Core Molding Technologies Inc

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 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- to 18-month range. We're pleased with the level of end-market diversification represented in these trials, which includes electrical boxes, multifamily commercial doors, buses, and 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 Coors 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 Monterey, Mexico. Monterey has been designed to provide additional capacity for future growth in low-pressure injection molding and DCPD processes. Additionally, we are adding topcoat paint capabilities to this facility as customers have specifically asked for this capability, especially in the construction and agricultural machine market. We believe the Monterey 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 topcoat paint capabilities to our Monterey 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 enables 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 costs 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 seven to 10 years. Based on our current projections across truck, power sports, and other growing end markets, we expect annual product revenue to exceed $325 million within the next 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% to 19%. Adjusted EBITDA margin of 11%. That'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 Gafer. 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 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. The 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 to 19% for the year. SG&A expenses for the third quarter were 7.6 million, or 13% of sales, compared to 12% in our prior year period. Excluding the 220,000 in footprint optimization costs, our SG&A rate would have been 12.6% for the quarter. As Eric discussed, our footprint optimization project is underway. We have invested 500,000 so far and plan to invest 1.5 million by the end of 2025. Again, this project involves relocating production to a different plant to generate cost savings of over 1 million each year, beginning in January of 2026. Operating income for the quarter was 2.6 million or 4.4% of sales, down from 3.6 million or 4.9% of sales in the same period in the prior year. The third quarter's interim effective tax rate was 29.3% compared to 18.7% in the prior year quarter. The increase was due to taxable income being generated in higher tax rate jurisdictions this quarter. Net income for the third quarter was 1.9 million, or diluted income per share of 22 cents, compared to net income of 3.2 million, or diluted EPS of 36 cents in the comparable year period. Excluding the impact of footprint optimization costs, our third quarter diluted EPS would have been 24 cents. Third quarter adjusted EBITDA was 6.4 million, or 11% of sales, We generated $14.2 million in gap 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 to $22 million, including investments for the Mexico expansion. As we previously announced with the award of the Volvo Mexico business, the company will invest approximately 25 million over the next 18 months. As of September 30th, our balance sheet was strong with a total liquidity position of 92.4 million, comprising of 42.4 million in cash, plus 50 million available under the revolver and capital credit lines. The company's term debt was 20.3 million at the end of the quarter, and our debt-to-EBITDA ratio for the trailing 12 months remains less than 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 ROSI metrics are computed using the trailing 12 months of operating income in total capital employed, a pre-tax metric. Please see our earnings release for the gap to non-gap 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% to 12%. However, we have forecasted fourth quarter sales to increase, driven by new program launches and significantly higher tooling sales. As a reminder regarding tariffs, Our products in both Canada and Mexico are USMCA compliant and are currently exempt from tariffs. We will continue to closely monitor how changes in trade policies affect our customers and their end markets. And with that, I would like to turn it back to Dave.