood. Yeah. I'll hop in queue. And let others ask. Thanks. Yeah. yeah Understood. understood Yeah. yeah I'll hop in queue. i'll hop in queue And let others ask. and let others ask Thanks. thanks

Speaker 5: Once again, if you would like to ask a question, please press star one on your telephone keypad. You have a follow-up question coming from Chip. Your line is live. Once again, if you would like to ask a question, please press star one on your telephone keypad. once again if you would like to ask a question please press star one on your telephone keypad You have a follow-up question coming from Chip. you have a follow-up question coming from chip Your line is live. your line is live

Speaker 1: Thanks. I just wanted 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? Thanks. thanks I just wanted to make sure I wasn't hogging the line. i just wanted to make sure i wasn't hogging the line I guess just one more for me on the new business opportunities. 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. the canadian rail project that's a nice win opportunity for similar type projects And then SMC, how is the traction there? and then smc how is the traction there It sounds like it's going pretty well. it sounds like it's going pretty well But any more detail you can provide? but any more detail you can provide

Speaker 6: Yeah. Two parts to that, Chip. So the first one on the rail Trojan troughs. We actually had that business in 2022, 2023. 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 would turn into that bigger multi-year program. So we're excited about it. Can't say that we've 100% won it, but we're 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. Yeah. yeah Two parts to that, Chip. two parts to that chip So the first one on the rail Trojan troughs . so the first one on the rail trojan troughs We actually had that business in 2022, 2023. we actually had that business in 2022 2023 It tends to be a project-based when a city or a municipality does a section of rail. 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. it's a big project for us for a couple of years So we've had a couple of years without any. 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 we have another one of those currently building a test track for next summer And that would turn into that bigger multi-year program. and that would turn into that bigger multi-year program So we're excited about it. so we're excited about it Can't say that we've 100% won it, but we're certainly there in the test track and believe that we are in a good position to win the whole installation. can't say that we've 100% won it but we're 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. your second question was around smc We put some comments in there. we put some comments in there We have, since last quarter, four very specific customers that are trialing, actually molding parts, had some of our engineering teams working with them. And so 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. We have, since last quarter, four very specific customers that are trialing, actually molding parts, had some of our engineering teams working with them. we have since last quarter four very specific customers that are trialing actually molding parts had some of our engineering teams working with them And so made a lot of progress with 4 of the 10 customers that we had focused on. and so 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. 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

Speaker 1: Perfect. Okay. And then just last on the buyback. You didn't do any in this quarter, but can you just remind us what your authorization is there? Thank you. Perfect. perfect Okay. okay And then just last on the buyback. and then just last on the buyback You didn't do any in this quarter, but can you just remind us what your authorization is there? you didn't do any in this quarter but can you just remind us what your authorization is there Thank you. thank you

Speaker 2: Yeah. We have roughly about just over $2 million left in the buyback. It's still in place as of today. But yeah, we plan on still utilizing that as a way to use our capital. Yeah. yeah We have roughly about just over $2 million left in the buyback. we have roughly about just over $2 million left in the buyback It's still in place as of today. it's still in place as of today But yeah, we plan on still utilizing that as a way to use our capital. but yeah we plan on still utilizing that as a way to use our capital

Speaker 1: Great. Okay. Thanks for all the color. Appreciate it. Great. great Okay. okay Thanks for all the color. thanks for all the color Appreciate it. appreciate it

Speaker 6: Thanks, Chip. Thanks, Chip. thanks chip

Speaker 7: Thanks, Chip. Thanks, Chip. thanks chip

Speaker 5: Your next question is from Bill Dezellem with Tieton Capital. Your next question is from Bill Dezellem with Tieton Capital. your next question is from bill dezellem with tieton capital

Speaker 3: Thank you. 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? Thank you. thank you A couple of questions. a couple of questions Would you please start by walking us through the tooling business that shifted to Q4 from the Q3? would you please start by walking us through the tooling business that shifted to q4 from the q3 What the dynamics were behind that? what the dynamics were behind that

Speaker 2: 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's all kinds of different tests. You have to do full production run tests. 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 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's kind of the nature of the tooling. We don't have a ton of control. 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 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's all kinds of different tests. so there's all kinds of different tests You have to do full production run tests. you have to do full production run tests You have to do quality tests. you have to do quality tests There's different specifications. there's different specifications And so, working with a customer at times, those tests get delayed for one reason or another. 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. 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 got delayed into Q4. and so in this case one of our bigger tooling jobs that we originally thought was going to close in q3 got delayed into q4 We are currently in the process of doing those tests. 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. i don't see that job specifically being pushed out any further at this moment But that's kind of the nature of the tooling. but that's kind of the nature of the tooling We don't have a ton of control. 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. We can push our customers as hard as we can and work with them. 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 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. but at the end of the day it's not lost revenue It's just a timing issue. it's just a timing issue

Speaker 6: Hey, Bill, kind of a 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. 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. Hey, Bill, kind of a way that we look at it as well. hey bill kind of a way that we look at it as well Usually, if it's a lot of times, it's not us. 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. it's the entire product level is really what they're dealing with And they're trying to really put everything together. and they're trying to really put everything together The ideal case for them would be every supplier, every validation test, everything works, and then they get full approval. 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. 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. 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. 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

Speaker 3: That's helpful. Thank you. And then you referenced the footprint optimization. That you were doing, and that was going to have nice cost savings. Would you please walk us through physically 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 a cost savings. That's helpful. that's helpful Thank you. thank you And then you referenced the footprint optimization. and then you referenced the footprint optimization That you were doing, and that was going to have nice cost savings. that you were doing and that was going to have nice cost savings Would you please walk us through physically what's moving from where to where and why that's taking place? would you please walk us through physically 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 a cost savings. besides just the money aspect and maybe it's just straightforward as a cost savings

Speaker 7: 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. Sure, Bill. sure bill If you remember the term resin transfer molding or RTM parts. 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 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. 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 a part of that business unit down there, and so they are skilled, capable, and engaged, and we've struggled in Ohio to produce those, I'll say, heavy manual labor, difficult parts, very hands-on 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 that's capable of it. Over 300 of our employees in Mexico are a part of that business unit down there, and so they are skilled, capable, and engaged, and we've struggled in Ohio to produce those, I'll say, heavy manual labor, difficult parts, very hands-on 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 that's capable of it. over 300 of our employees in mexico are a part of that business unit down there and so they are skilled capable and engaged and we've struggled in ohio to produce those i'll say heavy manual labor difficult parts very hands-on 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 that's capable of it

Speaker 3: That is very helpful, and the math behind this, you said you were going to spend about $1 million on the transfer, and it'll save you about $1 million a year. Did I hear that correct earlier? That is very helpful, and the math behind this, you said you were going to spend about $1 million on the transfer, and it'll save you about $1 million a year. that is very helpful and the math behind this you said you were going to spend about $1 million on the transfer and it'll save you about $1 million a year Did I hear that correct earlier? did i hear that correct earlier

Speaker 7: Yeah. It'll be about $1.5 million total investment. So, cost side, and then $1 million a year annual run rate ongoing, so. Yeah. yeah It'll be about $1.5 million total investment. it'll be about $1.5 million total investment So, cost side, and then $1 million a year annual run rate ongoing, so. so cost side and then $1 million a year annual run rate ongoing so

Speaker 3: Excellent. Okay. Thank you both. Excellent. excellent Okay. okay Thank you both. thank you both

Speaker 7: You're welcome. You're welcome. you're welcome

Speaker 5: We have reached the end of the question-and-answer session, and I will now turn the call over to Dave Duvall for closing remarks. We have reached the end of the question- and- answer session, and I will now turn the call over to Dave Duvall for closing remarks. we have reached the end of the question- and- answer session and i will now turn the call over to dave duvall for closing remarks

Speaker 6: 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. Thank you for your continued interest in our company. 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. we look forward to providing an update on our progress when we report our fourth quarter results Have a great day. have a great day Thank you. thank you

Speaker 5: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. This concludes today's conference, and you may disconnect your lines at this time. this concludes today's conference and you may disconnect your lines at this time Thank you for your participation. thank you for your participation