Core Molding Technologies Stock

Okay. Welcome today to our 2026 first ever Investor Day and plant tour at our Matamoros facility in Mexico. We've got a lot of great products, as you can see around the room that depict what we do. We've got a lot of great materials to go over today. I want to give you a quick run of the show.

When I step away, we're going to play a quick video that will give you some nice background on some of the stuff that we're doing. And then I'm going to turn it over to Eric Palomaki to run through a presentation. Our presentation today will be broken into 2 parts. We'll have a break in the middle. At the end, we'll have a long Q&A session, followed by dinner and networking in the back of this room. Right outside the room is restrooms, if you need those, on the far left over here, there are snacks, drinks and anything you need. If you got to get up and go out of the room for anything, help yourself, no worries.

Also on the table in front of you is the Internet information. If anybody needs the Internet, welcome to do that. We don't have plugs on the tables. But if you need to charge something, we can make some room outside for you as well.

With that, let's get started. First and foremost, everybody has seen a safe harbor statement, which you see up on the screen in front of me. Everybody's read one of these, so I don't plan to read that, but please note that we will make forward-looking statements in today's presentation.

Now to the best part, our speakers. Most of you in this room and most of you on the webcast have had plenty of opportunities to speak with our President and CEO, Eric Palomaki; and our Chief Financial Officer, Alex Panda. And while you're going to get a chance to speak with them more and hear from them more today, you're also going to get a chance to hear from some of the other leaders in our organization.

You're going to get to hear from people like Alex Bantz, who's our Chief Commercial Officer; Stephanie Pulliam, who's our Executive Vice President of Human Resources; Mike Gayford, who was just announced Monday as our Chief Operating Officer; and Arnold Alanis, I'm sorry, who's our Executive Vice President of Operations of our Mexico facility.

With that, I'm going to get our video started, and then I'm going to turn things over to Eric. Thank you.

[Presentation]

All right. Welcome to Investor Day 2026. Pleased to have all of you joining us in person as well as on the webcast, and thanks to some of our suppliers and banking partners also for being here today. We're glad to have everybody.

Today is an important milestone for us. This is our 30-year anniversary as Core Molding Technologies, and the journey we want to talk to you about is the next chapter of Core. We're not here to tell you the turnaround story, but we're here to demonstrate how the turnaround that we've had over prior years is turning into a platform for growth. Over the last several years, we've rebuilt our operating foundation, strengthened leadership and improved execution and invested in our capacity.

Our objective today is simple: to show investors why Core is positioned to create substantial long-term shareholder value. Each member of our leadership team today will help you connect our strategy, our operations and our people associated with our capital allocation and how we work together to drive profitable revenue. The message today is why Core and why now.

We'll have some time at the end for questions. So please feel free to jot those down. We've got a lot of material to cover. I know you're going to want to ask questions, but we'll have plenty of time to do that at the end today.

So why now? Investors, if you remember anything today, let it be these five things. Growth is visible and it's tangible, not just through a promise, but through actual customers with actual products that we've won and are in the process of launching. Our operating transformation has already produced measurable results. You can see it in the P&L and the gross margin.

Scale matters. As revenue grows, our quality of earnings will benefit from those economies of scale. And the capital decisions here at Core are made through a rigorous and disciplined process associated with a return on capital employed calculation.

Our goal is to build trust. Do what we said we're going to do, which we think we've done in the last few years, and continue to do that over the next few years as we say what we're going to do and then we execute and do what we said we were going to do.

So why invest in Core? We combine a lot of characteristics that are difficult to find. Core Molding technology ranges from thermoplastic to thermoset. We do have 45 years of award-winning manufacturing experience, and we operate in attractive markets with high barriers of entry. Many of our products end up being sole-sourced with Core Molding. There's only one set of tools, and we make and manufacture those parts for our customers. And those customers, we have decade-long relationships, they're large successful blue-chip companies, and we work with them well over many decades and will continue to for many decades to come.

Our large and ultra-large molding capabilities are difficult and expensive to replicate. When you all get the chance to tour our facility in Matamoros and see the size and scale of a 5-story tall press and what it takes to make that installation, you'll really appreciate the barrier of entry that it takes to build some of these parts that you see behind me on the stage.

We've proven that we have a disciplined process for capital allocation. And most importantly, I'll remind you again, we've seen the growth. We've already seen wins, and you can see it in that gross margin line as well.

As we think about the transformation journey, it's important to reflect back on the past a few years, and what we call our Must Win Battles. You'll see here all of the leaders today tell you about a particular must-win battle as they go through. But from the highlights, back in 2019 and 2020, we called that the turnaround. We focused on stabilization, leadership, our customers, fixing equipment, and liquidity challenges. We built foundational systems, things like leadership development, diversification and operating discipline systems, our manufacturing processes. All of those combined together today applied to must-win battle of Invest for Growth and our 2026 must-win battle, which is our investments in our Mexico facilities. That's the expansion of our Monterrey facility from a 50,000 square foot operation to a 200,000 square foot operation as well as an added square footage and 4,500-ton presses at our Matamoros facility to support sleeper roofs.

When we think about performance, we always try to measure it. And what are those key performance metrics that we want to measure? One of my favorite quotes from Dr. Deming, "In God we trust. All others bring data." A few of those data points that I'd like to share from the last 5 years. Internal promotion rate in 2020 was 10%, last year 48%. So almost every other person that we promoted inside of the company came from inside. For you guys in person, you're looking at an entire group of them standing in front of you. This entire group was part of an internal succession over many years of development, executive coaching, internal training classes, and so on. That exists down through our organization as well. It's not just what you see here today.

In purchasing savings, we weren't tracking in 2020. Last year, we tracked $3 million of savings on annualized direct material purchases or, in some cases, onetime capital purchases, but we track all of them and we support teams when they win in those negotiations. Our training hours were relatively not tracked in 2020. Last year, we tracked over 20,000 development hours through salaried, hourly positions, on our shop floors with our leaders at various levels, we're investing back in our people, and you should see that from our team today.

Our variable margins sometimes range wildly quarter-to-quarter, for those that remember, our variable margin or our margin would vary based on mix, based on what certain markets were doing, and those were in the 20% to 24% range. Last year, we averaged about 30%. And it was consistent quarter-over-quarter in that 30% range, and that's continued into the first 2 quarters of 2026.

Our scrap varied widely from 3% to 6% back in 2020. Last year, we averaged under 2% for the entire year. Sometimes in some of our plants, which we'll show you a picture, have even gotten under 1%. And finally, and certainly not least, our safety performance score. We were at a 4.01 serious injury incident rate. So those are recordable rates in 2020. Last year, about a 75% reduction down to 1.07. That is one of the reasons why our employees stay with Core because they're part of the solution to drive safety improvements and all of these other improvements.

There's one thing I've learned in 25 years of manufacturing, there's always another problem coming around the corner, whether it's a new launch, a new project, a new tariff, doesn't matter what it is. There's always going to be a challenge. It's the ability to understand the data, solve that problem and then measure the effectiveness of our solution. Did we get it fixed or not and sort of reiterate and solve those problems. That is what it means to be good in manufacturing.

And when we're good and when we solve those problems or have those successes, we believe in celebrating them because we believe winning is contagious. Whether it's in the upper left-hand corner, you see Mr. Panda and his Corporate Controller, Andrew Leskowitz, getting a cake or when they did the refinancing. They're refinancing this year, so, it will save us over $900,000 over the next 5 years, a significant accomplishment that those two helped us lead. And you can even see on teams, Mr. Gayford and Mr. Alanis holding their cupcakes because we planned in advance, so they could have cake too on that day. Thank you, Tammie.

In the upper right-hand corner, the first time Matamoros hit under 1% scrap. Arnold and I cooked -- helped cook, we didn't cook them all, helped cook 750 steaks. We put a hurt on the steak industry here in the Brownsville-Matamoros region that week. Or in the lower right-hand corner that was our ribbon cutting earlier this year in Monterrey. Instead of standing on a stage and cutting the ribbon, we stood with the people on the shop floor with our entire team and made them part of the celebration of the opening of the plant, as we believe winning is important and it's contagious throughout the organization.

This is certainly a key slide to make sure you understand. Diversification is part of our strategy. For sure, this presentation, it does admit and show the decline in revenue through a difficult truck cycle over the last few years. Despite that reduction, you can see that margins have improved from the 8% range to 11% range despite decreasing revenue. We improved pricing, productivity, cost structure, and our execution through this time period. As that volume returns, we expect those benefits and operating leverage to further improve the quality of our earnings. We've become a stronger company because of this cycle. And as the cycle recovers, you'll be able to see it.

When we think about our future, we think about diversification. It's been part of our history and our legacy already. Diversification from 15 years ago was heavily dependent on the truck and transportation industry, 91% truck. In 2025, that percentage dropped to 44% with powersports making up an additional 27%. So 75% of Core is in truck and powersports. When you hear us talk today about diversified sales that means a win outside of truck or powersports. We're still happy to win truck and powersports programs, but we're focused on winning things outside of truck and powersports.

This will reduce our diversification risk, reduce the cyclicality. And so far, over the last 2 years, 65% of our new wins have been in those diversified categories. Ultimately, it lowers our concentration risk, both by any single one customer or any single one market, which we believe will enhance the quality of our earnings, making Core Molding Technologies a more resilient and engineered solutions business.

What are we uniquely good at? Every great company wants to understand and be clear at what it does best. We borrowed this concept from one of my favorite books, Jim Collins, in 2001, wrote a book called Good to Great. Some of you may have read it, and this is called the hedgehog concept. What can you be the best in the world at? What are you passionate about and what drives your economic engine? Here at Core, we know the answers to all 3 of those things. We're passionate about culture as a competitive advantage, taking care of our people and making Core a great place to work. We know what we can do the best in the world at. It's large and ultra-large molding and its manufacturing processes that are uniquely challenging in some way. And we know what drives our economic engine. All of you that are going to visit Matamoros, will get to see it tomorrow. It's Mexico truck production, it's powersports, and it's unique solutions like SMC compounds, battery boxes like you see in the back corner, our lattice production, various small components. That is what makes up Core. And if we apply those decisions to our everyday making processes, it will allow us to continue to move from good to great.

And that brings us to the strategy house. What is our long-term strategy and how we align it to the entire company? We share this with everybody in the entire company. It's posted in every plant. Everybody understands it. And at the top is our vision to be the most reliable, innovative, and responsive partner in engineered materials and manufacturing solutions. At the bottom is the foundation, our Core values, to be a learning organization with a courage to challenge, to mutual respect and transparency. And through the middle are the 5 pillars. In priority order, culture is a competitive advantage. We want to be accountable to results, never to be a victim, but to deliver on results. That is what makes a culture and makes it a competitive advantage.

The second pillar is operational excellence. We're still a manufacturing company. We're not working on AI large language models. We're a manufacturing company. We've got to be good at scrap. We've got to be good at problem solving and take a data-driven approach that is absolutely core to our competence.

And the last 3 are all related to growth. Grow wallet share, and being first in our customers' minds. It's working with customers that we already have today to help solve problems and expand those. It's to solve problems for our customers. We've got to listen so that we can provide the how for the what of our customers.

And the final pillar, industry diversification, where when we're focused on organic growth and new wins, we'd love those to be diversified new customers. Also, when we take an inorganic approach, and Mr. Panda will give you more details, we're also looking for industry diversification when we look at an acquisition.

And anybody can have a strategy, but the strategy is only good if you can execute it. That's the most important part of any strategy. And so this is how we bring our strategy to life. We start with the strategy house. We convert it into a 5-year plan with detailed walk of exactly the things that we think we can do, have already done, or are planning to do to make sure that it meets our objectives and goals, and then we convert it into a policy deployment matrix. That policy deployment matrix has all the annual initiatives for the entire business and is reviewed with every employee at every location. This keeps everybody on the same page and engages them on an annual process, which they can take through the red, what we call the red thread, understand the challenge in the project, make sure that's part of their annual goals and objectives that each person understands how it relates to them. And then we go through a process of reiterating that through weekly reviews, monthly operations process to make sure that we are successful in accomplishing all of the annual objectives that we set out every year. And then we repeat this process year after year continuing to iterate to achieve those 5-year objectives.

And addressable market is a question I often get from the investment communities and investor conversations. It's very difficult for us to talk about that with Core because the opportunities are in any market. It is a huge opportunity. It could be the chairs and tables you guys are sitting at today. It could be any one of these large parts that you see behind me from the powersports and truck, but it could be in almost any market. The size of that market could be in the billions. But the composite industry is where we live and grow every day. 7% to 8% CAGR, if you were to search the Internet and look at why were our composites growing. The reason composites have continued to grow over many years globally is because of the conversion of wood, concrete, and metals into a composite when you're changing the technology and moving to a composite.

Our traditional truck and powersports, we continue to win. We've worked with many of these customers for decades. We understand where our investments are and why those are strategic and valuable to our customers, like the ones that we're doing in Mexico today, and those will help us continue to win in the truck and powersports business. And some of the new areas we're focused is utilities and building products. We've been successful on burial vaults and flush covers like the ones you see in the back corner over there. Those are the kind of flush covers that we make. We've been working with electrical enclosure boxes as well as grid hardening batteries like the large white battery box you see against the wall. That's a battery for on a bus, but a very similar size that goes on in industrial that does grid hardening, where they're installing batteries to help support peak loads of grid demand for electrical usage.

It doesn't matter the industry, but if we can associate a composite part, large, effectively molded part, in the composites industry where we can solve problems for our customer. Those are the best projects for Core Molding.

And why composites? These are some of the reasons why the world changes those traditional materials over to composites. We don't want people to come to Core to buy composites. We want them to come buy solutions, solutions to a problem that they have, whether it's helping them reduce weight, improve durability or lower a total life cycle cost, we want to help solve that problem. And we'll create opportunities through part consolidation, sometimes metal parts, there are rivets, welds, additional features, we can mold that all into 1 part we can offer material savings or labor savings to our customer. The more complex those problems become, the more attractive they are to us, and this is a benefit for Core.

When you apply them to Core and some of the products that we have today in that large and ultra-large format solution, this is what they look like. In the truck market, it could be hoods, school bus hoods, sleeper roofs or air deflectors, like the one you see behind me. Can take a bird hit at 75 miles an hour, no problem.

If it's powersports, it could be the skid plates that we have an underbody protection that we launched last year, a great new product or the cargo boxes that we have for UTVs like you see in the back, imagine the people that takes and the assets, it takes to make a part that big in a one-piece molding. That's what makes Core unique, and that's why we own a large percentage of the cargo box UTV market because they are very difficult large parts to make. Or if it's a powersport for water, like the personal watercraft hull and mid-deck, you see to my right. Those are great products, and we're in 85% to 87% of the personal watercrafts in the world because of our ability to make those in single pieces.

In building products, you've surely seen them around a deck or patio either at your house or somebody else's or you walked on a dock this summer that was made out of a composite or I promise you, every one of you has opened an SMC door and never even realized that it was a composite door that you opened in or out of a house residence or condo.

In the utility space, you've been on a rail line and seen a trough beside it. We're making composite troughs. If you've seen anybody installing a parking lot in a commercial space, they can't run water off and so they have to collect the storm water under the parking lot, so it doesn't run off in the creeks and streams. That's what those green chambers are for underneath the parking lot to store water.

Again, won't corrode, won't rust. It's not wood, it won't rot, and it's significantly lighter and cheaper than concrete. And in the last process, everybody that's coming to Matamoros, you'll get to see one of my favorite processes, building a 12-foot industrial fan blade, hollow composite fan blade, 12 feet long and one piece. No bond joints, no assembly, a single part, a truly awesome engineering process.

And how do those apply to some of the recent new wins? The automotive part, you see in the upper left is the inner bedsides, tailgate and D-panels, a great process for us in the electric vehicle space in a heavily utilized cargo facility takes quite a beating with throwing things in and out of the back of a truck. Our construction vehicles, like the lift you see there, where the customer wants a composite side pod, painted in color, and we've added topcoat paint capability to both our Matamoros and Monterrey facilities to be able to serve the construction and agricultural market.

The medical bed application on the upper right replaces stamped steel and powder-coated panels. You get a molded part with hinges, with handles with guides -- excuse me, everything you want on the part already molded in, saving that customer a significant total assembly cost. They've already awarded 2 programs to us because of the success of the first one.

And the battery enclosure, shown on the lower left is a battery that can be hot-swapped on the top of a bus. So you never have downtime for charging. And that's similar to the part we have here in the room today. We solve problems to be able to drop that battery from the top of the bus onto the ground without failure.

Our topcoat paint that I mentioned as well as our SMC compounding that we have in Columbus, Ohio, is another key area that we've been able to win and grow new additional business. And in the lower right-hand corner. For those of you that were on the tour today or got here early enough Monday to see the Starship launch out of Starbase here at Brownsville, Texas, carrying a few satellites into orbit this week in the last 24 hours. Those satellites need to talk to a base station.

Shown there is the base stations that communicate with satellites. And it really looks small on the page, but that part in the lower right-hand corner is 2 meters across. It's over 6 feet across and provides the chassis for all the hardware and all the assembly for that unit, and they'll be launching in December this year in Matamoros.

So let me summarize. Why Core? Because we have proven our operating transformation. Why now? Because growth is becoming visible. And we have strengthened the foundation, diversified the business and built an execution culture. Most importantly, we've positioned ourselves to capitalize on large market opportunities.

Next, Alex Bantz will show you how we're converting these capabilities into measurable commercial growth. Thank you. Alex?

Thank you. All right. Thanks, Eric. Good afternoon, everyone. My name is Alex Bantz. I'm the Chief Commercial Officer for Core Molding. I've been with the company not quite 2 years now. I joined in November of '24. So coming up on my 2-year anniversary.

Because I'm the newest member of the group up here, I'll spend just a few minutes talking about my background, just so you get a flavor of who I am. My background is actually in engineering. So my degree and my education is engineering. And I started as an engineer and as fast as I could, I went over to the commercial side. So it's apparently in my blood.

I started in procurement then I went to sales and then I did product management, marketing, and then into sales leadership and management. Most of my career has been in that commercial space, but all of my career has been in manufacturing. That's what I know. That's what I love. I still get a kick almost on a daily basis when I get to see parts that I've been intimately involved with out in the world. So it's -- I've had the pleasure of working with some great customers and great companies, and I get to see myself -- my parts out there almost every day. So that's still a rush to me. I know it's kind of silly.

And ultimately, my engineering background really does help me to understand our customers and deal with the highly technical products that we sell at my previous customer or previous employers -- employees and here at Core Molding.

So I was hired here to accelerate growth. So that's what we're going to talk about today. So in that growth conversation, we'll talk about where we've been and how we've significantly transformed our commercial organization, both the structure and the processes. We'll talk about the successes that we've achieved along that path over the first 18 months. Record level of incremental platform awards. And then also we'll talk about where we're going and how we are excited about how much tremendous runway of growth we have in the markets that we're focused on.

So starting with people. When I first came in, again, November of '24, the first thing -- one of the first things I noticed when I started thinking about how we can accelerate growth. I noticed that the structure of our group was really hindering our ability to grow. And what I mean was the structure we had key account managers. And account managers were completely responsible for the entire process of customer relationships. So they were getting pulled into quality issues, payment issues, pricing, delivery, everything and then also growth at the end of it. And it was that growth at the end of it was really the issue. They weren't able to focus as much as we wanted them to on pure growth.

They're getting pulled in multiple directions and really detracting from our ability to grow. So what we did is we created a dedicated growth team. So all day, every day, they wake up, they think about growing the business, and hopefully, they think about that until they go to bed. And whether that's with our current customers or new customers.

At the same time, we also created a team dedicated to maximizing the customer experience. So what they do is focus on those day-to-day issues so that the other team can really focus on that growth, and the customer experience team really enables growth 2 ways: they allow that focus to happen in the growth team, but also they increase the customer satisfaction to facilitate growth with our current customers, which is vital to our growth path.

And through specialization and adding resources, we've tripled our bandwidth for growth activities, and we doubled our bandwidth for increasing that customer experience. And both groups are really benefiting from that efficiency of focus.

Another thing I noticed when I started and really just observing the team in general. A couple of things. I noticed that we were really just turning quotes. So we really focus on quantity and speed of quotes coming in and getting them out, which is fine. But we weren't really focusing enough on the strategy of how to win those opportunities. We were treating a $5 million opportunity the same way we would treat a $0.5 million opportunity.

And also, our key account managers on our team were taking more of a passive approach to finding new opportunities. So in conjunction with the structure changes, we implemented some new processes to further increase the effectivity of both teams. And here's a highlight of some of those.

For the growth team, which we call our business development team, we created a ranking system to help us identify and prioritize the best opportunities where we have the best chance to win. We trained on and implemented value-selling methodologies into our sales process to identify and solve the root issues of each opportunity, what the customer really needs when they're asking us to quote on something. We're driving a how-to-win approach through the -- mentality through the entire sales process and asking those questions immediately when we find out what is the competition? How can we beat them? How can we outmaneuver them? What are their strengths? What are their weaknesses? What are our strengths? How do we win this business? We want to treat every opportunity as a battle against our competitors.

And then more so this year, we're focusing on proactively identifying new opportunities in our focus markets that I'll get into here in a little bit, and Eric already touched on. So instead of taking that passive approach, now we're getting proactive and really taking it to the market.

On the customer experience side, really, the initial focus was on maximizing our scorecard. So we have blue-chip, really sophisticated customers that have pretty intense scorecards that's how they evaluate how we operate on a daily basis. So this team is now going to be able to make sure that their judgment of us is an alignment of how we think of ourselves. And then once we get that alignment, how do we maximize those scores, so that when a new opportunity comes around, we are in the best position possible to win it.

And in addition to that, we're also aligning with the plants and the operations team with our customers to make sure that throughout the entire order process, we're in alignment on minimum order quantities, lead times, everything to make their job easier and our job easier. And advocating for our customers when it's appropriate, but more importantly, advocating for our facilities and our plants to our customers when appropriate. And ultimately protecting our current business and enabling that growth team to go out and grow with our current customers.

So that all sounds great, but does it really actually mean growth, right? So is it working? And I might be a little biased, but I would say, yes, I think it is working.

So 2025, $63 million in annual incremental revenue. That's a record. So we asked all our long-term serving employees and some of our Board members. No one can remember a year of more growth than we experienced last year. And we're following that up with this year, $26 million in the first half and great momentum going into the second half. So that's nearly $90 million of growth annually in the first 18 months of the new system.

But it's not just the numbers that are exciting. It's also the diversity that you see within the numbers when you really dig down. And those numbers are -- that diversity is by market. You can see here different markets we're serving, where we're winning by customer, it's not like we're going out and winning 1 or 2 huge opportunities. We've got 30 different opportunities, discrete projects that we're working on. And that's really helping us diversify our customer base, our process and our markets.

And Eric already mentioned 65% of those wins are in diversified markets beyond truck and powersports. So that's going towards our goal of diversifying the business. We want to grow truck. We want to grow powersports, but we want to grow everything faster and we're doing that.

And then when you look at the minimum amount of revenue over the lifespan of these projects, and we took a pretty conservative look at this. When you add all that together, we estimate $400 million of total revenue that we've won in these 18 months. So very exciting stuff.

So where are we at today? So what you're seeing is a snapshot of our current pipeline. This is a snapshot in time. This is probably done in late July after we closed second quarter. And you can see a lot of numbers here, but I'll just -- I'll focus on a few. And the one that really jumps out and I should probably put it in bold, $1.4 billion of total revenue over the lifespan of these projects that we have in our funnel currently today. Transformational growth opportunity for us.

We've got $150 -- nearly $150 million of opportunities annually that is prospecting. So that's what we call Stage 0. This is the initiative that we've really implemented this year, where our guys are going out and finding opportunities, not waiting for them to come to us. And then we've got $210 million annual incremental revenue that we're actually quoting right now, whether it's quoting, negotiating, or waiting for an award. And that $210 million over the lifespan. That's where we're getting that $1.4 billion, and we're not even taking into account the $150 million because we don't -- we're not sure what those lifespans are.

And then more exciting is when you look at our previous win rate over the last 18 months that we've experienced and you apply it to these numbers, that gets you $83 million of annual incremental revenue. I'm not saying we're going to get that, but that's -- if history were to hold, that's where we would be. So that's very exciting.

So all these numbers point to me that we have a very robust pipeline. But how do we keep it that way? And how do we actually make it even more robust, even bigger? So that's how we're going to focus on these 5 markets that we kind of tease in the video. Eric kind of mentioned them a little bit already, but we'll dig a little bit deeper into each one of these.

Truck market is always going to be our -- I won't say always, but it's traditionally been our biggest market and will be for the foreseeable future. This is the market that we were born out of. This is our heritage. When we were spun off from International Truck 30 years ago, we were -- like Eric said, even 20 years ago, we were 90% truck. That's our heritage and will continue to be our heritage. But we still have significant room for growth. That's the exciting part. We are a very known player in this space, and we have a lot of room to grow.

So the traditional applications are sleeper roofs. So at some point, hopefully, we'll go outside, and we'll see some trucks that we parked outside. Those are the sleeper roofs that we have a pretty dominant position within North America. We've got hoods like the part over to my right. And then we've got wind deflectors, light deflectors, like Eric already mentioned can survive a 70-mile -- I didn't know that. So I [ learned something ] to...

So -- and we are -- the exciting thing is that there's a handful of major players in North America. We are engaged in selling to every one of them, and we have really good relationships, and we're winning with most of them.

So being that truck is our largest market, stands to reason that it is the biggest portion of the awards that we won last year, over the last 18 months and also our current pipeline. So that's to be expected. But in this space, again, we are a very established market leader. There's only a handful of companies in the world that can do what we do. And we have over 30 years of experience, very, very well established. And hopefully, you're getting a sense for looking at the parts behind us, looking at the video and those of you that are going to go to the plant tomorrow, these are complex parts and assemblies. Very few people can do this in the world, and we are one of them.

Our customers always are also recognizing and awarding us for the operational excellence improvements that we've done in the previous years. That is a big part of why I'm here is because we earned the right to grow through those initiatives of operational excellence. So going forward, how are we going to attack this market? Our inside sales team working alongside with the operations team will ensure that we are keeping our customers happy. And so that we will continue to be on that short list of every opportunity that comes for hoods and roofs in the foreseeable future. And we also will ride the wave. So we're in a trough right now, but we are forecasting -- everyone is forecasting a significant growth in the market in the coming years, just the market cycle, Alex Panda will talk a little bit about that here in a little bit. And then also, we are working very diligently and hard to go beyond the hoods and roofs that everyone knows us for.

There's lots of opportunities beyond those, whether it's inside the cab for more traditional thermoplastic parts but also outside the cab. A great example is the traction plates, whether it's on the steps or in the back near the fifth wheel. Those are traditionally aluminum. And aluminum is getting very expensive right now. So it's a great opportunity for us to go in there with a great solution for plastics and displace that.

Our next biggest market currently is powersports. So this would include side-by-side vehicles, personal watercraft, golf carts. It's not on here, but ATVs would also fall into that category. We -- Eric already mentioned, we have very dominant positions with the cargo boxes and the boat hulls that you see here today, not only thermoplastic but also thermoset. We're not showing that today, but that's another one that we have a good position with.

But we do have additional opportunities in the golf cart space. We've talked to those guys. We've had good conversations, and we're going to keep at it. We think there's tremendous opportunity for us in the golf cart space, which continues to be a very booming industry with the wave of retirements going on.

In addition to our market-leading positions in the cargo boxes and hulls, we bring some pretty unique technologies to this market. Eric already mentioned the patent-pending skid plate technology that we already have placed in one customer, and we are working very hard to get that to be the standard across the entire industry in the coming years. But also, in addition to protecting those positions, we're really targeting growth in golf carts and winning with other customers that we don't -- we have some connection with, but don't really serve too much in that, like Honda and Kawasaki.

So beyond our core markets of truck and powersports, the utilities and infrastructure market is probably the most exciting space for us to grow, in my opinion. When we think of this space, we think of really 3 main categories, maybe a fourth I'll mention, but water filtration and drainage, power generation, data centers, obviously, very hot topic right now, but also some HVAC applications as well. And one of the reasons that this is such an exciting market for us is, it's huge.

It doesn't take long to build up to that $1 billion, just looking out very quickly. So I don't know how many billions it is, but it is in the billions. So a huge runway for us, but it's a very diverse market. So all of our processes are applicable. And what we're showing here is just a snapshot of some of the exciting opportunities for applications as well as customers.

So when you look at recent awards and current pipeline amongst our core markets, this is the second one. Again, that's why we're so excited about it. Lots of great opportunities that we already won and that we're currently working on. And again, with our diversity of applications and processes that fits very well for this market, and we're very excited about that.

A great example of that is, opportunity we're working on right now where a customer came to us for a thermoset part, and we found out that it was being made to a thermoplastic part. And we said, "Hey, we can do both." And they were quoting each one separately, and they were going to assemble it themselves. And we said, "Well, we'll quote both. And while we're at it, we'll go ahead and assemble it for you and give you one complete part." No one else was doing that. So that's been a very good -- good ongoing conversation and absolutely separated us from our competition. So very exciting. That's just one example of what we can do.

And another advantage is our experience in being a molder, and a producer of SMC. So there's a lot of SMC used in this space. So for customers that want a molded product, the fact that we make our own SMC gives us an advantage for numerous reasons. Cost is one, of course, but also the technology, and experience, technical know-how that comes along with that. And for a customer that might be molding their own parts and wants our material, the fact that we mold SMC, we can have really good conversations with them on design. And really, we understand their possible pain points and really help them avoid some pitfalls.

So our customers -- our experiences, our customers are very much valuing that, and it's allowing us to win. So in this space going forward, we're going to proactively pursue opportunities in the electrical submarket specifically power generation and data centers. We've invested in market data, and we've gotten a good head start on identifying customers and applications. And both of those spaces are going to grow no matter what.

I know that there's -- we talk about maybe there's too much data center going on, but when you're talking trillions of dollars, obviously, a huge amount of growth, even if it slows down a little bit. So very exciting for us.

Building Products. So this is -- when we think of building products, we think about home exteriors, where a lot of wood parts are being displaced by composite plastics, whether that's a door, like Eric mentioned, shutters, siding as well. You can see one of the examples there of composite siding.

And then when you think of patios and decks, we do decorative lattice that you might see in some of the big box stores. But also decking is a very interesting market right now. We're not really looking at the decking itself. But because that's such a trend right now, all the ancillary parts that go along with it is very exciting for us. So we're looking at ways to tag on to that and potentially grow with that market. So that could be the railings, the structure, anything that goes along with the actual decking itself. So a very interesting and very exciting market. And then finally, kitchen and bathware, there's a lot of applications for SMC, including shower bases.

Our value proposition in this market is -- has a lot of similarities to what we just talked about the utility market. Diversified portfolio of processes and products, our experience in molding large-format parts and producing our own SMC certainly helps us in this space. And our experience, again, of collaborating with customers to solve problems and delivering elegant solutions is a huge advantage for us.

So going forward in this space, some of the utilities, we are proactively pursuing OEMs of the products we've identified as good fits for our processes, and we're evaluating other paths to the markets like direct-to-box potentially or direct-to-consumer. Right now, what we've discovered is there's a lot of steps between our facility and the end-use application. So we don't know what the answer is, but we're asking the question, is there a better way to do that? Do we go direct to the actual consumer? Or do we go direct to those big-box stores?

Then finally, construction and ag market. Amongst the 5 markets, this is the one that we're probably earliest in the development phase. We have a small foothold. We do some parts for John Deere. We have some applications with fans for barns. But this is not -- while not as large as some of the other markets that we're dealing with, it doesn't -- we don't think the opportunity is over $1 billion. But certainly, it's in the hundreds of millions. And again, starting from where we are with single-digit millions, a long path for growth for us.

And more excitingly, and one of the reasons that we are really focused on this is because of the parallels between this space and the truck space, you can see hoods and you can see roofs. Those are things that we know. Those are the things that we've been doing for 30 years. And our ability to talk to our customers in this space, whether it's John Deere, Caterpillar, Case New Holland, what have you. Our experience with those truck manufacturers and powersports OEMs gives us a lot of credibility in the space. And some of the conversations that I've been a part of, they really value that we have that experience, and are asking us a lot of great questions of how we can grow with them.

So our value proposition, again, you're going to see some similarities again with the previous 2. Our portfolio of products, again, is a strength. And our experience in SMC production as well as molding, and large format parts when you think about construction vehicles, ag vehicles. These are big parts. These are big vehicles, and they need big parts. So that falls right into our bailiwick.

So going forward, we're going to leverage that credibility with our truck customers to win more quotes. We're doing that right now. We're going to proactively and persistently educate customers -- customer engineering teams on the advantages of our thermoplastic technologies. So DLFT and low pressure are a little unique in the space, and it's not something that engineers learn in school. So we have to educate them. We've already done that with powersports to great success, we have to do that again in the ag and construction space. It's going to take time. We know that. We have to be consistent and persistent with it. But those seeds will come to fruition, and we will be a decent player in this market eventually. And then finally, we are looking to add a dedicated resource to this market and really, again, get that efficiency of focus where they all day, every day, they're looking at how to grow in this space.

So in summary, circling back to where we started. We've made significant transformation of the commercial team through improved processes, focused teams, and investments and additional resources. The team is executing at higher levels and poised for growth, and that growth is accelerating.

A record year in 2025, great momentum so far this year and in the first half that we've proven and second half that we're working on right now and more to come. And finally, tremendous opportunity ahead of us. We have billions of dollars of available opportunities in these spaces, these 5 markets that we're focused on, and that's what we wake up every day figuring out how to do that. And while I would say 2025 and so far 2026, like I tell my team, it's a great start, but it's only that, it's a start. We have to keep pushing and keep going. And this is -- we'll be much, much further along when we look back in 5 years, when we're $1 billion company.

And with that, I will hand it over to Mr. Gayford.

Thank you, let's go. So shortly after Alex started, I've shared the story with John earlier at lunch. I told him, "You sell it, we'll make it." And you can obviously see they're having a lot of success, so the pressure is quickly turning it back to Arnold and I to make sure we keep up with the sales team. But -- good afternoon. So Arnold and I are excited to -- they led us out of the manufacturing plants, and we're going to present to you guys the operating platform at Core.

With this week's announcement, I thought it would be appropriate to give a little background on myself. I have almost 30 years of manufacturing experience and quickly approaching 19 years specifically in composites. I joined Core nearly 4 years ago. And one of my first assignments was the Must-Win Battle for getting the basics right in Gaffney and Columbus.

We stabilized equipment, strengthened accountability, and put the right people in the right roles and then also rebuilt the operating discipline. The success in that Must-Win Battle that Eric talked about was built on in subsequent years for Invest for Growth and now for the Mexico expansion.

So today, I'm honored to stand before you as the COO -- in the COO role. I see this as a continuity. It's not a change in the direction. My focus is converting the opportunities that Alex talked about into stable production and profitable growth.

So back to the operations platform. Most investor presentations focus on markets, products, financial results. We want to show you today the operating system that makes those results possible. Because we can't physically take you through all the plants, even though we will take you through Matamoros tomorrow, we're going to show you how the network works, how each operation plays a specific role and why we believe the operating system and the people are a competitive advantage.

The important story is not that we own manufacturing plants, a lot of companies own manufacturing plants. What differentiates Core is how we combine the people, the process and the specialized assets across one integrated network. We develop people internally, we move leaders and knowledge between facilities. So expertise is not trapped in one plant. Many of our products, as you can see, are large complex parts. We'd like to say at Core, we build big better. So let's look at the framework.

We describe Core's operating platform through 3 reinforcing elements: execution, specialized manufacturing footprint, and differentiated composite solutions. Execution earns customer trust. Our footprint creates scale and options. Our capabilities allow us to solve difficult customer problems using the right material, the right process and the right cost structure. The value is not one plant, process, or piece of equipment. The value comes from combining experienced people, material knowledge, engineering capability and large-scale assets into one system. The starting point for that is execution.

Our commitment is straightforward: safely ship good parts on time every time. The 3 measures on the page represent the basics of manufacturing, safety, quality, and delivery. So as Eric said, Dr. Deming said, "In God we trust. All others bring the data." So there's the data the last 5 years of how we've been performing on those metrics.

Additionally, the other proof is how our customers recognize our performance. In 2025, Core received a Supplier Quality Excellent [ role ] from General Motors. In '24, we received the BRP Gold Supplier Award. And in 2023, we received PACCAR's 10 PPM Supplier Award for quality and execution performance. Those awards are results of consistent performance, not isolated events. It comes from experienced people, disciplined processes and consistent operating standards, which are deployed across every facility in our network.

So now we're going to dive into the footprint. Core operates over 1 million square feet of manufacturing space. We have 83 presses in North America. Our presses range up to 5,500 tons, allowing us to manufacture some of the largest composite structures in our markets. These large assets are important. Not every competitor has the facilities, equipment or capital required to produce parts of this size. Again, at Core, we build big better.

Just as important, not every competitor has a technical expertise to run them successfully. The key takeaway from this slide is specialization. We are not trying to make every facility do everything. At Columbus, that is our center of excellence for SMC compounding. Gaffney focuses on hood and battery enclosure systems. Winona anchors our proprietary DLFT technology, which is direct long fiber thermoplastic. Cobourg specializes in engineering solutions and specialty products using the structural foam and structural web processes. Matamoros provides scale manufacturing and is our truck roof center of excellence.

Monterrey is the growth platform that combines structural foam and structural web with DCPD and topcoat paint technologies into one location. Each facility has a clear role and specific strength. Now we're going to look at each plant in more detail, starting with Columbus.

Columbus is much more than a manufacturing plant -- and our SMC compounding center of excellence. It is our SMC compounding center excellence with over 100 million pounds of annual capacity. Our recent investments in equipment, controls and automation have improved material consistency, reduced scrap, and provide a more reliable input into our SMC network. This consistency has helped some of our plants reach the 1% scrap goal. As Eric pointed out, we created a steak shortage in Matamoros when we achieved that goal at the Matamoros plant.

Columbus also supports external material customers. We mold parts ourselves, so we understand what the material must do when it reaches the press. That combination of compounding, molding, engineering and application knowledge differentiates core when working with external customers.

Another example of how we leverage this capability is with transfer programs. We had a customer transfer a mold on a Friday afternoon and said they needed parts. By Wednesday, we had compounded -- we have made a new compound, made parts and sent them with the business development team to be tested at the customer. That highlights the power of internal compounding. It creates speed.

So with that, we're going to take a video tour of the Columbus plant.

[Presentation]

So that's a quick overview of Columbus. I know some of you have been to the plant, but it's really impressive. The mixing system, which is the heart of our compounding operation. Those vessels that you saw in there would stand floor to ceiling in this room to give you kind of an idea of the size of those mixing vessels that we use. And then that line is making compound over 40 feet per minute is what the speed of that. So it's very impressive to see in person.

So that's what gives us control at the beginning of the value chain where product consistency and finished part performance start. We are able to leverage this internally to achieve the low scrap percentage that we talked about, and we're also able to leverage it to sell compound to external customers.

Now Gaffney tells a different story. If you want to see how culture moves from one plant to another, Gaffney is a great example. Gaffney is our hood and battery enclosure center of excellence. But when I think about the plant, I think about having the right people in the right seats. We have three leaders, Marshall Starr, Dorotty Ortega, and Andres Garcia that have each worked in 3 different Core facilities and bring broader experience into this operation. They transferred not only technical knowledge, they brought operating standards, relationships, lessons learned, and leadership expectations.

Culture is not a slogan. It's not a poster on the wall. It's how the operators respond to problems, reinforce standards, and develop people, and deliver the customer commitments. The equipment matters, but the people make the operation successful. Gaffney demonstrates how internal development, leadership mobility, great consistency, strengthen the business and prepare the plant to pursue adjacent opportunities like the battery systems, the battery enclosures in the back of the room.

So with that, let's take a look at this Gaffney plant.

[Presentation]

So Marshall is great. You saw there giving a presentation. Marshall came up, he was originally started as a stealth aircraft technician, he has worked his way up and worked at Coca-Cola for a period of time and leads our maintenance excellence program. So he brought the maintenance excellence from Coca-Cola to our plant, leads that. One of the things I'd highlight in the Gaffney plant is, we call -- we talk about tracking green oil because all our presses use thousands of gallons of oil. And even a speck of dust will ruin the servo valves in them. So we have a green oil program that the Gaffney team has really helped us develop to filter that oil to a very low concentration so that we maintain our presses and keep that oil impeccably clean.

So Gaffney shows how putting the right people in the right roles, turns culture into a competitive advantage.

Now we'll move into Winona. Winona is built around our proprietary DLFT process. Chris Jansen, Mike Bergman and Melissa Wangen, are 3 plant leaders that have more than 20 years of experience with this technology. Chris even started as an intern. Was then an engineer, engineering manager and then now the plant Director. Additionally, our proximity to Winona State helps us add engineering talent and develop the next generation of technical capability.

One of the most valuable things in Winona is -- it produces, is knowledge. The talent can then move beyond the plant. Julian Rodriguez is one example. He started as an intern, moved into product engineering and now works in our corporate account management department with Alex. The technical and manufacturing experience enables a deeper customer conversation because the account manager understands what the process can do, where the risks are, and how the operation can create value.

Winona also demonstrates cross-plant integration of our specialized manufacturing footprint. In the current program, we are creating a DLFT part in Winona and an SMC part in Matamoros. The SMC part ships from Matamoros to Winona where we combine it for final assembly and Core manages both technologies and delivers one integrated solution to our customer, rather than our customer having to manage multiple suppliers.

So with that, we'll take a look at the Winona plant.

[Presentation]

So Winona, in Winona, I take you right to -- if we were there, I'd take you right to the tailgate manufacturing cell where we make the tailgate inner panels for General Motors. It's such a fine dance of automation and manual operations all in one cell. There's about 7 people dancing through that cell, and they produce 60 vehicle sets per hour between loading the press, doing some manual operations, then loading it into a robotic cell and then delivering it every day for General Motors. It's quite a sight to see. I hope you guys get to see it one day in Winona. So Winona combines experience, emerging talent, proprietary technology and cross-plant integration into solutions that are difficult for a single process competitor to match.

Next, we'll look at Cobourg. Cobourg provides another example of technical capability, this time through manufacturing efficiency and direct customer collaboration. So Cobourg does 2 things particularly well. It makes today's products more efficiently, and it works with customers to engineer tomorrow's products. The lattice product demonstrates the first capability. The team improved the process so multiple pieces could be molded at one time, increasing our output from the same existing piece of equipment.

The skid plate application is another. A skid plate means the shield underneath the side-by-side that demonstrates the second capability. The business development team heard about the problem during a supplier summit. We challenged the Cobourg team to solve the problem. Cobourg worked directly with the customer on performance impact testing, developed a thermoplastic alternative for a side-by-side vehicle application. And the team did not simply receive a print and mold the part. The team helped to engineer the solution and around the application.

The results demonstrate why customers choose composites. Lower weight, corrosion resistance, durability and greater design flexibility. Let's take a look at Cobourg.

[Presentation]

So you saw the skid plate application there. We make about 24 of those every hour. Also was there was the generator pads, and you saw us in putting in inserts. The Cobourg plant does a great job of engineering error proofing into the process. We use cameras and vision systems to make sure we get all those inserts into those -- the bases to make sure we protect our customers.

So Cobourg demonstrates how continuous improvement creates capacity in today's business while we -- while customer collaboration creates tomorrow's growth. Across the 4 plants, the stories are different, but the operating model is the same. The same operating model continues in Mexico where we combine scale and growth capacity. Arnold is going to take us through the Matamoros and Monterrey facilities.

Thank you, Mike. Appreciate that. Good afternoon, everyone. My name is Arnold Alanis, and I'm the Executive Vice President of Operations for Mexico. Been with the company for 14 years now, and I bring about 32 years of experience in manufacturing. Today, I'll walk you through the 2 Mexico plants, Matamoros and Monterrey. And our 2026 Must-Win Battle.

Let's start with Matamoros, our largest facility. Matamoros is a 600,000 square foot facility with 672 employees and with capacity up to 5,500 tons. The plant is designed for large-scale cost-competitive manufacturing, SMC, DLFT and spray-up processes. It also supports some of the most complex programs and is the largest heavy truck roof manufacturing facility in North America. Those of you who are going to sign up for the plant tour tomorrow will be able to see that firsthand.

Let's take a few minutes to see the Matamoros operation in action.

[Presentation]

Now let's move over to Monterrey. Monterrey has gone through a significant transformation, expanding from 50,000 square feet to 217,000 square feet and 226 employees. The facility currently operates 9 presses with capacity up to 1,000 tons. But this transformation was not -- was about much more than just square footage. We consolidated 2 plants into 1 facility and brought an external warehouse operation in-house. This created a more efficient operation and more importantly, positioned Monterrey for the future.

Today, Monterrey is being established as our DCPD center of excellence with integrated topcoat paint capabilities, and a strong platform for future growth. The goal is clear: build the capabilities in Monterrey today that will allow us to grow the business tomorrow.

[Presentation]

Next, there's 3 reasons why Core wins: execution, capability and solution. Number one, every day at 9 a.m., we're standing on the production floor, reviewing safety, people, quality and delivery. Number two, we have a unique capability to offer 2 processes under one company, thermoset and thermoplastic. Thermoset being -- molding heavy truck parts like SMC, thermoplastic mainly in powersports and personal watercrafts. And number three, we work closely with our customers to find solutions to their problems or needs.

This concludes the overview of our 6 plants. Thank you. I'll now hand it over to Steven.

Awesome. Thank you, guys. Thank you, everybody, so far. That concludes the first session of our presentation. We made it through that a little bit quicker. So during this break, we've got some extended time, we've got 2 trucks sitting out in the parking lot. If anybody wants to go to the restroom, get something to snack on or anything like that and then meet us outside, we'll head outside and do a little show and tell. Thank you.

[Break]

Okay. Part number two, here we go. Let's finish this thing out. Next up, we're going to have Stephanie Pulliam come up, and she's going to spend some time on culture as a competitive advantage for us. But first, I want to play another quick video, and then welcome Stephanie to the stage.

[Presentation]

All right. Good afternoon, everybody. I'm Stephanie Pulliam, I'm the Executive Vice President of Human Resources. I joined Core about 5.5 years ago. I started as the Director of Total Rewards. I am one of the lucky beneficiaries of our succession planning process. I will talk you through a little bit about that. But I took this role on just under 2 years ago. So I spent time with my predecessor, Renee, going through our succession planning to make sure that I was set up and prepared for this role as I took it on. So it's just a tiny bit about me.

So you've clearly heard from our leaders why culture and people are important to us. I think you've heard that woven through all of the presentations so far today. You've seen culture talked about in the various plant videos. So I want to take a minute to kind of ground us back to the strategy house that Eric shared earlier. Culture as a competitive advantage is our first pillar. It's our most important pillar. We truly believe that having that culture and people in place are really what help us execute that long-term business strategy.

And then we put in place various leadership development programs because our leaders are the ones that help create that alignment for our employees back to that business strategy. The culture is where we bring in the behavioral components, and I will talk about the programs that we have in place to support all of these. And then ultimately, at the end, I will talk about some of the execution of the strategy from the culture and people standpoint.

Okay. So let me talk a little bit about some of the systems. We've spent a significant amount of time and energy into developing systems and processes to support our leadership and talent development. Eric mentioned our Must Win Battle back in 2021, had some components of organizational development. So some of these programs were developed as a result of that Must Win Battle, and we've continued to build and improve upon those in the several years after that.

Now these systems that I have shown here, lots of organizations have these, right? So what I want to do is take a minute to explain what is maybe unique or at least special for us at Core, what makes it important to us. So starting on the left, our internship program. So our interns are brought in. They get assigned projects. They have the opportunity to present back to us to the leaders, the conclusion of their internship, the results of their projects.

Mike mentioned, plant Director, Chris Jansen in Winona, started [ as ] an intern with us. Another intern that I would like to highlight is here with us in the room today, Thalia in the back, started with us in corporate HR as an intern. And today, she actually helps manage our internship program.

Moving into our career paths. So we want to make sure that our employees know what those potential advancement opportunities are matched with the business need. So we've developed those career path plans that show people how they can move forward in individual contributor roles ultimately into people leader and potentially up to executive positions.

Now the tools that we have in this career path are also critical for the leaders. So built into these career paths, we're giving the leaders the tools to help facilitate those career path conversations with their employees to help understand where their interests are, where their skill sets are to potentially continue those career path conversations.

Now moving into skills assessments, being a manufacturing organization, you can imagine that it's very critical for us to understand the technical needs that we have, the technical abilities and ultimately, where our workforce stands in relation to those. So we have a big matrix where we are able to evaluate those skills, and that really helps us identify where we have subject matter expertise and where we maybe have some areas where we need to prioritize those development or training efforts.

All of these things then translate into targeted actions that we put into our individual development plans. Now these are not performance improvement plans. This is different. This is focused on true professional development. So we have put together these tools. It's a formal individual development plan. It could be for somebody who is working on that succession path and giving them targeted actions to work towards those potential future opportunities. It could be for somebody newly promoted into a manager position to make sure that we're giving them the opportunity to achieve success in that role and what are the things that they need. We partner mentors with them through this, we utilize what their natural strengths are to help them be successful.

Moving into performance management. Every organization has performance reviews, right? We give performance reviews to all of our employees. Internally, we say that we use this to measure both the what and the how. So of course, everybody has goals. We want to make sure that we are executing on those goals. That's the what. But equally important are those behavioral competencies. So we're building those competencies into our performance management system.

One of the things that we also do that is maybe a little bit unique is all of our salaried employees are given a professional development goal. So even if they don't have a formal individual development plan, everybody has something tied to their own professional development through that annual process.

Leadership Essentials is our foundational leadership training program. So oftentimes, you hear that people are promoted into their first people leader position, but they don't necessarily have the skills or the knowledge to be successful in that people leader role. So we recognized that gap, and we developed this Leadership Essentials program as the true foundation of that. This is where I have a little bit of my show and tell. I think I felt like maybe I needed to contribute something to the very cool parts here. So I want to highlight this workbook.

You can see it's over 200 pages. This is something that our organizational development team led by Cristina Farr, developed entirely in-house. So we wrote our own book on those foundational leadership skills and how that translates specifically at Core. All of our leaders have been trained in this Leadership Essentials program, and some individual contributors as well as part of their succession planning opportunities, they get trained in this. And we do this ongoing for people who are new to the organization or newly promoted into a leadership role.

The second step after that is our leadership development program. We call that LD-II. This is a more select group. So these are for our high-potential employees. They are nominated and selected for participation in this program. The picture that you see on the bottom right is our current cohort. It's our fourth group. I am one of the lucky graduates of this program as well and some of the names that you've heard mentioned throughout the day. We do this year-long program with this group and they get lots of trainings. They are assigned projects as a part of this program. But one of the things that has been truly successful for us is a weeklong conference that we do where this group gets to come together in person.

So a lot of times, these individuals are in different roles. They're in different plants, so they don't have the opportunity to come together in person. And this gets them the opportunity to see each other, to interact with the leaders and get that face-to-face interaction.

And then finally, I'll wrap this section with the succession planning. So all of this comes together with our succession planning. We evaluate this at least 4 levels deep into the organization, in some cases, more. So what that means is that we have succession planning evaluated for the vast majority of our salaried workforce. One of the things that we do is we hold cross-functional workshops. So after we do our succession planning evaluations, we get together with the leaders to have conversations with each other and share our succession planning evaluations as a leadership group. And this really has helped us see where we have different people that have interest maybe in other areas or maybe they have skill sets suited to a different area. For those of you going on the tour in Matamoros tomorrow, you'll get to meet our Plant Director, Homero Castro. He's a perfect example of this. So through these workshops and discussions, we identified that -- so his background -- let me back up, his background is in finance. He was our country controller, but we learned that he had an interest in a plant director role. So that got us talking about, okay, well, if he's interested, we think he might have some skills for that. What can we do to help work him towards that position? So part of that included getting him into an operations role, and he's now the plant Director in Matamoros.

So all of these programs combined, right, help us make sure that we're attracting new talent that we can develop the talent within and that we can retain people, and all of these tie back to our foundational value of being a learning organization.

So shifting a little bit, those systems, those processes, they are all great. They give us a foundation, but they're really only part of the equation. We need to make sure that we have that culture and we have the behaviors around it to make those systems and processes successful. One of the things that we did, taking that first pillar in our strategy house is defining these culture standards. And this started with our leadership team. We did a workshop, and then we started to have workshops with the management teams at all of the plants to talk about what our culture is, who we are, how we want to operate. We then continue those discussions, getting feedback from employees because at the end of the day, we really wanted to make sure that these culture standards, they give us a common language. It gives us consistency, and we wanted that to come from the people, not just from us, but we really wanted everybody to see their input into developing these culture standards.

Another thing to highlight how critically important these culture standards are to us. As we went and rolled these out through training, Eric and I partnered with Mike and Arnold. We went out to every facility. We held all-hands meetings so that we could get in front of every employee to show just how important we feel culture is. And express, right, that everybody in our workforce, they are the ones that are going to help us actually bring these culture standards to life.

We need everybody to display those behaviors every day. And then our leaders are the ones that help us reinforce that. And they do that through a variety of ways through one-on-one conversations, and we have a toolkit that we've developed to help our leaders have those one-on-one conversations. We do that through feedback and coaching. We've recently implemented a real-time feedback tool. So that gives the leaders weekly pulse survey information so they can interact with the teams and get that feedback live and have the ability to interact back with the employees.

Of course, accountability, recognition. We have a platform. We've built these culture standards into our recognition platform, and that helps us make sure that we're promoting those behaviors that we want to see repeated. All of that ties back together with development, again, to our learning organization value. So all of those programs are tied back into our culture standards as well.

You've gathered that we like data here at Core. So I want to show you some data of how all of these programs translate into measurable progress for us. So our salary voluntary turnover is our first metric that I would like to highlight. We are incredibly proud of this statistic. So in 2021, we had a voluntary turnover of just over 19%. Today, we are tracking below 7%, and that is an annualized number. So for 2026, that is not year-to-date, that is if we continued on the rest of the year, this is where we would sit. So we are incredibly proud. Having that stable workforce is truly what allows us to execute that long-term strategy.

Looking into our leadership pipeline. So we want to make sure that we are understanding our bench strength and building that bench strength. Our senior leaders, which we define as our director level and above, 74% of those individuals were promoted internally into their current positions, which is a true testament to all of the programs that we've developed and also all of their active involvement in participating in those programs.

Of that same group of people, 65% of them have an identified successor listed today. So that helps us understand where we do have that bench strength, but also where we know we may need to target maybe some interns to build that talent pipeline or look at workforce planning for strategic external hiring.

Next one I'll talk about is our promotion rate. So Eric mentioned this in the very beginning of where we were last year. We're continuing that same trend this year. We're hovering right around 50% of all of our open positions being filled through internal promotions, which again is just a tremendous testament to all of the things that we have in place. Now as we look to grow, right, we do expect that, that will come back down a little bit, but we will still continue to do all of those programs and maintain a strong internal promotion.

I mentioned the weekly feedback tool that we have. We also, for several years, have been doing an annual employee engagement survey that touches all of our employees. We do that on a scale of 1 to 5. And so our score on that has improved from 3.6 in 2021 to a 4.0 in our most recent survey. And that's with 80% participation of the entire workforce.

I talked about our individual development plan. So the last statistic I have to share with you is that we, today, have 142 people with an active individual development plan.

With that, I'd like to close by, of course, bringing it back to our people. We're celebrating our 30-year anniversary today -- or this year. All these pictures are the internal celebrations that all of our people have had. You can see how proud they are. You can see these trucks outside and some of the pictures. We bring those out to our employee celebrations. But really, all of the success that we've been able to achieve, we would not have been able to do it without the people. These are the people that are going to help us with the next 30 years.

So really, for us, we think the connection is pretty simple, right? You have those strong -- that strong culture, which gives you better leaders, gives you stronger teams, leads to that execution. Ultimately, that can translate into the customers having confidence in our team and leading to that long-term sustainable growth.

And with that, I will transition over to Alex to talk about our financial overview. Thank you, everybody.

Thanks, Stephanie. So as Stephanie said, Alex Panda, Chief Financial Officer. pretty sure everyone in this room knows who I am. But for those that are on the webcast that don't know, that's my introduction. So you've heard from Eric, who led us off with the vision of the future of the company, right, going from good to great. And then you had Mr. Bantz over here talk about our must-win battle from 2 years ago, invest for growth and the success that we've had over the last 18 months.

And then you had our operational leaders, Mike and Arnold talk about our must-win battle from 3 to 4 years ago of operational transformation, which has been extremely successful, and you've seen that in the margins over the last couple of years. And then all of this couldn't have been possible without the HR systems that we've had in place that has led us to a culture as a competitive advantage, right? We believe in that. And so my job today is to tell you all, well, how does that turn into long-term shareholder value, right? And we're going to get into that.

So before we do, we're going to talk about our capital allocation policies. And many of you in this room have seen this data. So first of all, maintaining a strong balance sheet. As of 6/30, we had 0 debt and our cash balance was $12 million. For working capital, we really strive to have payment terms with our customers of 30 days and with our suppliers 60 days. Those payment terms really allow us to take our AP and have it offset our inventory, which is always a goal of ours.

But the real main reason to have a strong balance sheet is to be able to take advantage of those organic and inorganic growth opportunities that come up, right? We can't control the timing of when those come up. But what we can control is that we're ready for them, and we have the capital available to take advantage of those. And you've heard us talk a lot about organic growth, right? It's our #1 priority at the end of the day. We require a return metric of 14% and you've heard us talk about the investment in Mexico, right? And that's why a lot of you guys are down here to see that investment in Mexico. $25 million over the last year and will be wrapped up by the end of the year.

Our sustaining CapEx is roughly 3% to 3.5%. I would say, over the last 2 to 3 years, our floor has been $10 million. So we've been a little bit above that. But as we continue to grow, we will target 3% and 3.5%. And then lastly, total CapEx for 2026 will be $30 million. Now inorganic M&A opportunities. Our main priority here is to diversify our end markets, right? It's a lot easier to get into new markets and expand into those new markets through inorganic growth rather than organic growth, right? You go buy those customer relationships. The financial criteria for an M&A opportunity for us is to hit that 14% return metric by the end of year 2 and then also be below 2.5x leverage by the end of that year.

And then lastly, returning shareholder -- returning capital to shareholders, right? We have a stock buyback program in place. We just renewed it in Q1 of this year. We have $7.5 million of availability left to be spent over the next 3 years. So what have we done to make sure that we have that availability? Well, in July, we just refinanced our debt, right? And so we extended our debt and now matures in 2031. We've increased our availability from $75 million to $100 million, and we've simplified the structure. We've gone to a $50 million revolver and a $50 million delayed draw term loan. Now that term loan will be used for large organic or inorganic opportunities. And we also were able to make the debt cheaper.

Now in order to do this, we've -- we did a very disciplined multi-bank bid process. So we had 4 banks come in and bid on the business, and we worked with them. And I'm proud to say that we have 2 of our banking partners here today, Huntington and U.S. Bank. Thank you guys for being here. We really appreciate it and value the relationship we've been able to build over the last couple of years. So you heard Mr. Bantz talk about the organic growth opportunities that we've won over the past 18 months, and we're going to take a little bit of a deeper dive into those -- into that data. So over the last 30 months, we've won $142 million of annual sales of awards, right? $115 million of that revenue is incremental.

Now we categorize our wins in 2 different categories. The first one being replacement business, which would be if we're currently making a truck program, truckload program and it's up for rebid and we rewin that business, that's a replacement program, normally not incremental business, right? We might get a little bit better margins, a little bit more revenue. But at the end of the day, it probably won't move the needle a ton. The other category is incremental. And this is a program that we currently don't make and it's brand new to us. So every dollar of sales of that award will increase our sales overall. So of that $115 million, $85 million has not yet launched. And 90% of that $85 million will launch in the next 12 months.

So I'll give you a little sneak peek of what our must-win battle in 2027 is. It's the launch of all of these programs, right? It's imperative to the success and the growth of our company that we launch these programs flawlessly. And like Mike said earlier, if you'll win it, we'll build it. We're going to put Mike and Arnold's team to the test on that one. So you can see the diversification of those new wins, right? So of the new wins, 28% has been in building products. Utilities was 22% and then other was 11%. So we've really won a lot of business outside our main 2 industries for truck and powersports.

Now like everyone else has said, we don't want to decrease truck and powersports. We love our truck and powersports customers. We want to continue to grow those customers and into those markets, but we want to grow everything else at a faster rate. You've also heard us talk about sales to $300 million, right, and the confidence we have us getting there. This is why. This chart on the -- up here is why. Right now, we have launch programs of roughly $225 million and that $85 million walk to $300 million, it's not a matter of if it's going to happen, it's a matter of when.

We know we have launched -- or we know we've already won those programs. It's just a matter of launching them. We've also talked a lot this year about our investment in Mexico, right? And I'd like to break it down in 2 different categories, Monterrey and Matamoros. So it's a $25 million investment, $20 million of that is in Matamoros. What do you get with that $20 million? Well, 2 brand-new state-of-the-art 45-ton presses, which those of you that are here today and are going to see the Matamoros facility, we will see tomorrow. It's going to be extremely impressive.

We also get 50,000 square foot building expansion. And then we're also able to move our DCPD process from our Matamoros facility into our Monterrey facility. And we really did that for 2 reasons, the move of DCPD. So the first reason is our main DCPD customer is in Monterrey. So we have about $1 million of logistical savings that we've already negotiated splitting with the customer 50-50. And then the second reason was to lower our capital expenditure into the Matamoros facility because now we don't have to do an additional building expansion to be able to do all of the Volvo assembly, which really was the linchpin, right, of why we did -- gave us the capital to do the investment. And then switching gears to Monterrey.

So like Arnold said, quadrupled the footprint size to 210,000 square feet. And we were also able to consolidate a 30,000 square foot external warehouse into the facility. So we had some lease cost savings there. We also were able to add Topcoat Paint, which, like Alex said, the ConAg industry will not let you win a program if you don't -- if you're not able to build or paint those products. But at the end of the day, doing these kind of investments require the discipline of hitting your return metrics, right? The team went over and over and over again going through the costs, understanding where our savings were to ensure that we hit a 14% return to protect our shareholders.

So what does all this organic growth mean for our margins? I actually get that question a lot from many of you in this room. So you guys are very familiar with our company. Baseline gross margins are 17% to 19%. We've given that guidance now for 2 to 3 years. As we get into $300 million and $350 million of sales, we expect an additional 200 basis point improvement for improved leverage. And then all of those programs that we've won, all of the work that has been done on the operational transformation will be another 200 basis points.

So our target gross margins in the near future will be 21% to 23%. Those additional gross margins give us more availability to go do an acquisition. And like I said earlier, the #1 priority is diversify our end markets when we do an acquisition. And we've been pretty successful at that. So I've been with the company 12 years on Thursday is my work anniversary. And the first acquisition we did when I was at Core was the Winona facility. We purchased it from CPI Binani. And we got 2 main things from that acquisition. The first one we got was the D-LFT process that you've heard Mike talk about. The second thing we got was a great relationship with BRP and grew us further into powersports, primarily in the marine market, right?

And then the second acquisition we did was in 2018. We purchased Horizon Plastics, which gave us the Cobourg, Ontario plant and then also a Monterrey facility, which at that time was just a startup. There's really nothing in there. And we got a couple of things out of that acquisition. The first one being structural foam structural Web, which is a low-pressure injection molding process. we're also able to get our building products market going when we're selling Lattice to UFP. And then the last thing we are able to have is our ATV business, right? So growing powersports. We're able to grow powersports with both BRP and a brand-new customer, Polaris.

So what's the financial criteria of an acquisition that we're looking for? $50 million to $100 million in revenue, 14% return, like I said earlier, by the end of year 2. And again, we want to be below that 2.5x leverage by the end of year 2. Eric and I have had the pleasure of meeting with a bunch of different companies over the last 18 months. We pretty much have gone and visited a company every other month essentially. And what they're looking for is about 6 to 8x EBITDA for a multiple. And I will tell you, it's normally closer to 8% than 6%.

When we're talking about $100 million of acquisition sales, what -- how does that change the business? What does the business look like after we do that, right? So our largest customer would go from 19% to 13%. And then our largest market, truck would go from 44% to 30%. And just to give you an idea, I just walked you through the 2 acquisitions we've done in my time. When I first started, we were a 90% truck company. We're able to diversify down to 45%. This would get us down to doing to 30%. So our long-term financial goals, they haven't changed. I guess they changed a little bit. Instead of saying $505, 1 year went by, so we now have to say $500 million in 2030. So $500 million by 2030. We added gross margin on here.

When I started 12 years ago, my predecessor, John Zimmer, he told me the story once. He said, Alex, if we could just hit 30% variable margin and hit 10% fixed costs, we'll hit gross margin of 20%. And if we just control our SG&A costs of 10%, we hit that long-term goal of operating income of 10%. And then just magically, the math works, we're going to hit that return on capital target of 16%. That's all we got to do. He made it sound so easy in like 3 sentences, right? But those are our long-term financial goals. And $500 million is easy to stand up here and say, "Hey, that's a number on a page, right?"

Anyone can make an Excel sheet say anything. But why do we have belief in that number, right? Why do you hear us stand up here and have confidence in hitting that $500 million number by 2030? Well, we've already talked about a couple of reasons why. So we already have known wins of $85 million. We know we're in a truck trough, right? And for those of you who don't know the truck cycle, truck cycle is about 2 years of downturn and about 3 to 5 years of uptick. Right now, we're in the second year of a trough. And so ACT, which is the industry expert forecasts an increase over the next 3 to 5 years. We're projecting that to be roughly $30 million. So that gets you into the mid-$300 million range, right? While $100 million of acquisitions, whether that's 1 for $100 million or 2 for $50 million, that gets you a little bit closer, $450 million.

And the last piece is Mr. Bantz's job over here to continue working on organic growth and winning programs after programs. And we really see growth in 2 different areas, right, that we're really focusing on. SMC sales. We've won 4 major programs in the last 12 months on SMC sales. We've launched 3 of the 4, and that last program will be launched by the end of the year. ConAg, we're just getting started on ConAg, right? We've invested in Topcoat Paint in Monterrey. We're reaching out to customers. We're being active. So that will take a little bit of time to get.

But if you think back to the slide I had a couple of minutes ago, $142 million of awards that have won over the last 30 months. That's basically a $55 million annual run rate. So whether it's $100 million of acquisitions or $150 million of organic growth over the next 3 years, it is doable. It's achievable. We believe it. So you guys should too. So what does Core look like with $500 million in sales? Well, we're going to hit those long-term goals. So $500 million in sales, 21% to 23% gross margin, operating income of 10%. John Zimmer, hopefully calls me and say, "Hey, guys, great job. You did what I said a handful of years ago." And then we'll hit that ROCE target of 14% to 16%.

A couple of other financial metrics that are interesting when we're at $500 million is our EBITDA margins should be between 16% and 18%, just a math equation based on our depreciation and amortization. And then operating cash flows will be $60 million to $70 million, which is a big cycle, right? Then we have more cash, more capital to go do more organic growth and more inorganic growth. And so really, at $500 million in sales, CORE will be positioned at a higher-margin cash-generative company that really creates long-term shareholder value.

And for my last slide, we'll go through 2026 as guidance, an update. So for 2026, we're keeping our sales guidance the same, 0 to up 5%, probably going to come in right around the midpoint of that. There is a shift, though, in our truck. So over the last 4 quarters, we have seen increases in truck quarter in and quarter out, but we have seen and have heard and worked with our customers, there will be a shift from Q4 into Q1 of about $5 million to $7 million of sales. That's mainly due to 2 reasons.

The first, we're hearing that a lot of other suppliers to truck companies are shutting them down. And so they're not able to keep up with the demand increases. And then the second piece is because of the conflict in Iran and the diesel fuel costs being at an all-time high, some OEM truck buyers are pushing orders out into Q1. So it's twofold. The other thing that will impact sales is our tooling sales. You guys heard us talk a lot about tooling sales and the timing of tooling sales. Earlier this year, we announced that in Q4, the Volvo tooling program will close in Q4. Where we've worked over the last couple of months and basically negotiated with Volvo a contract change, which will allow us to recognize tooling on a percentage of completion basis, which will allow us to pull in tooling sales into Q3 is about 75% of that $35 million.

And then in Q4, we'll recognize about 15% and then the last 10% will be recognized in 2027. Full year gross margins will be 16% to 17%, so just slightly under that 17% to 19%, again, mainly due to 2 reasons. First one being higher oil costs, which have increased our resin costs. We're working with our customers to pass through those price -- or those cost increases and increasing our sales. We've been able to work with them on most of those, but there has been a delay in some of the larger OEMs. As you can imagine, it's been difficult to get those price increases done. But as of today, all of them are effective and will be effective for Q4.

And then the other thing is with those -- the rise in diesel fuel costs, the extra freight that we've incurred between Monterrey and Matamoros, which starting up a new facility, there are some impacts there. Those higher fuel costs were not in our plan at the beginning of the year. And so we've incurred a couple of some additional costs there. And then lastly, we're announcing a new footprint optimization project. This really gets back to what Mike talked about with our focus on our Daphne plant being the hood and battery enclosure Center for Excellence and our Columbus facility being our center for Excellence for SMC compounding. So this is going to cost us about $2 million. About 50% of that will be incurred in Q3, 50% of it will be incurred in Q4, and we'll have about $1 million in annual savings moving forward. Those costs will be in SG&A and there'll be an add-back to adjusted EBITDA.

And with that, I'll hand it over to Eric for the wrap-up.

All right. Thanks, Alex. Thanks for converting everything we talked about today into how it affects the P&L and what it will look like for you guys in the future. I want to thank you for taking your time and investing your time with us today and listening to us. We appreciate the opportunity to share our story and our vision for the future. If there are 3 things I want you to take away. First, Core's transformation is real and it's proven. Second, organic growth is accelerating. You've seen the new business wins and our market diversification approach. Third, we have a disciplined capital allocation framework, and we focus on returns and shareholder value.

What you guys should believe is that we've demonstrated improved margins through a difficult cycle. We've built a stronger operating platform. We have meaningful opportunities to scale revenue and earnings, and we have a management team aligned around execution and accountability. I'm incredibly proud of all of them that you guys got to see today and the skills they have. Our path forward is clear: grow organically, increase diversification, improve returns on capital employed, expand our margins and deliver sustainable long-term shareholder growth.

Thank you guys for listening today. We're going to take a brief intermission, and then we're going to set up for a panel up here and take questions for the next 45 minutes and look forward to answering all the questions you guys have for us. There is coffee here on the side, so we could get a refreshment, take a little break and lease set up, and we'll do questions. Thanks.

[Break]

Okay. Moving on to our question-and-answer session. We've got plenty of time. So if you've got a question, please raise your hand. Let me find you. Remember, I know a lot of you are probably loud and you think I don't need a mic, but we need the mic for your question so it can be live on the webcast. So if you have a question, raise your hand, please wait for me to come to you with the mic, and then we'll get things started. You're more than welcome to ask one person in particular or the whole team. So let's get rolling. Tyler?

One of the areas that's kind of a hot topic, but it's not necessarily on your road map is kind of the aerospace and defense area. And with so many new companies like Anduril, Palantir, Saronic, they're kind of changing the paradigm a bit and bringing a lot more commercial focused speed to market. Curious if any of that's kind of in the road map or if there's any potential to kind of tap into any of those areas with so much going on in that space. And again, just being a little bit different from the old defense prime paradigm in the past. Again, there's a lot -- it seems like a lot more commercial focused kind of opportunities. So yes, curious if you've thought about it or have new road maps for anything in that space.

Yes, I'll start, Tyler, and then I'll let Alex give you some feedback. But we've had the opportunity to quote a couple of programs and I would say, that defense contract world. And the challenge, I think the U.S. government is making is how do you take cost out of this? The historical materials used are what I would call carbon fibers and titaniums for race cars and airplanes, which makes a missile or a one-way aerial defense vehicle very expensive. And so they're looking for ways to make that cheaper. We've had the chance to quote a couple of things, converting it from carbon fibers into a glass fiber-based resin matrix, which is you're talking about 1/10 the cost, right? Very, very big difference.

Today, we don't have any of those programs in our new wins, but we've had the opportunity to look at a few of them. I think our large format presses in the U.S., not only for those guys, but also just think about the drone technology and our government is looking for anti-drone and drone technology to bring to, unfortunately, the future of potential wars.

Yes. I would just add, we have had some exposure to some of these one-way vehicle applications. And they're very interesting. That -- the whole space is a little bit of an unknown for us. So I think we need to do our homework and really understand the lay of the land and how do we differentiate ourselves and do it in a strategic way and not just kind of stumble into it.

Do you -- you guys have pretty much indicated that there's a lot of new business that's ramping next year. Are there any other plant optimizations that need to be done? Or are you set once this Matamoros spend is done for this year? Is there a CapEx thing that you're going to need to do to ramp these projects? Or are you already ahead of the game?

Yes. Thanks for the question, Tom. I'm going to have Mike tell you a little bit about the project Alex sort of announced there at the end relative to our U.S. footprint.

Yes. So we've been -- we've already been -- have the CapEx programs built into that. The footprint optimization plant in Daphne, we're optimizing what we're doing as far as the battery closure systems, one of them you see in the back of the room there. So we have that built into the system. Next year, as far as CapEx, we're looking at our standard CapEx spend. We're not -- we don't have any other optimization program planned at this time. We have invested in presses and some rebuilds as part of that optimization as well. We've seen that in Daphne this year as well. So to answer your question, it would just be looking at standard CapEx spend going into next year.

Yes. I would add, I didn't talk about it in detail, but on that organic growth slide in my section of the slide deck, of the $85 million of revenue launching next year, about $14 million of capital remains. Now $8 million to $9 million of that is what's left to be spent as of 6/30 on the Mexico investment. And so if you take that out of the equation, you're really looking at $5 million of additional CapEx to do the majority of that $85 million of annual revenue because the Volvo program in that $85 million is roughly $12 million to $15 million. So CapEx for that -- the launch of those programs is minimal.

Energy costs are front and center of everybody these days and your raw material costs must be forefront of your concern. So question is, how is that impacting your costs? And do you hedge any of your diesel purchases? And if so, like how far out?

So the only hedging we do is foreign currency. It's funny you asked that question because we've done a lot of investigation over the last 6 months on oil hedging. We've actually asked some of our major suppliers, do they hedge? And all of them, which are bigger than us, said absolutely not. So I don't think we're going to try to do something that those guys don't do. So right now, we don't have any intention on doing that, but we have investigated it. But as of today, we don't have any plans for it.

[indiscernible]

Correct. Yes.

Yes. We don't, but we have raw material adjustment either clauses that are very specific a calculation. If polypropylene does this, then this is the calculation. So in some cases, it's as easy as that. In others, it requires a lot of discussion about how oil price affects our resin price because especially our highly engineered resins, there's just not a good defined global standard.

And so the raw material clauses we've historically done have been very -- it's been based on raw materials, not freight itself, right? And so one of the things we've done more recently is start to try to build in a freight adjuster clause with some of our customers. And we've been successful with one customer recently.

I wanted to ask about SMC and why it's catching on like it is. And I guess, what differentiates you competitively with your SMC product and process compared to what others are doing?

I'll start, Mr. Bantz can continue for me. But one of the biggest is that we make our own SMC and mold SMC. So when you think of the marketplace, there are many that make a compound, and that's what they do. They specialize in making compound, not molding it. So the fact that we can have good engineering and molding conversations with a customer buying that compound, we have seen lots of positive feedback from customers and potential customers in that regard. It's something we spent a lot of years perfecting.

Think about all of the molding engineers inside of our company and Daphne, Matamoros that have given feedback to the compounding team and the chemists and the many, many years of evolution of that, something we really focused on internally, which made our scrap better. That's how we really -- that's one of the key factors how we achieved sub -2% scrap as a company over the last 4 years, bringing that to a potential external customer is a real value.

And I would just add to that. It's not that we just make SMC. We make SMC for some pretty intense applications like trucks. So as we've gone into the space and talked to some customers in the building products, the quality of our SMC is from a scrap percent on their presses is a pretty substantial benefit to them. And then also, we -- as we have gone into the space, we understand that customer service is pretty critical and dealing with the customers that we do, we're used to that. We just need to make sure that we keep that top of mind as we grow into the space.

Are you marketing it differently? I mean is there something with the sales process today that was different that you just really weren't doing in the past that's allowed it to the customers be more aware of it?

We haven't really done any active marketing per se. We've done some just research and cold calling. We're trying to ease into it, learn the industry. And then when we feel we have a good footing, then we're going to go pretty hard into it. We're not quite there yet.

This one is for Stephanie. Curious how long it took -- when you introduced the feedback program from the employees and so forth, how that was received initially? How long did that take to them to buy into it? Was there a little bit of a pushback whether they really believed you were for real about it? And I'm just kind of curious how that all played out because that's really important, what you've all done.

Yes. Thank you for the question. So it's relatively new. So first, we started with a pilot. So we -- that was just over a year ago that we started the pilot of that. Now I will say our annual employee engagement survey has been in place for many years. So I think that has helped give that level of comfort with people giving feedback and that we are putting action plans in place, so they know the feedback is being listened to. But I think when we rolled it out, the new tool, we did training sessions leading into it and showed people the tool. So the biggest thing that we hear concerns about is the confidentiality. So we were showing them the tool to address that concern upfront saying, here is what we see to give that level of comfort to people.

And then what we -- so once we launched it, then another thing that we did is, I mentioned Christina. She's our org development leader. She and I held meetings after a couple of months of the program being in place to check in with those leaders, go through the feedback with them, give them tips on how to share that feedback back to the employees and how we are listening to them and what we're doing about it. So I think that's helped give that continuous momentum of we are continuing to look at this and listen to it.

Good. Another related question, the internship program, is that an internal one? Or when I think of an internship, I thinking of you're bringing somebody like students in or whatever. Could you kind of expand on that?

Yes. So it's an internal program. We partner with different universities and colleges depending on the different locations. Winona came up a lot. That has -- there's a local university there, Winona State that specializes in composites. So that has been our most successful with getting student interns. And then we have various partnerships with like technical colleges. I have someone in my team who sits on the board in Columbus of one of the technical colleges with the HR groups to leverage that and get some more insights.

I touch a little bit on the feedback. One thing I do want to mention, Stephanie, least of Mexico is something new for them, obviously, going into it, understanding the system, and they got a large group out there in Mexico. So when they started to do the exercise, really -- it was really positive. It was really welcoming and they started to get engaged and start providing feedback to us, which is really pretty necessary for us to hear that from them.

Sort of a follow-up question to the CapEx question from earlier. When you did that bridge to get to the $500 million of revenue, some of that was organic growth. Obviously, there's the acquisition that you had in there for about $100 million. So presumably, that's its own things that would probably come with its own plan. Do you have enough capacity currently in the existing facilities that you have to do that organic -- the remaining organic growth to get you to the $500 million? And I understand there might be some tooling. But other than that, the facilities need to be expanded? Or do you need other major CapEx to get there?

Yes. Great question. The short answer is no. So we have enough capacity in place to do roughly $450 million to in sales. Where it gets a little tricky is do you have the rightsized press in the right process in the right location, right? Everything has to line up in order to not have a capital expenditure. And so that's where it would come. So if we could wave a magic wand and fill every single press with the right sales, then yes, we could get to $500 million organically. We wouldn't even have to do an acquisition with 0 CapEx. Now is all of that going to happen? I think the odds would tell you no. We'll probably have to do some CapEx. But in theory, we do have capacity to do roughly $450 million to $475 million.

Eric, I think what will be interesting to you is that we also -- Mr. Bantz has added a process to rank opportunities. And so when we get a new opportunity to quote, we consider what is the market? Is it diversified? What is the size of it? But another thing is do we have the capacity or capability already to serve that customer because those are much more interesting to us if it's filling empty capacity than, oh, it's an interesting opportunity, but I'm going to have to make a large capital investment to be able to do it. And on some of those, we're going to add $150,000 overhead crane or lift. You see the size of our parts, right?

Depending on the part, there's going to be some CapEx, but it's can we leverage a majority of an existing capital installation. And that's something we do in that ranking when we decide, is this a good project for us? Is this what Alex calls an A or a B item?

I don't know if you want to add anything, Alex, to how you rank projects. That's something new in the last 18 months that Alex has brought to the organization.

Yes. So any new opportunity that comes in, there's about 12 questions we ask. And again, we try to hit the financials, the fit from a customer standpoint, logistic advantages, what we think about the customer, what we think the customer thinks about us. And certainly, one of those is capacity utilization. And that's something that we're probably -- we have the ability to tweak the importance of each of those rankings, we'll probably start kicking that a little bit more as we roll in this next $85 million of new capacity or new business into the organization over the next 12 months, so we can dial that up in importance.

I'll ask a question on the other side of that. On the acquisition stuff, I guess, Alex, I wouldn't mind hearing your thoughts on -- you were around during the Horizon deal. And I guess, walk me through what you thought was good about that, what was not great about that and how you want this time to be different or something to that extent.

Yes, good question. So the timing of the Horizon deal was not great at the end of the day. We have started to have operational inefficiencies in our other plants and the focus of the management team was on those other plants at the time. It's really more of a coincidence that when we did the last acquisition, we started to see the decline in profitability. But the acquisition itself really had nothing to do with the decline in profitability. It was really the core stand-alone business that we had the issues in and that we were trying to fix. But it's a common question we get because of the timing of it. But -- so I would say the only thing I would change looking back would be the timing.

Could it have been 12 months later, which we can't control. But what I will say is that acquisition has paid for itself probably 2 times since we've bought them. The lattice business throughout COVID boomed, the ATV business we've won and been able to leverage with BRP and the Polaris business we've won over the years has been phenomenal for us. So yes, if I can delay it 12 months, maybe I would say that. But overall, it still was the right move and created long-term shareholder value at the end of the day.

Just a little stress in between there and now. Then my follow-up is, it seems -- maybe I'm wrong on this, but it seems like we've changed the acquisition target a little bit over the last 3 years or so and kind of increasing it from like $30 million to now it sounds like $100 million. I guess I was curious about the thought process and what went into that and why that change?

Yes. So I'll maybe answer quick, and Eric, you could probably give a little bit more color. So we have visited, like I said, a handful of companies over the last 12 to 18 months. Some of those -- one of them was in Monterrey, and it was about $10 million in sales. So we've gone from one end of the spectrum all the way up to a company that was $100 million in sales and quite a few in between.

And what ultimately where we got to was when we do an acquisition, the amount of work that is required, whether that's $10 million or $100 million acquisition, the work is the same. And so if we -- if our goal is to diversify our sales and we do a bunch of $10 million acquisitions, it's going to take a lot to do, right? And we're a smaller company. And we, at the end of the day, need to be almost perfect, right? We need to bat 10 for 10 when it comes to acquisitions. And so it's really important that we get it right. So we have broadened from a size standpoint, but I think the most important thing is to stay disciplined to the financial criteria and the metrics on the return and our leverage ratios by year 2.

That's pretty well said, wasn't it? Yes, good job, Alex. And I think the only thing I can add to it is that we have gotten to see different-sized businesses. And sometimes those $10 million businesses just aren't that exciting. We won $10 million of skid plates last year just on a single part, single tool and a process, that's a much more exciting thing than a $10 million acquisition with all the headaches that come along with it with the integration and everything that goes.

So at some point, you got to have some size to make it worth all the effort and the energy that goes into it. And the other thing I would add is that Mr. Panda has done an outstanding job the last 12 months starting to model our future 5 years. Now we can't give you that Excel sheet, but he's taking the information on the wins that Mr. Bantz comes up with, the hypotheticals and saying, "Hey, if we win 25% of the stuff in that pipeline that Mr. Bantz presented to you, what would that look like?" And it gives us confidence to be able to model what could we do, right, and still stay in a conservative leverage ratio. What could that scale look like? And so I think because of all those new wins, $85 million of launches, we're going to be at a point where you guys are going to look at us and go, what are you doing with the cash to redeploy it? And so we've got to make sure we're ready for that. We're anticipating that question a year from now.

Yes. The only other thing that I would add is as we were visiting smaller companies, management team is critical to the success of the acquisition, right? And when you go visit those smaller companies, the bench strength of companies is not nearly as strong when you start getting into that $50 million to $60 million, $70 million range. So those smaller companies, we would have to be -- us around this table would have to be extremely hands on. And so that also has played a factor in us visiting companies.

I wanted to ask about quote win rate. What has it been over, say, the last 12 months or so versus historic? And I do have another sales question after that.

Sure. So when I came in, I did a look over the past 5 years, and we were at like a 20%, 25% win rate. We look at it a little bit different now. So when we have a new opportunity come in, we rank it, As or Bs or Cs. As are the top 5 to 8 that everyone in the organization should be aware of as high priority. And then Bs are that next tranche that there's a lot there. And then the Cs are the ones that we will treat a little bit differently. We'll still quote maybe, but we have an expedited costing process for it, and we just don't treat it the same as the As and the Bs. So what I track is the win rate of those As and Bs. And right now, we've been at 40% over the last 18 months.

Great. That's helpful. As you grow the organization, say you achieved the $500 million or so in revenues, how do you believe your sales process needs to evolve as you're a larger organization like that?

Sure. As we grow into that number, we -- certainly, the customer experience team becomes more critical because now this is new growth, it's a lot more new customers. The plants are going to be busier. So there's more things that can go wrong on a daily basis as things do. So that team is going to be from a commercial perspective, that customer experience team, the inside sales team is going to be more critical, making sure we staff it appropriately. And again, that they're paying attention. They're on the ball on the customer scorecards as these new projects roll in.

And then also, as we win these projects, I didn't really talk about this, but the business development team, they are involved all the way through the launch until it actually launches. So we don't keep them -- we keep them engaged all the way through that so that they can maintain the profitability of those new wins through that entire process, as cost may creep. And then there's that handoff. So we need to make sure that handoff is smooth and then the inside sales group is really on the ball and making sure the customers are happy.

I will ask one more question, if that works. And I'm going to shift to emission rates that are supposed to be going into effect here January 1 of '27. What's the update there? So many different things.

We thought you would know.

I'm going to be the expert on that. So emissions regulation is still on paper, go into effect January 1 of '27. Now there is a proposal out there that I think is not until November that gets weighed in on officially that says, hey, we're going to slowly transition that evolution through the year of '27. Now we have -- there's one trucking OEM that already claims to be meeting '27 standards, right? And so they're taking that path. We have another OEM that's already announced, I think, publicly, but I'm not sure enough to tell you the name that they were going to offer '26 engine choices in '27. They're already prepping and planning that this is going to be approved and they're going to be able to do that. So all of that, it just creates confusion is the general take from it.

And I think it smooths it out. It makes it not a big event. So I don't think there'll be a big peak and a big trough, but I think it smooths it out. I think diesel prices and oil and macro events in Iran probably outweigh this emissions cycle at least in the next 6 months. It's going to be -- I mean, I saw diesel at $7 a gallon in Ohio last week. And I don't think I would have ever said I would see that in my life. And so I was -- I mean it's a real thing for the industry of trucking. And every good that you're buying that gets all across America in a truck just got more expensive because diesel went to $7. Probably the California or West Coast guys are used to $7, but not in the Midwest.

Question on the powersports market. You've done very well with it. You've also emphasized despite the fact that it's very large, it's quite an important market with kind of a tough consumer environment, why is powersports doing so well for you?

Yes. We're fortunate enough in some of the mix on our powersports. So our personal watercraft business hasn't been spectacular this year. Q1 was actually quite good. If you remember our release in the first quarter, there's a lot of prebuild for the summer season with -- again, diesel prices are $7 and gas prices are in the mid-5s. It's an expensive day out on the lake to take the truck, haul the powersport, right, haul the boat over. What we get a bit of a tailwind is the cargo boxes. So you see that cargo box there for you guys that haven't driven or ridden on one of these vehicles, they're on every job site. So every job site that's -- we just drove down to SpaceX today and see all of that, the people are using pickup trucks, but they're also using side-by-side vehicles.

Every AI data center job has them on site to ferry -- people to ferry their equipment. That's how they're driving around job sites. Cities and municipalities are now instead of buying a pickup truck, they're buying a side-by-side vehicle. I see people also -- Bantz was talking about golf carts. We really like the golf cart industry, but I see people buying side-by-sides to drive to the grocery store, to drive to the convenience store, to drive to the dinner. In the rural parts of the United States, people are buying a vehicle that they can haul gear with, go hunting with, drive to the grocery store with. It's just a big overgrown golf cart. And it's surprising to me how many people buy those.

We're fortunate because we have doors and cargo boxes on the ones that are used for those jobs versus the what I would call sport units, things that people are going to go out just to race just for fun on Saturday or Sunday, we have a lot less percentage of those units in the side-by-side market. That's a big advantage to us, the cargo boxes.

It's not so much the discretionary as it is the commercial construction and then as you described.

Right. That's a big advantage to Core, and in our large boxes.

Real excited about the SMC promise for the future and curious how Mike is going to operationalize sort of that quicker quote-to-cash business? And how do you look at the proprietary recipes? There seems like there would be different ones for everyone. And give us some color and insight on that, would love it.

Yes. So obviously, we've been preparing for that. Part of the optimization program is to focus those resources that we have in Columbus more directly on the compounding business. So we will have -- we have 25 salaried personnel in Columbus that are going to be focused on compounding. So we're shifting engineering resources into compounding and continue to look for ways in leveraging that to optimize that. Also in Columbus, we have our AME team and our materials group there. And we are actively winning business that does require those certifications you're talking about. We are going after UL certifications for flame retardant, for UV protection and have been going through a little bit of a learning process this year on how we do that effectively and grow that team.

And we have Vinod as our -- still with us as our director who's been in the industry for 40 years that's handing off a lot of that knowledge to the next generation that we're developing. And then we've made investments in our lab to support that business as well. We have just installing what we call a QUV chamber, which does the ultraviolet testing on the SMC panel. So stuff in the past that we would send out and it would take a lot longer to turn that around. We're bringing those things in-house to support the business as it grows as Alex's team brings those opportunities into the plant, we're able to turn those around, supply data to our customers and release a new formulation.

I'm going to add something to that. Being a supplier because I've received material from Columbus, it's great quality. I've seen a significant improvement in quality. Our team is really excited about getting material and running product and stabilizing that process. So now we got our presses all stabilized. We understand not only Mexico, it's across the organization and all the plants that feed our material into it. So great improvement throughout the organization for sure.

This one is for Alex. You've told us a little bit about the transformation of the sales team with salespeople and customer experience people. Give us a bit more detail about how the commercial team is different than it was 3 years ago in terms of numbers also in terms of salespeople? And maybe where do you think it would be in 3 years?

Sure. I don't want to talk too much about numbers just for competitive reasons. But I would say, generally speaking, we are heavier on that business development side right now than our customer experience. And to this gentleman's question, I think that will shift over as we win more business. But our organization in general, we've added a fair amount of resources, I'd say, 30%-ish, somewhere in that 30% increase in my team, pretty substantial. And yes, and mostly focused on that growth. We have added resources dedicated to specific markets, whether that's a market vertical or a regional market. I think it's safe to say we have a person in Mexico that is focused on Mexico. That's new for us. We do have a person for SMC that we've hired recently, and we do have an open position for the ConAg market.

Guys, I'm hoping you can help me square a couple of revenue numbers. Alex Panda, you've given baseline revenue of already launched programs of $225 million versus TTM revenue of about $275 million. You have known wins of somewhere in like the $85 million to $90 million range. And I've heard you say that $310 million-or-so of revenues in the bag, and forgive me if I'm putting words in your mouth there. But then there's also this relatively high confidence expected wins from the pipeline of another $83 million. I'm presuming you're not going to stop selling tomorrow. I assume that number goes up, which when put all together, it starts to get you pretty close to your capacity of $450 million to $475 million in revenue with your existing footprint. Help us understand how we should be putting all these revenue numbers together and then how that affects the urgency to acquire or not?

That was a lot of numbers. That was impressive. So we're currently working on our 2027 plan. And one of the things that we have started to discuss is we normally wait to give guidance to like March, right, historically. One thing that I've talked to Sandy about is this year, because of the launch of the programs and the increase in product revenue is giving that guidance out earlier, probably more like December. We'll do a separate press release just to provide 2027 guidance.

The big thing about the revenue that I would say of the $85 million is going to come down to timing, right? Do programs get approved? What quarters do they launch in? We're currently working on. There's about -- of the $85 million, there's like 4 or 5 really big ones, which would drastically shift that revenue and when it starts and when it becomes full run rate. So the best example I could give you is the Volvo, right? Volvo in Mexico. It's roughly $12 million to $15 million. It's forecasted to start in Q1. Is the new Volvo plant in Monterrey going to be ready starting January 1, 2027? Probably not. But what I can tell you is Volvo has interest in us selling truck roofs from Monterrey to the U.S. And so I think that, that could be part of it, too.

You're looking at me for an answer.

That's right, if you want to add?

When you're building a 1.7 million square foot plant, that's a big project, right? They're going to hire 5,000 employees for that Volvo plant. So we don't know exactly how that launch will look, whether we build roofs and ship them back to the U.S. or ship them to that Mexico. That's what would shift it, I think, would be where you're trying to get, Alex.

I think one of the questions you asked to make sure we get the answer to it, the $225 million number that you pointed out, why is that very different than the trailing 12 months is tooling. So something we -- you hear Alex constantly say this. To us, it's clear, but we struggle sometimes to communicate this to you all is that we look at product sales very differently from tooling and project sales. Their margins are very different. One is very, very lumpy and it's onetime occurrences.

So when we do these really big truck roof programs like the trucks we walked outside and looked at, those are $30 million-plus tooling jobs, and they happen once every 10 years for an OEM. They're very infrequent versus a product sale where we're selling a part like you see here in the room over and over again, day after day, week after week, those have a very different margin profile. And that's the big difference between that trailing 12-month number. I don't have it memorized, $260 million and that product sales of $225 million. And so when he did that walk to $310 million, that was all on product sales. There was no tooling in that walk. That's something I think we're going to work on this year at trying to change the way we present that to you all in The Street to make sure that it's clear.

Yes. One of the things that on our P&L and our 10-Q and 10-K, right, is we have -- we really just say net sales and then you have to go to Footnote 5 really to see the breakout. We're going to start breaking that out on the face of the financials. We used to do it actually when I first started, but we got rid of it because we don't normally have large -- this large of tooling programs, right? It only comes once in a while with these large truck programs.

Because it goes every 10 years. That's why we did it 12 years ago. Those giant programs, all we need to make sure that's split out.

But I would say the -- from an acquisition, it's going to come back to being disciplined in our process for the acquisition. You mentioned that in your question of, okay, well, all of these sales, what does that mean for an acquisition? We would rather do organic growth, right? We have -- we know our costs. We know our customers. We will get better returns on organic growth. So if we have to continue to invest in our company and use our capital for that, we'll take that over doing an acquisition, where inorganic growth really comes into play, in my opinion, would be to really start to accelerate the diversification of the sales in the end markets.

Good. You talked about what has changed around your thinking around acquisitions, but what has changed amongst the potential targets you speak to in terms of their willingness to be acquired?

Do you want to take that or you want me -- so one thing that we've worked on, I would say, starting this year, a different kind of strategy is before we've worked with some investment bankers on the buy side of who's actually for sale in talking to those companies. What we've started to do is Eric and I sat down with a handful of other people and started to come up with a target list. Who does Core want to buy, right? Not who's for sale, who do we want to go after? And so we've created that list and then we started reaching out to those companies. Those companies said, "Hey, we're not for sale. We don't really want to talk." Some companies said, "Hey, we're not for sale, but why don't you come in and talk to us?" One company actually that we went and visited, we got more information on and turns out they were for sale. And then we said, "Hey, we're not as interested after seeing a little bit more behind the scenes."

So I think that strategy has changed to us building relationships for companies we really want to go after in the future. And then that way, when they make the decision, we are for sale, we can be the first call and maybe they don't go through a process, right? We don't go through a bidding war against PE. We get a first look and we put in a bid and if it's good enough, then we get to buy them. So that's a strategy we've started to take, which is kind of another road that we're walking down while we're working with other investment bankers on who's actually for sale. The other thing I would say is, there's about 4 or 5 really good investment bankers that know the plastics industry. And Eric and I now have quarterly calls with those investment bankers. So we're constantly getting updated on what is going on in the market from a who's for sale, who's not for sale type of deal.

You've talked a lot about culture. How does that play as a competitive advantage as you approach potential acquisition targets, if at all?

That's a great one because we just were working on that a month ago. There is certainly a culture out there in some entrepreneurs and family-owned businesses that they fear the private equity culture. Whether that's justified or not, I'm not sure I'll comment on, but they certainly have heard a lot of stories about people trying to improve profitability and not worrying about culture, not worrying about the employees and just ripping and tearing apart businesses to make them resellable 5 years later. We certainly see people talk to us about that. So whether it's real or not, the perception out there is very real.

When we show up and talk about culture and they can go to our LinkedIn or our web page and see the events and the employee things that we do across the business, they all recognize that we really do believe in and care about employee culture. It's something we certainly pitch when we're on some of those visits talking to companies. We have taken Stephanie with us on a few of those trips purposefully because that is as important to us as the financials. So it has been Alex, Stephanie and I on a few of those trips, at least the initial ones to make sure we understand what does this business have. And sometimes you can peel off and get some additional information from some of the HR leaders or how they really are working behind the scenes.

Yes. And I think the other thing about that is from our employee perspective, it's great, right? Acquisitions will provide growth, bigger company growth opportunities for employees. And so the few that have a look behind the scenes at that, and when we talk about acquisitions, that's an easy kind of sales pitch, right, to talk about. But I think the same goes the other way, right? When Stephanie can go into that room in our initial conversation and on a maybe smaller scale basis, do a presentation that is similar to what you guys saw today, there's a track record there going into a company and saying, "Hey, we have 48% internal promotion. So you become part of our family, odds are, you're going to get promoted." And I think that's a huge selling point, right? That's a differentiator between us and some other company. Definitely a competitive advantage.

The only last thing I'd add is absolutely, every time we go and talk to these companies, there is private equity with deep pocket books and a lot of capital to put to work. And that is definitely a challenge that we see in the industry in the last few years. I don't think we've gone and looked at a single acquisition, maybe one of those half a dozen that he's talking about, the private equity wasn't there with a pretty big checkbook, at least allegedly. Whether it closed there or not, right, that's the question.

One other thing, and this may just be a misperception of mine. But you talk about battery technology, and I know you sort of created excellence down in Gaffney that you're emphasizing for that. Help me understand what you're doing around battery technology and the battery containers or whatever that is different and allowing this to sort of gain share, if I'm hearing you correctly.

Yes. So there's a lot of battery technology out there that uses metal cases, metal boxes. So you can imagine changing it to a composite. I think it would be good to look at that part over there. And when you look really closely and see the way the ribs and channels have been molded into one part, can't do it with metal. That's what makes SMC an advantage. Now what makes us unique, maybe for some other SMC compounders that can do this also is how do you also then add flameproofing. So one of the biggest failure modes of a battery is that self-ignition and you guys -- I mean, the best videos on the Internet are vehicles on fire, and they're very difficult to extinguish. It is a very large amount of energy. So they want them to be fireproof SMC.

So we have developed SMCs that have additives in them that basically release water as that heat activation happens, and that can help extinguish thermal events from progressing beyond that one cell, right? Once you start a cell, you're probably going to lose that cell. The key is not to lose all of them next to it or the vehicle or the building or something else near it. So you get that molded in feature, which is why SMC is better than a metal part. And then you get the added benefits of us making a custom compound that [ improves ] fire.

Yes. So I would just add, it's more than just a box. I mean it is a critical part of the overall assembly. And we don't know the exact number, but we estimate that, that battery system back there is tens and tens of thousands of dollars of battery stuff inside. So they really are concerned about the quality of the container around it, and it really allows us to flex our technical muscles and show them what we can do versus others.

Any final questions?

Some of the uniqueness that the battery guys want, leak test. When you make a hood, we don't leak test a hood. Believe it or not, we don't leak test a boat hull. But they want it to be perfectly sealed, hermetically sealed because you leak water, saltwater, spray, something off a truck and transportation, that would be bad for a battery. That's a unique thing that the manufacturing guys have to learn how to do.

I hope it's not the last question because you may not be able to answer it or willing to answer it. But tell us a little bit about the competition that you're facing. We know about MFG, STS, CSP. CSP changed ownership and now they owned by, I think, a German company. What has changed in the last 3 or 4 years or whatever period with these guys, are they getting stronger? Are they getting weaker? And if you don't want to answer, I understand.

We'll answer a high level. It changes a lot over time. If you go and look at our friends that were acquired by private equity, they're going through some challenges in some of their plants. Now not that dissimilar to Core 5, 6, 7 years ago, having downtime, press maintenance issues, things like that.

Hate it for them as an American manufacturer, but they also have some operations that are running brilliantly that we respect as an outstanding composites manufacturer in the industry. We go to composites industry things. We see the leaders of those businesses there. We know some of the things that are happening. And I would just -- Bantz may answer a little bit differently, but I'll summarize that as we want composites to grow. We don't want to wish ill of them because if somebody says, "Hey, I don't want to make batteries with composites. We all lose." And so we want our composites industry friends to be successful. We just like to be slightly more successful than them on some of those projects. But we win when we convert those concrete, wood and metal parts to composites. That is where everybody wins and the pie gets big in the composites industry.

Yes. I think the only thing I would add is, we have put in business systems over the last 5 years to compete with anyone in the industry. And as long as we follow those processes and stay disciplined, we will continue to win programs and stay competitive.

Yes, I agree. That was great.

I'm curious about the cost competitiveness. I mean, obviously, composite is lighter weight maybe, doesn't corrode and all that versus, say, cement for vaults and that kind of thing. I'm just kind of curious whether you can speak to what the competitive pricing advantage is for you? And is that what helps you win a contract or whatever?

Yes. On a concrete part, the concrete is almost always cheaper as a per pound of concrete. Now where you get into wins for us is you need backhoes and excavators and cranes to lift precast concrete parts and the composite part, maybe one person can pick it up and install it, especially in those flush covers and vaults, we're talking about parts that are half the weight, sometimes even lighter than that. And that makes it a very easily installed product that competes.

I would also add to that packing density and shipping costs, you're paying weight per truck and with the cost of diesel prices, you can get much more composite parts within that same truckload. So a lot of those competitors are -- will struggle in the shipping side of it where we have advantages with our ability to stack those, some of the products we've seen break down so that they can have much higher packing density and then the cost that Eric talked about in the field by reducing backhoes and things of that nature is definitely an advantage.

Yes. And just piece price versus total cost of ownership is really what is...

Total value. And the one you didn't ask that you should have asked is what about metal. So you got nobody asked a tariff question. I'm surprised we didn't get a tariff question. We practiced our tariff answer. But on metal side, steel and aluminum have both skyrocketed in the last 12 months. Now some of that's tariffs, some of that's Canada import and that discussion. But that -- every single one of those increases on those metals is a tailwind for composites.

And so when we're out there looking at the trucks, we showed you guys some of the aluminum outer panel parts that have historically been out of aluminum for its corrosion resistance. There is no reason those shouldn't switch to composites over the next couple of years. I would suggest some of those tariffs and the cost of steel and aluminum, that's probably not going to change this administration to the next. That's a great tailwind for composites.

Okay. Before I turn it back to you, Eric, for closing remarks, Arnold, I'm going to put you on the spot for a minute, maybe get you a mic when Eric gets ready. Walk us through tomorrow. Tomorrow, we've got the plant tour. Everybody is coming in. We're going to be in separate groups, which is great. But Arnold won't be in both groups or all 3 groups, oh man. So give us a quick picture, maybe 3 minutes on what to expect, what should we be looking for? Where should we be paying attention to and concentrating our time?

So tomorrow during our tour, there will be 2 vans leaving the actual hotel. I'll be in one van. There's going to be other groups in another van. We'll go across the border. Once we get to the plant, the majority of all the staff members, which are the managers, any staff members are going to be wearing color white. Us, ourselves are all going to be wearing black. In case you have to have any questions, here are the people that are going to be answering those questions. We'll separate into 2 groups. Once we get into the plant, there will be 2 groups. We'll start off in an area, we'll kind of separate. And by the time we come back, we're coming back into one location. Should not be an issue at all. We've got all our permits set up. There is no need for us to stop to get any type of permits to get across the border. We are doing that as we speak. So as soon as we get there, we can go straight into the plant tour, walk the plant with the team, get to meet the team, get to see the processes. And on the way back, 10:30 is our departure time from there, and we'll come back across the border.

Are there any snacks? Are there any snacks?

Absolutely. We're going to have some lunch. So we'll have lunch around 10:30-ish, 10:30 at the plant.

And when we're at the plant, please don't take videos or pictures while you're in the plant, just ask you guys not to do that. If you do want a picture of something very specific and you see one of us, and we can take that picture and e-mail it to you knowing that we don't have something in the background of it, we're happy to do that. So just feel free to ask one of us in the black shirt and, hey, I want to picture of that thing or you want to picture next to something of yourself, happy to do it. Just please don't do that while you're in the plant.

All right. Let me wrap this up, and we'll get to our happy hour and dinner here. Five years ago, our primary objective was transformation. Today, our objective is growth. We've talked about it a lot today, and we believe Core is uniquely positioned in the intersection of execution, what we've done over the last 5 years as well as the expanding market opportunities. Our disciplined capital allocation that Panda talked to you about is how we're going to evaluate all of those, focused on organic first and inorganic second. We're proud that we've accomplished this, and we're excited about what lies ahead.

And as we wrap up here, I want to make sure I thank Annie and Lupita, who helped get all of us organized, the food, everything you guys got in here. Thalia, who we introduced -- Stephanie introduced. She's in our HR team and helped set this up all day. And of course, Arnold and his team, there's a lot of work that we put on him to get all these parts in here to get us across the border, all of that. And I don't forget Tammie. Thank you, Tammie, who makes sure that I made it here and everything else happens. Thank you, Tammie. So with that, thanks for coming. We'll wrap it up for the day. Really appreciate everybody coming. Let's go.

Good morning, everyone. Welcome to the Core Molding Technologies Fiscal 2026 Second Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

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

Good morning, everyone. Thank you for joining us for the Core Molding Technologies conference call to review our fiscal 2026 second quarter results. Joining me on the call today are the company's President and CEO, Eric Palomaki; and CFO, Alex Panda. This call is also being webcast and can be accessed through coremt.com via an audio link on the Investor Relations, Events and Presentations page.

Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. Statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are uncertain and outside the company's control. Actual results may differ materially from those expressed or implied, and today's earnings release includes our forward-looking disclosures. Risk factors and other uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Core Molding Technologies assumes no obligations to update or revise any forward-looking statements publicly.

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

Now I would like to turn the call over to President and CEO, Eric Palomaki. Eric?

Thank you, Sandy. Good morning, everyone. Before we cover progress on our initiatives and second quarter results, I'd like to share that Core's story is being featured this month in the American Executive Magazine. The article highlights our transformation from a turnaround story into a growing execution-driven enterprise. As we reflect on more than 30 years of operational progress in a cyclical industry, we see how the foundation we built positions us for continued success. Looking ahead, we do so with confidence, excitement and momentum as we pursue the opportunities before us.

Additionally, I want to remind everyone that we are hosting an Investor Day in September. We look forward to welcoming both our long-standing shareholders and prospective investors to see firsthand the value we create every day. And yes, they'll also get a chance to look close at the scale of our operation, including some truly impressive manufacturing equipment.

Now turning to our second quarter results. We delivered solid performance that reflects the continued resilience of our diversified portfolio and the ongoing execution of our Invest for Growth strategy. We continue to build on our commercial momentum, securing nearly $26 million of net wins in the first half of 2026 and remaining on track to achieve our full year objective of $50 million in additional new business awards. Over the past 2 years, we have secured more than $112 million in new business wins and a growing number of these awards are now moving into production across a number of end markets. While many of our programs have longer quote-to-cash cycles, we continue to gain traction with customers seeking our SMC compound as their proprietary advanced composite materials. Producing this raw material compound typically offers shorter commercialization time lines.

To support our top line momentum and to capitalize on the growing sales pipeline, we strategically added 2 business development managers, one dedicated to the construction and agricultural markets and another focused exclusively on expanding relationships with customers seeking proprietary SMC compounds. We remain focused on broadening our presence in attractive new and addressable markets, and our team continues to identify and engage new customer opportunities every day.

This year's must-win battle includes our greenfield build in Monterrey, Mexico, where construction was completed in less than 9 months, both on time and on budget. Our Monterrey facility is now in production of structural foam, structural web and DCPD products, including installed prime paint and top coat paint application systems.

Turning to our facility in Matamoros, which will be on full display at our Investor Day in September. The plant expansion continues to make impressive progress and will increase our large molding capacity with 2 additional 4,500-ton machines during the second half of 2026. Importantly, our Mexico project installations and footprint optimization have not disrupted our existing operations and progress. Throughout this process, we have maintained flawless customer delivery and quality performance, demonstrating our team's ability to successfully execute significant growth initiatives without compromising operational excellence. I am incredibly proud of and grateful for our team's hard work, long hours and unwavering commitment to making this achievement possible. Together, these strategic investments totaling $25 million across our Mexico operations position us closer to our customers and align our business to capitalize on long-term growth opportunities.

Operationally, our focus on disciplined execution continues to deliver results. During the quarter, we achieved 99.2% on-time delivery and a quality performance of 49 parts per million. Our quality performance was 49 ppm, meaning fewer than 50 defective parts for every 1 million parts produced. This level of performance is considered top tier within the automotive supply chain and compares favorably with the quality expectations of leading OEM customers. Simply put, more than 99.995% of the products we ship meet customer requirements. These results reflect a strong focus on repeatable operational excellence, a culture of continuous improvement and the dedication of teams across all our facilities. This operational discipline has enabled us to improve profitability, diversify our business, expand into new markets and continue investing in productivity, capacity and continuous improvement innovations.

New business wins totaling nearly $26 million in the first half of 2026 continue to transform and diversify Core Molding sales profile. These awards further broaden our revenue base, reducing our exposure to historically cyclical end markets such as trucking and powersports, which improves our consistency of earnings. Importantly, 100% of our new business awards this year represent new opportunities rather than replacement programs and approximately 65% originated outside of our traditional truck and powersports markets. 74% of this business will be produced with our existing U.S. manufacturing footprint, allowing us to leverage installed capacity, improve returns on invested capital, drive profitable growth and generate stronger cash flow.

As we have previously discussed, our team has secured approximately $112 million in incremental new business awards over the past 24 months, providing a clear line of sight to production revenue opportunities that could exceed $300 million in 2027. Just as importantly, many of these programs are supported by long-term customer relationships and sole-source production of highly engineered components. This gives us visibility into demand, confidence in our growth trajectory and a strong foundation for creating sustainable long-term value for our shareholders.

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

Thank you, Eric, and good morning, everyone. For the second quarter, production sales declined 1.2% year-over-year as strong growth across powersports, building products and industrial and utilities end markets largely offset the current softness in medium and heavy-duty truck. Excluding truck, production sales across our remaining end markets increased significantly, up 20.8%, reflecting the diversification efforts Eric discussed and the strength of our commercial execution.

To provide additional context, truck represented 40% of total product sales during the quarter, and this significant market declined by 23% compared with the prior year period. While truck remained a headwind to consolidated growth, we are beginning to see production volumes improve and expect sales to continue ramping through the second half of 2026. Our powersports end markets continue to perform well, generating 7% year-over-year revenue growth. Building products, while still a smaller portion of our overall portfolio, delivered exceptional growth of 36% compared with the prior year period, driven by the successful launch of previously awarded programs and increasing customer demand.

We delivered meaningful gross margin of 20.3% in the second quarter, an improvement of 220 basis points compared with the prior year period. Gross margin benefited from a capacity charge received from a customer during the quarter. Excluding this item, gross margin was 19.4%, which remains at the high end of our targeted full year range of 17% to 19% and reflects the strength of our operational execution, product mix and manufacturing performance.

SG&A expense was $10.4 million or 16.6% of sales. Excluding $1.8 million of Mexico expansion and succession-related expenses, SG&A was 13.8% of sales compared to 11.5% in the prior year period. These investments support our long-term growth initiatives and leadership succession planning while we continue to maintain disciplined cost management. Operating income for the quarter was $2.3 million compared to $5.2 million in the prior year period, reflecting the elevated SG&A investments discussed above.

Net interest expense was $60,000 in the second quarter compared to $32,000 in the prior year quarter.

During the quarter, we recognized a noncash loss of $88,000 related to the extinguishment of term loan debt and a gain of $170,000 associated with the termination of our interest rate swap.

Net income was $1.8 million or $0.21 per diluted share.

Adjusted EBITDA was $7.6 million, representing 12.2% of sales compared with the 12% in the prior year period. Despite the continued softness in truck, our adjusted EBITDA margin remained stable, reflecting the resiliency of our diversified portfolio and ongoing operational discipline.

Net cash provided by operating activities was $7.1 million during the first half, while capital expenditures to date totaled $12.1 million, primarily related to our Mexico expansion initiatives.

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

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

Return on capital employed was 5.7% or 6.2%, excluding cash, based on trailing 12-month pretax operating income. As recently awarded programs launch, production volumes increase and asset utilization improves, we expect return on capital employed to strengthen to our long-term goal of 14%.

Additional details, including GAAP to non-GAAP reconciliations are available in our earnings release.

During the first half of 2026, we repurchased 24,545 shares at an average price of $18.62 per share, representing approximately $457,000 of capital return to shareholders. No shares were repurchased in the second quarter. Earlier this year, we increased our share repurchase authorization by $6.5 million and intend to continue deploying capital strategically to invest in future growth and offset share dilution.

Today, we are reiterating our fiscal 2026 guidance and continue to expect the following: one, total sales to be flat to up approximately 5% year-over-year, with project-based tooling revenue weighted toward the fourth quarter; two, the majority of the $63 million new program awards secured in 2025 begin contributing meaningfully in the second half of 2026 and reach full annualized run rates during 2027; three, truck production volumes continue improving through the second half of this year; four, full year gross margin in the range of 17% to 19%, although individual quarters may fall above or below that range based on product mix, volume and timing.

Regarding nonrecurring costs, Mexico expansion costs were $3.4 million through the first half of the year. And with the majority of the work now complete, we do not expect a material increase to those costs during the balance of 2026. In addition, we incurred $1.4 million of succession-related expenses through the first half and do not anticipate significant additional costs for the remainder of the year.

Turning to regulatory and macroeconomic developments. While the policy environment remains dynamic, we continue to work closely with customers across North America and have not experienced any material disruption to production schedules related to ongoing USMCA discussions. Our focus remains on managing the factors within our control, and we believe our diversified manufacturing footprint, strong balance sheet and long-standing customer relationships position us well as trade policies evolve. Looking further ahead, discussions surrounding the USMCA review have increasingly centered on strengthening North American manufacturing and expanding regional sourcing.

Regarding recent increases in oil prices, we maintain contractual raw material pass-through mechanisms that are expected to substantially mitigate the related cost impacts. Overall, we remain confident in our outlook, significant available capacity and a balance sheet that provides flexibility to continue investing in long-term growth.

With that, I will turn the call back over to Eric.

Thank you, Alex. As we look ahead, we are increasingly aligned with some of the most compelling growth opportunities in North America. Our customers and their customers are making critical investments in utility modernization, communications infrastructure, grid resiliency and energy transition initiatives. We have secured programs supporting projects funded by the Build America, Buy America Act and other Infrastructure Investment and Jobs Act initiatives. While the ongoing expansion of high-speed broadband networks continues to create opportunities for our advanced composite solutions.

During the quarter, we secured a significant award for battery energy storage systems and continue to pursue opportunities tied to accelerating power demand due in part to AI data center development, utility infrastructure modernization, grid reliability and load shedding solutions. These markets require durable, lightweight and highly engineered composite products, areas where Core has set the standard in differentiated capabilities with long-standing customer relationships. Many of these opportunities are concentrated within our industrial and utilities end markets, where we continue to scale adoption of our proprietary SMC technologies. We are particularly encouraged when customers design our proprietary components and materials into their branded products serving both consumers and critical infrastructure markets. Once engineered into an application, our solution often becomes integral to the performance and value proposition of the end product, creating long-term customer relationships and opportunities to partner and grow alongside them.

Our powersports and utilities markets provide strong examples of this strategy in action. In powersports, our OEM customers incorporate proprietary advanced composite materials into their watercraft, where durability, lightweighting and performance are important differentiators for consumers. These attributes help our customers strengthen their brands and distinguish their products in highly competitive markets.

In utilities and industrial applications, customers increasingly utilize composite solutions as an alternative to traditional materials such as concrete. The benefits include enhanced durability, lower transportation and installation costs, reduced storage requirements and improved worker safety. For example, composite enclosures for underground transmission can often be installed by 2 technicians without a crane, simplifying deployment while reducing the risk of injury. Equally important, these products are increasingly being marketed around sustainability and performance benefits, including long-term resistance to chemicals, water and shipping. Whether serving retail customers or supporting large-scale infrastructure and hyperscale construction projects, these applications demonstrate how our proprietary materials create value for customers while expanding our opportunities for long-term growth.

As Alex discussed on building products, we secured significant customer wins in 2025 that have now entered production and are generating revenue. We win programs well before revenue is realized as design, tooling, validation testing and production launch occur over multiple phases. Our building products revenue in the second quarter grew more than 35% year-over-year, reflecting the successful conversion of commercial efforts into meaningful revenue and earnings growth. At the same time, we are beginning to see improved demand trends in the truck market and expect production volumes to continue to strengthen through 2026 and are forecasted to increase into 2028. Combined with the growth of our newer end markets, these activities create a broader and more balanced platform for future performance.

Looking ahead, we remain confident in the long-term strength of our business and the significant opportunities ahead. Our disciplined capital allocation strategy continues to balance investment in organic growth initiatives with a thoughtful approach to acquisitions that can enhance our scale, capabilities and market reach. While we are broadening our evaluation of potential M&A opportunities, including larger transactions, our financial and strategic criteria remain unchanged. We are committed to pursuing opportunities that are accretive, strategically aligned and capable of creating long-term shareholder value.

Supported by a motivated commercial organization, a strong operational foundation and our reputation as a trusted partner, delivering comprehensive design, fabrication and finished assembled solutions, we continue to make progress towards our long-term revenue objective of $500 million. At the same time, we remain focused on profitability, cash flow generation, return on capital employed and serving customers across attractive end markets, including truck, powersports, construction, energy, industrial, aerospace and medical.

I want to thank our dedicated employees for their hard work, commitment and unwavering focus on excellence. We are celebrating our 30-year anniversary this year. After 3 decades of continuous operations, we know that people are our greatest competitive advantage and the driving force behind our success. I also want to thank our customers, shareholders and Board for their continued confidence and support as we execute our long-term strategy.

Before I close, I want to mention our upcoming Investor Day and plant tour in Brownsville, Texas on September 29 and 30. I'm excited for investors to see firsthand what makes Core unique, our people, our culture, our manufacturing capabilities and the operational discipline that drives our performance. We have received tremendous interest and already have a strong group of investors registered. Capacity is limited, but a small number of openings remain, and we would welcome the opportunity to showcase our business to anyone interested in learning more about our long-term value creation story.

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

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

I wanted to ask on trucking. It sounds like you're starting to see some encouraging signs and you expect that to continue here in the back half. Just maybe you can expand on that and provide a little color on sort of what you're seeing and what your expectations are for go-forward?

Yes, sure. On the truck side, certainly, the first half would have been on the lower side for us, and we see that recovering second half of this year. And if you go to industry forecasts, that's over the next 2.5 years, we'll continue to see increases. And so both from, I would say, very specifically from that forecasting and industry knowledge perspective, we see that increasing as well as in the order books and the day-to-day action that's happening today. We see that across all of our truck customers. The second half will be stronger.

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

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

On the new wins, we're up to $25 million, $25.8 million, just shy of $26 million for the first half. And those are -- I think I mentioned in the script, 65% of those are outside of what we call the traditional truck and powersports business or new industries. Some of those are in the utilities market where we're trying to move underground data cables infrastructure networking, things like that into neighborhoods residentials, moving all of this data that has got to be transmitted to AI data centers and all of the modernization of those Internet connections, all of those need to interconnect boxes. And so we have had a number of years now of success. And again, this quarter, another customer that's trusting us with our composite solution. It's a better replacement than concrete. It's lighter. 2 people can put it in without a crane. You don't have any kind of corrosion or cracking problems like you do with wood or wood rotting or metals corroding.

So the composite solution we have provides a good structure as well as a lighter product that's easier to install. And so it's really kind of taking off with multiple customers that are building composite solutions for anything that requires underground data cables being buried.

On top of that, we had another SMC compound win this quarter, and that one is inside the trucking business. So we're excited for that one as well as an electric vehicle tailgate cover that we also won this quarter. So a number of good products, some of them inside that traditional business, sometimes some of them outside, but we'll continue to grow those and diversify.

And finally, I want to add, Chip, you'll remember that we always try to use the assets we have. And so 74% of it being on our U.S. facilities that have existing presses where we don't need to buy or make a large capital investment. We just run those products on an existing asset is a very good win for us this year. So we're excited about that metric.

Yes. And I think the growth -- it's exciting to see the wins that we've talked about over the last couple of years are starting to come through on the P&L, right? You have powersports year-over-year. We have the skid plates launch that launched in Q3 of the previous year. So year-over-year, that's an increase. Then also in building products, the door skins that we launched in Q2 -- the end of Q2 of last year, we get a full quarter this year. And so you see an increase in building products. And then the last one I'll mention is in the other category, automotive, we've run an automotive program for a while now, and we saw some pretty significant increases on that program in Q2. So that was just a demand increase.

Got it. Very helpful and good to hear great color. And maybe just my last one, guys, just around, I think you called out M&A scope sort of broadening or maybe even looking at some larger stuff out there. Just walk us through what you're thinking about on the acquisition front.

Yes. Alex and I have had the chance to visit a number of opportunities already. We're averaging about 1 a month, and some of those have been smaller in scale than what we've looked at and some of them been a little bit larger in scale. But really, the focus isn't necessarily on specifically the size, it's how it can be accretive, how it can add diversification to our portfolio, how we can make it a very good return on capital employed opportunity that fits with Core Molding. I think that's the most important thing is that we stay disciplined to something that fits our culture, our processes, our sort of DNA.

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

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

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

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

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

When we talk about that lag, it's why we sometimes note about SMC compounds, we're finding that we can get all of that testing and validation done in the 6-month range. We have done -- we're doing 1 tooling project for, call it, more of a molded ship. There's no assembly, no complicated add-ons, and we're doing that in about 7 months, 6 to 7 months. So we've had a few wins that we've gotten well under that 12 months. But when you think of the bigger assembled products, a hood, a roof, watercraft, they're all in the 12 to 24 months from that point of tooling to the point of production revenues and product, what we would call product revenues.

That's very helpful. And then you talked a little bit about the truck market and that the anticipation with -- from an industry perspective is that, there will be growth over the next, say, 2.5 years. Would you please tie that into the current new regulations that are or are not coming in? And just what are the moving pieces here? And how do you see that regulatory environment affecting the moves to new models?

Yes. So truck market recovering second half of this year or improving. Exactly how much that will grow will yet to be determined in the second half, but definitely seeing the second half stronger than the first half. The industry predicts annual volumes for the next 5 years, and they see the next 2.5 years of continued growth of both Class 8 and medium-duty trucks.

You do touch correctly on the wildcard that is out there that maybe none of us know what that wildcard is exactly going to be if somebody changes it, but January 1 of '27, so 5 months away, 6 months away from now, the emissions regulations do change, and that will require powertrain differences for all of the OEMs. So that added cost or added price on a sale of a truck could create a, I would call, short-term quarter-over-quarter impact to volume, but likely not change that overall annual trend over the next 2.5 to 3 years.

There's lots of conversations out in the industry about whether that emissions regulation will have slight changes to it, tweaks to it. It likely won't change drastically, but it could change its timing, could change some of the details around it. We don't have any formal insight on to exactly what that is. But as of right now, it goes into effect January 1, '27.

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

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

That's a great question. And I will tell you what I think to be the case, Bill, but important that somebody validate this. I think it is when they issue the VIN number onto the engine, not even just the chassis. So it's finishing of the engine is where I think the emissions reg happens. So that has to -- when that is produced, relative to December 31 or January 1. So you can still deliver that truck that was built December 15, you can deliver that 2 months later or have it set at a dealership or something like that. It still qualifies as a 2026 emissions regulation versus if it was built, the block stamp and finish the engine into '27. So that was one of your questions.

As far as overall, some of those industry forecasts try to predict how much prebuy is the term given to it. So are you waiting for the last of the year to place your order? Are you willing to take orders earlier? What happens is the build slots start to fill up and that will force a buyer into ordering a truck even as early as November or October or back into September. And so there could be some of that, that's creating some of the increase in run rates right now today that people are actually starting to build more trucks in August right now because of those build slots filling up at the end of the year.

And apologies for taking a little extra time here. But if we heard you correctly and if your understanding is correct, that the incentive then would be for the manufacturers to produce as many trucks as possible prior to December 31, have that VIN number on the engine, and at that point, you have a 2026 model year. And then they can actually either sell that truck next year at a lower price or they could actually take some higher margin with basically an umbrella pricing under the '27 regs. Are we thinking about that right?

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

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

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

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

Good morning, everyone. Welcome to the Core Molding Technologies Fiscal 2026 First Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this event is being recorded. I'll now turn the conference over to Sandy Martin, Three Parts Advisors. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us for the Core Molding Technologies conference call to review our fiscal 2026 first quarter results. Joining me on the call are the company's COO and incoming President and CEO, Eric Palomaki; and CFO, Alex Panda. Dave Duvall, current CEO, will also be on the call for the Q&A session, and this call is being recorded.

This call will also be webcast and can be accessed through coremt.com via an audio link on the Investor Relations, Events and Presentations page. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. Statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are uncertain and outside the company's control. Actual results may differ materially from those expressed or implied, and today's earnings release includes our forward-looking disclosures. Risk factors and other uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Core Molding Technologies assumes no obligation to update or revise any forward-looking statements publicly. Management will refer to non-GAAP measures, including adjusted EPS, adjusted EBITDA, the debt to trailing 12 months EBITDA ratio, free cash flow and return on capital employed. Reconciliations to the nearest GAAP measures are available at the end of our earnings release, which has been submitted to the SEC on Form 8-K.

Now I would like to turn the call over to Eric Palomaki. Eric?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes. Interesting. Yes, a great market opportunity.

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

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

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

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

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

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

The next question comes from Bill Dezellem with Tieton Capital.

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

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

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

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

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

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

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

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

Correct. Correct.

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

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

Thank you, Lawrence. We have a good team.

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

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

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

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

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

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

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

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

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

That changes your decision process.

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

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

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

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

[Operator Instructions]

As a reminder, this conference call is being recorded.

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

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

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

This call is being webcast and can be accessed through coremt.com via an audio link on the Investor Relations, Events and Presentations page. Today's conference call, including the Q&A session, will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading.

I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are uncertain and outside the company's control. Actual results may differ materially from those expressed or implied. Please refer to today's earnings release for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Core Molding Technologies assumes no obligation to update or revise any forward-looking statements publicly.

Management will refer to non-GAAP measures, including adjusted EPS, adjusted EBITDA and debt to trailing 12 months EBITDA ratio, free cash flow and return on capital employed. Reconciliations to the nearest GAAP measures are available at the end of our earnings release. Our earnings release has been submitted to the SEC on Form 8-K.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Got it. And with Q4 being higher.

Correct.

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

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

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

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

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

Good problem.

Yes. Good problem.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reimbursed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Correct. Correct.

Good definition of how we answer questions.

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

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

Congratulations on solid quarter.

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

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

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

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

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

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

Joining me on the call today are company's President and CEO, Dave Duvall; as well as COO, Eric Palomaki; and CFO, Alex Panda. This call is being webcast and can be accessed through coremt.com via an audio link on the Investor Relations Events and Presentation page. Today's conference call, including the Q&A session will be recorded. Please be advised that any time sensitive information may no longer be accurate as of the date of any replay or transcript reading.

I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are uncertain and outside the company's control. Actual results may differ materially from those expressed or implied. Please refer to today's earnings release for our disclosures on forward-looking statements. These factors and other risks and uncertainties described in detail in the company's filings with the Securities and Exchange Commission.

Core Molding Technologies assumes no obligation to update or revise any forward-looking statements publicly. Management will refer to non-GAAP measures, including adjusted EPS, adjusted EBITDA, the debt to trailing 12 months EBITDA ratio, free cash flow and return on capital employed. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Our earnings release has been submitted to the SEC on Form 8-K.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I'd also like to share an update on footprint optimization initiative launched at the end of the second quarter, which we expect to be completed by year-end. As part of our ongoing focus on product level profitability, the current softness in the truck demand created an opportunity to consolidate our RTM or resin transfer molding process by purposefully relocating select programs to another one of our facilities. This strategic move will streamline operations at the originating site and is expected to deliver further margin improvement.

Lastly, I wanted to call out our operational teams for their 99% on-time deliveries and excellent 62 PPM performance. PPM, which measures the number of defective parts per million produced is used by our customers to measure quality performance, a rate below 0.01% indicates a level of quality and demonstrates the precision of our quality processes. We have also gained industry low safety incident rates and employee turnover rates, which we take pride in. These favorably trending metrics reflect well on our culture and commitment to excellence across all our people and our plants.

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

Thank you, Eric, and good morning, everyone.

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

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

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

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

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

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

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

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

Our return on capital employed was 6.5%. And excluding cash, the rate was 8.7%. As we continue to launch new business, we expect this metric to improve by better leveraging top line performance and driving better asset utilization. Both ROCE metrics are computed using trailing 12 months of operating income and total capital employed a pre-tax metric.

Please see our earnings release for the GAAP to non-GAAP reconciliation tables. Our capital allocation strategy remains flexible with a significant focus on organic growth as well as disciplined management of debt and working capital and share repurchases.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Excellent. Okay.

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

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

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

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

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

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

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

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

Your next question is from Bill Dezellem with Tieton Capital.

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

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

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

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

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

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

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

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

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

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

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

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