Core Molding Technologies Inc

Everyone, welcome to the Core Molding Technologies third quarter fiscal 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. As a reminder, this conference call is being recorded. I will now turn the call over to Sandy Martin with three-part advisors. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us for the Core Molding Technologies conference call to review third quarter results for 2023. Joining me on the call today are the company's president and CEO, Dave Duvall, and EVP and CFO, John Zimmer. This call is being webcast and can be accessed through coremt.com via an audio link on the investor relations events and presentations page. Today's conference call, including the Q&A session, will be recorded. Please be advised that any time sensitive information may no longer be accurate as of the date of any replay or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts including statements or expectations or future events or future financial performance 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, by their nature, are uncertain and outside of the company's control. Actual results may differ materially from those expressed or implied. Please refer to the earnings press release issued today 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, free cash flow, and return on capital employed. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Finally, a copy of the press release has also been submitted to the SEC on form 8K. And now, I would like to turn the call over to Dave Duvall. Dave?

Thank you, Sandy. Good morning, everyone, and thank you for joining our third quarter earnings call. Let me start today's call with a couple accomplishments during the quarter. A few weeks ago, we received the EcoVitis Bronze Award in recognition of our ongoing sustainability achievements. This award demonstrates our systematic approach to environmental stewardship, and it directly supports CORE's value proposition to our customers that are driving to accurately quantify and reduce their Scope 3 greenhouse gas emissions. We believe this is a visible reminder of our responsibility to our employees, communities, and the environment. We were also one of six finalists in the Award for Composites Excellence competition at this year's annual CAMX, for Composites and Advanced Material Expo in Atlanta. The award recognizes the unique proprietary engineering technology we use to produce one of our customers' personal watercraft hulls. It demonstrates our ability to combine different composite materials and molded-in features to optimize the design for improved performance and cost. These are important recognitions of Core Molding's strong value proposition through our technical solutions and sustainability efforts that we are continually strengthening in our organization. As always, I want to thank our hardworking team of talented people for executing Core's shared vision for growth and driving improvements in our business every single day. Our most important competitive advantage is our talented team working together in a culture that values transparency, learning, and openness to challenge. This makes a difference, and we continually and purposely drive this culture within our organization. Our team strives every day to execute the company's four strategic initiatives. One, driving revenue growth. Two, technical solution sales. Three, enhancing profitability. And four, generating cash flow. Along those lines, I'd like to report that our must-win battle to drive significant operational improvements in specific plans will be complete this year. We've achieved a 19% overall productivity improvement by October, and will achieve the targeted 20% by year end. With all facilities operating well, it now accelerates our ability to leverage a company-wide operational excellence system to scale the knowledge sharing and improvements. Just to finish up on the strategic importance of the must-win battle this year, it directly improved our gross margins, which were challenged a year ago. It provided additional capacity in those locations by improving the throughput, It put all locations at a level of performance that allows us to implement a holistic operational excellence process to better leverage our knowledge. And four, it allowed us to free up key technical resources to better execute and integrate an acquisition in 2024, which is a goal. Having the necessary technical resources in a common business excellence system will significantly improve our ability to quickly execute and efficiently integrate an acquisition. I believe this is a clear example of our organizational ability to execute our key strategic initiatives, which in turn creates improved performance across all areas of the organization. Turning to our third quarter results, as we discussed earlier this year, our 2022 third quarter product sales were up over 36% over 2021. So we anticipated that second half 2023 Product sales would likely return to historical seasonality, and they did. Although our third quarter product sales of $80.9 million were down 12.4% from prior year, this does not tell the whole story. John will add details to this in a moment, but I would like to make some initial comments. We grew gross margins by 450 basis points to 17.6% for the third quarter. representing improved gross margins despite lower fixed cost leverage. This was one of our key focus areas in 2023. And I believe this third quarter results proves that our business transformation is enhancing the strength and resiliency of the business. Our gross margin improvements this year are the direct result of purposely executing our strategy. Although revenue growth is always an important deliverable, we are also laser-focused on driving profitability through enhanced margins, operational efficiencies, and better capacity management while also winning technical solution sales for the future. We produce single-source, tooled products for our customers on multi-year production programs structured to deliver revenues, improve margins, and incremental cash flow for several years. Most of us suspected that continually rising interest rates were going to affect the demand at some point, and we believe we're well prepared to take advantage of it financially, operationally, and strategically. Specifically on sales growth, our technical solutions team signed new contracts during the first nine months of this year that will contribute annualized revenue from new and replacement work totaling approximately $50 million. with planned launches primarily in 2024 through 2026. These programs relate to new and reoccurring customers in end markets, including building products, industrial, transportation, and power sports. Full volume levels for these programs will ramp up over the next several years. We continue to see a solid pipeline of opportunities similar to the current opportunities we've signed this year, which reinforces our long-term sales growth potential. We are excited to tool and launch these programs, especially since they further expand our business into diverse and growing end markets with engineered solutions. Finally, regarding our sustainability efforts, we are currently partnering with a customer to install full regrind and material processing systems to reclaim raw material from our production process at our Matamoros, Mexico plant. This process will reduce both our waste and cost, while providing a value and reduced cost to our customer. Based on their production plans over the next several years, this will reclaim over a million pounds of raw material. We continue to work with customers to use or increase our storage or usage of recycled material or develop recyclable solutions from a conversion away from traditional materials. We have aligned our strategies to provide technical and unique solutions to customers by deploying our extensive portfolio processes. This expertise and capacity are important to our long-standing Blue Chip customers who rely on us as their single source supplier of critical components. We continue to see how sustainable solutions build long-term relationships and value for our customers, employees, and shareholders. With that, I'd now like to turn it over to John to cover the financials in more detail.