Core Molding Technologies, Inc. 2026 Q2 Earnings Call

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. 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 longstanding shareholders and prospective investors to see firsthand the value we create every day. Yes, they'll also get a chance to look close at the scale of our operation, including some truly impressive manufacturing equipment.

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 two years, we have secured more than $112 million in new business wins. 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 timelines.

To support our top-line momentum and to capitalize on the growing sales pipeline, we strategically added two 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. 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 nine 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 two 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 per every one 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. A 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 continued 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%-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.