- Earnings call transcript Q3 2022

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Operator

Good morning, everyone and welcome to the Core Molding Technologies Third Quarter Fiscal 2022 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded today.

Now, I will turn the call over to Steven Hooser, Three Part Advisors. Please go ahead, sir.

Steven Hooser

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

the Duvall; Executive on and Financial me call Core Zimmer. are Joining Molding's Officer, CEO, John Dave President and Vice company's the and Chief today President

during also including future financial reading. Today's the page begin, is or of coremt.com. audio date no section would are including the the and would that Private to of Presentations or link as the also today's session, of recorded. this I any can statements future Litigation to Investor are events will forward-looking at Act like and we provisions are made be made longer you that Please safe discussion historical XXXX. to not or remind pursuant or the on webcast Before that the the Q&A be Reform be that of accurate of expectations Relations may facts, you transcript any and call, statements, like call I being accessed remind performance, through statements replay be Securities information the time-sensitive Events harbor advised

cash return Reconciliations be earnings income refer found can adjusted any adjusted of and assumes release. other or outside to their our our disclosures implied. on end forward-looking will the from measures nearest on capital forward-looking the Securities by uncertain and was with the the no Management These differ for are today to and Commission. risks the earnings and obligation company's that uncertainties detail issued refer flow, Exchange in control. nature, statements, employed earnings free may GAAP are to to those revise Actual Technologies results Forward-looking Please including described company's or share. and non-GAAP EBITDA, at measures, and per filings materially the expressed update Molding statements. press Core in factors release statements. net publicly

the of to press submitted release issued earlier has over I’d copy we the Relations posted And with section website turn today Dave X-K our Dave? coremt.com. in to release SEC. Duvall. earnings like the A is that, Investor with an included the now Finally, call at been on the of

Dave Duvall

long-term to Steven, we Thank recent start products We relationship with for executed years. home U.S. customers lattice retailers United major I you, be want weeks America. box morning, supply commercial some provides partner decorative few continuing like good extend to to valuable powersports, to as the North and residential a infrastructure ago, well With as Forest throughout businesses others agreement today transport, improvement new it, and throughout big news. critical industrial, five everyone. to a products, look of A good Products utilities, summary a packaging, building with throughout this UFP another relationship we for and forward that our

Although we strong. remain and end our solid most remains is this demand environment, like demand markets companies in certain in cautious at outlook

plan trusted us. for agreements Fortunately, a XXXX they companies And in businesses their supplier industries. growing a of we with in and are production, as and locking are number key

We input new and have escalations our work freight after as sea agreements and headwinds and supply will chain that for navigating chain, confidence macroeconomic businesses essential recent in and done hit, we've our with manufacturer experienced. the markets U.S. especially to an their a partners significant end vital security price in are mutually remain supply challenges want develop when disruptions supply increase. beneficial amount allow agreements We of costs

grew remains and Turning wins XXX year, to our to million the performance new our pipeline the opportunity million. year first nine net at for months robust of this XX

believe that strong, higher capture quarter. was the quarter product margins. projects wins for further represents Results year, demonstrate the our we which mix As assets ability I select the are our were best opportunities. business third the pipeline to are [ph] new active manage a but with in all to This ability aggregate pleased reminder, capturing, and our primary our we and utilize [influential margins]

detail out to few growing QX example the record pleased that in high truck new of XX% of from are mile report margin in in performance, was last moved high is I production to primary sales being point heavy between the are this quarter some during addition, is progress also diversification the and moments, and third meaningful Despite $XXX product year. will to but essentially this represent include net up launches projects. sales We launched nearly truck, XX% launched. and strong wins by of product XXXX this net from towards We And in quarter. strong project, second quarter in number the medium reported launches product A product a year. QX third increases third a communicated sales quarter, level, or powersport currently a in now gross full new XX.X%. this XXXX production. our the Product to in and sales launches duty in XX% revenue flat in want seasonality the quarter this of revenue which we normal John million. cover which back over profit few reason sequential more tipped and

turn QX provided technical financials which a of to like utilities initiatives. production each With in they categories, over solutions Finally, more would they projects our providing we of related in it solutions, now solution We're an the stormwater the production, utility customer of continued about are cover] John engineered we team. other projects of [flush strategy products, of as [ph] to well and to in with full detail. and had these industrial are to industrial expected because XXXX. a have drives our the be are solution, major end launch number Each these I markets diversification, align engineering is help margin where our directly because to that, launches projects, now important of enhancement that and cover excited in large as in by that to

John Zimmer

and good morning, Thank you, Dave, everyone.

Third net that or Recall quickly in XXXX million, million up prior that the last sales million price as $XX.X We driven demand ago, rapid a to prior reacted business. and our third profit customers of customer period. our of inflation as of sales, Gross quarter sales year quarter increases. in material sales powersports XX.X% a well were $XXX.X with by XXXX year increased higher fall transportation Revenue the new largely raw and launches, and reflected XX.X% versus XX.X% so increases our to experienced recoveries. for year recover or work $X.X compared year the in product last period totaled material U.S. program was to in X.X% the industry, quarter. started to we our impact margins raw versus

mix with third in of coupled to XXXX. in of inflation The efforts raw resulted raw improved gross an material in changes been in significant negotiations. expected, product impact net quarter XXX gross through the in primarily to with pass was be same As ongoing seen XXXX, selling of gross though results in the have production inflation material The price by the basis quarter third inefficiencies. shifts, challenging The impacted in ongoing of period margin. increase efforts compared margin can points reported margin our and

the two the driven normal flat, XX% out quarter previously three product and approximately demand. was XXXX of Raw the XX% seen third our As which a gross primarily quarter. for discussed, second in in quarter medium Dave heavy in seasonality to mix. for truck prices. was sequential to quarter market we’ve by some leveled revenue somewhat decreases product along of sales material The the quarter duty has of approximately third heavy customers margin compared with was the in [indiscernible] to truck due in basically This push mix XXXX, inflation and by shift increased was

continue to will material work customers in raw to We costs pass through forward. changes going with

the costs expenses shuttering Cincinnati to $X.X prior demand plant. meaningful million the As or Prior yet. of included the mentioned, administrative recessionary in year are last see million, SG&A Selling, if $X.X were and pressures from general, XXXX carefully year increase, for $X.X could the which Dave period. we customer changes, nothing closing but of quarter we XXXX quarter for early watching compared in million

Excluding repay million SG&A extinguishment of last a QX or quarter, percent $X.XX $X.X extinguishment million approximately The July. issuance XXXX. the In share million was $X.X per was resulting company net $X.X was X.XX% fixed or debt one-time income fee plant that of aggregated debt net third approximately to compared cost from or early Adjusted or $XXX,XXX XXXX on flat, million costs, of a to per loss quarter non-cash as operating loss share. closing third the included approximately and refinancing approximately interest $X.XX year's income our loss of which reported million. for approximately completed sales $X.X $X.X the net debt $X.XX cost write-off debt. per remained $X.X EBITDA XXXX resulted share, of of The of in third sales. loss $XX previous quarter million of of X.X% million

our today. quarter You can for find numbers both reconciliation and press discussed tables to the release end at to non-GAAP third of the year GAAP date

startup offset million, costs by period. were plant was or costs increased nine months the has prior Year strong SG&A operating XXXX. $XX.X XX% million, prior in fiscal the operational $XXX.X results sales, impacted compared $XX closure first million line, XX% year inefficiencies margins objectives, income or of operating in recoveries. our in to Sales unfavorable the date profit ago, inefficiencies. program income of net below $XX.X $XX.X we months the The launch of production our period. for are and which raw the in million XX% sales, year income nine Gross versus of $XX.X were on to of to or first write-off reducing. and plants, up million the costs to working first income $XX.X excluding and mix nine share, year. $X.X increases Net date compared demonstrating totaled $X.XX product to the for a turning X.X%, the of months of material customer by demand months adjusted XX.X% sales per to and cost was were debt to or net $X.X million the issuance million. raw sales and first compared largely year. program million prior selling cost excess of Year prices million, diversity million success prior recorded sales of share or million or EBITDA per for we $XX.X aggregated the the in million $X.X for $X.XX was XXXX. two first for product company increases revenue Gross months nine strategic $XX.X experienced Now, favorable year compared by of driven nine of Net and material new versus

to $X.X $XX term cash were provided Turning million position, to year sheet. term spending with million has add which company's outstanding consisting capital reduced $XX our XX-months capacity of the by presses The online maximize XXXX, revolving our in footprint, activities days was the strong at of new totaled under in days. accounts increased new specifically liquidity year. adjusted drive the liquidity facility and of the nine first trailing to $XX.X operational. We and operating this XXXX, capital than less reliance ended September working our our the or increased of line robotics XX, and sales the expenditures our and of at and September be XX cap Xx approximately primarily related company end of capital, of increases automation sales September receivable EBITDA debt available accounts two $X.X now Approximately us DSO at expenditures EBITDA $XX.X company's this for available are revenue had and company's that presses XXXX the same and launch The came allows credit receivable Adding quarter our million, year relate of ratio date million efficiencies, current remains XX, the capital financial labor. throughputs or period million and XX.X cash incrementally and of flow and million estimate capital to September our and At to in at The credit. our programs. now will is months increase working to $XX.X for The in million million. balance on quarter-end. capacity, ended company million under $XX debt we higher have and

on pre-tax which return metric, capital return Our on was XX.X% employed, annualized is an a basis.

company the term to commitment. entered new our in to credit to continue into agreement $XX coupled continue balance with grow. We its refinanced company July, for CapEx the loan, flexibility provides with and that believe facility revolving sufficient strong loan, and successfully sheet million that aggregate Recall a debt liquidity the its loan

term We also part of SOFR as swapped agreement. X.XX% rate a fixed daily the interest for swap loan on floating a

credit With rate the credit repaid Concurrent our with the points, at all facility, term loan XXXX credit XX, sheet, lowers of improve charged average debt debt liquidity higher new balance our September cost. margin increased new and of interest the service our of basis agreement which facility. existing XXX than our we debt our and strengthens activities agreement, These X.XX%. cost was rates position, interest weighted

business see targets, quarter-to-quarter diversification as gross as well impact revenue changes product efficiencies related margin. strategic continues, mix we our shifts impact Although transformation that production to that

facility progress firmly our make growth which and of We dedicated drive technical on. than on enhance for volume Improving the the more grow on us reasons. engineered laser improve, and teams standpoint, programs remain focused efficient addition XXXX to truck. others plants on solution that more productivity we continuing a in the goals of in the conversions two heavy facility working the facilities, allows can will One, and improve efficiencies all to designing we based throughput manufacturing are margins. product are duty costs one to on remain our creation strategic plant handles input to presses with related sales six to two, and controllables less mix We value our operational facilities immediately we working beyond. in sales. our with long-term from ramp Of floor are of certain And production is plan this and core that more to profitability infrastructure and

and currently, customer and closely monitoring like Although expenditures, are for costs final with and cash Dave our and capital in some to With acquisitions, we remain and back decisions it we are to demand volumes comments. investments other allocation strength for that, turn in all capital people, encouraged regard by Dave? we would to expense. conservative I forecasts

Dave Duvall

Thank you, John.

see growing with continue We industrials, sports demand power for orders infrastructure strong and and packaging, for to solutions. truck utilities,

think we is work all created about As capacity, equal. not

Like are to and signs assets. the profitability our forecasts. of We purposeful our utilization in all are disciplined utilization, we watching right on for of focused in and be focused businesses order while commitment asset now, changing

end market reduce end of and one markets we a the of to diversify margin will our significantly single continue the gross in change. performance quarter, revenue For the by industry reduces from risk or This helps our risk affecting when to market. does concentration customer the business us stabilize

continues factors Our improvement that our and culture so we a improve the efficiencies processes of team internal organization. maintain within continuous manufacturing evaluating to of discipline our

we more which investing are on efforts. also and speed automation can progress in materials. sustainability process at our We the making steady We're

as also the up of food. countries cricket a report are today. I'm strategy. and our crickets which state we will climate, food highlight that help plants, is If publish we future, that better Every volumes that changes underserved our effect Last environment, for partnered the can to automated in in each a and can improve the for John are flywheel base serve reduce that the believe and these manufacture containers QX consumption to savings the that in that happy customer's will power make our focused the our first about packaging thermal as animal other were a production and this protein quarter, communities. our projects create in which We're we I some funded lives millions category, ramp XXXX, advancing. grow electricity that full and are rich meeting of I our reiterate farm or in We audits decisions design with our scope and to make energy for will larger allocation to cash utilizing factor want families customer the a powerful our we shared that on do make incremental areas locations. day we sustainability report day will choices energy in projects, of we affect for of species. said what capital

budgets pleased three-year record for plan, with And for optimistic and sales environment growth plan our allocation some at capital to will disciplined our prepare look cash, of with to we value the although carefully value long-term creation. cash strategy. remain best markets, means potential the profile, our we about newer change. and we use and are evaluating how are end our As creation, strategic that our as we to and monitor cautious macro This especially return continue we

rapid another team through year. I'm of Before the believe entire a years we has want great as the produce more we businesses successful focused and our I team. strong COVID, the member weaknesses our Simply inflation, team and been I while of and their dedication most move couple forward. want supply to navigated I a to and for alert, open been and have global thank continuing overall the proud execute challenging molding last in say challenging for for staying commend recently work It to hard through chain. to results and core stated, questions, business would challenging

We strong want call center. either to and diligence analysts also put to Operator? questions. support, and line call to the we answer thank your open cooperative questions. are teams With or I'd and a at their investors of today to on questions the continue for and the welcome all earnings fortunate in course follow-up up like for that, I that your to John have excellence

Operator

with Chip Hutton. first Please ahead. [Operator question here Instructions] our go And from come EF will Moore

Chip Moore

Dave. question. thanks taking morning, the good Hey, for John,

Dave Duvall

are doing, Chip? you How

John Zimmer

morning. Good

Chip Moore

I about Good. wanted to ask margins. Good. gross

inefficiencies. that the on little maybe sounds us like bit to Can production and better? And you mix addition understand about there more demand some in a little trucking talked it a side. the seasonality was impact maybe of then You shift help

remind impacts should So, that just also then work recovery any how as margins well? material take cost into just us and seasonality on account raw

Dave Duvall

we see majority a where maybe have the of margins normal that to we our QX, of We would aren't seasonality on have products. a high some as our sales QX where into

[ph], mixed to you'll margin will revenue] business. higher as [mainly QX see our really, So, our in that relative always the be history well. QX,

in look basis The XXX particular, I saw as you QX. we QX in of that think about at of points sales. percent the majority when it's being product mix for

operational we that do inefficiencies. of Some have some

And launches at the plants. about large like in electrical some John then that looking it's press and really systems, infrastructure, some plant other when of the the our some have talked facilities We of one plant, steam the of the systems, large the in systems.

John Zimmer

And Yes. materials. address on Chip, I'll here raw

part that quarter-to-quarter. what's happening at last raw We I comps. get something actually third from all notice or either comps, getting actually to have just I've is year in recovering. place materials started we kind business, certain we're downs that see and getting our of What down starting we're some and go recovery price. of most raw we're are the in ups where that materials mechanisms quarter, to year-over-year comparability starting point in We're significant to formally for though we’re starting You'll informally some got recovery. still know now

as revenue part the we the increases raw other as And at actually revenue materials. have to certain customers have of some recovery, that so, And decreases we time, same for material happens. raw

as year, little a but right materials saw least raw come start maybe more are some now. starting the of pretty materials our in to and have bit. other stabilize even now a most thing decrease the of little seeing is to We a of early stable big The raw hopefully we're right bit to now increases that at

stuff earth. come year steel on of reset this now next and as earlier prices and Some hopefully kind up we pay to year hardware zoomed back should steel prices that of that like early

maybe So, we'll that. seeing some start of

point. think And we're stabilizing this I in really being because a are material our gross to so, be effect bit margin factor at little the they're numbers and raw revenues of just think I a going see where going to margins, gross less recoveries

Dave Duvall

upside decrease think the is increase the I that a talked that. think of before, And I and challenge, of we the especially was as acceleration on really the challenge, the

Chip Moore

then And more the – press into think to it. quarter. Is you that new I helpful more want of new this Got diversify you some where then one year. added That's lies? sort areas. about, guys. coming business I that in also on talk And net Can in ask, right CapEx, here you can maybe

So, where automation on the and expect? stands we just that remind of and us should some what

Dave Duvall

say over On and the of a new industrial net utilities. XX% heavy part rest that The would wins, we that's would truck. little in in be of – of that,

John Zimmer

heavy bit has for little year. and also marine the truck So, a

the transportation So, is when million the about truck. for you million $XX say it X for year, of

little is things. utilities, So, mix mile little what power ConAg, XX%, rest of those between delivery the last sports, types

the And I less there's good so, net still see we wins one the a we on new being continue truck. again, things that of little to with bit truck think see there. And diversification that out is business

there. going and we're sense that of It's sense always win good on the new the margins better – the some a those. little to that truck we're on are that higher makes stuff for makes just So, so other probably just because bit focused go business some stuff we'll

Chip Moore

Got sense. it. Perfect. Makes

more one for just maybe me. So,

Just typically at in this going cautious, just customers and bigger bumping up cautious things. be would given you're just you little guess I this being the adding where macro year you guys. the slowdown and capacity kind at would more about potential monitoring against potentially get appropriately to point talk macro you're visibility constraints, or from cautious picture, of near-term? that's a where point capacity consider Thanks and when the where given more

Dave Duvall

but revenue the now. in capacity. would We cautious we think the in relative We of to to obviously seeing year, at the be look about strong beginning moving and that. same increase the forward more spends. continued investing We would not first watercraft, and quarter, start we going to ATV, we right anticipate probably personal expect I – still see everyone really seeing a as new first decline by next type that when it else, some year the see expect of of we're truck. to We're end Yes, in discretionary maybe demand

enough with next installed year, think year. the into capacity four grow, more growth see this least we have at until the I end we until of machines we that we've going

Chip Moore

Great. very it. Thanks All right. Got much.

Dave Duvall

Yes.

to on the growth decide grow probably we're thing new being big I deciding again hit probably the in had grow and we net we too XX we're before, the million install think what at this where year, on a focused to we're the selective all but to new being it million value is more new in. lot capacity, that wins is wins able got net the in XX of launch it value have Year to and level of more we same and business.

Chip Moore

Yes. And right. you profile, sounds All like feel Thanks. good. very risk

Dave Duvall

Exactly.

Operator

next Hughes SGF go Capital. Please come Mike Our ahead. with from question will

Mike Hughes

for thanks Yes, questions. taking my

from inefficiencies Just those point you the costs, on and issues? quarter margins to possible program in hit a the finer launch put gross the if can quantify on that and

Dave Duvall

will happen inefficiencies really happen what tough It's plant. got during of a throughout because you is, that kind Yes. launch

we've those So, of of always a it that's bond and a We'll bonding, create tried inefficiencies jobs and you measure sudden in scrap say, grab a it know, causes focused throughout everybody's hey, usually right. things, we but on all significant types some all launch. not can or to

much to as on not are you working really day your normal stuff. day so, just And

into is that with those it period is get What you get through worked six-month six-month really to or say issues a period. things place pattern and you where issues in a major back way And or and a cleaned you're has about get disrupt working usually your out whole or bond kind and the eventually where we do of plant. really scrap you can all thing nice charge launch, about facility. normalization up you so, the the those got The

would would so, of that the impact disappear hope in to next year of it. would that kind And launch from see QX to start be really, impact we

inefficiencies believe facility there, other really had I We out last we the points. another year you'll we the XX-Q, see we piece. of that Again, the the and out do talk XXX inefficiencies think about. break in individual On mix don't basis of that versus

the that if I but kind can and definitely number a to that think out plant, get of show so to a be on get we keep will small, believe I’m will would working not or we through reworked show there, XX well. something up up give be plant, something we points. margin. we But the something, going in it really It margins a won't that It’s going once basis it as or that. be working point

fix mid-teens to we And so, back products. launch and expect head that. start the high-teens through towards would as We margins see would our get to up as we that we we other

John Zimmer

Yes.

I of back-up, has know you think into production stop place on they'll as has the customer the start you get one challenges, supply some challenges in maybe of production, launch, put any base that the challenges. customer

a necessarily. say through working it's all operational that. not It's plant and just So,

Mike Hughes

Okay.

your just comments. John, on to follow-up So

that of So, plant's one Once margin that basis – this once correct? recover XXX points points to running it's sounds basis that gross can XXX from concentrating Is alone. like more this plant. you it efficiently, just

John Zimmer

Yes.

[XX So, [ph]. that goal today] I at mean, our to is XX%. we're be back I mean, we would what saying that get we to think is, I XX%

be and one we in to that the I be think through facility the other through would and get with XX% stabilization our the Again, XX% that having then where we issues that to the we're from work goal launch range. there. one get the back

that would but definitely you be back things, be And that of and range towards. every trying we that in the types would those mix will so, head quarter come to got

Mike Hughes

launch, Okay. is And existing it that with a Class customer? X

John Zimmer

yes. a X Class Yes, it's customer,

Mike Hughes

unless be really number existing guess, that strong I with an could tooling had you the then quarter. some And in okay. respects, transferring Okay, forward-looking you're a business In customer. a indicator

how tooling numbers much new So, business? the to related of

Dave Duvall

Yes.

a I for that during big this So, quarter we ones. couple a actually during had also. launched has quarter. One business of is know actually

was So, brand definitely new.

launched. a piece both which that we was both that new were program. the them, And of X quarter. biggest I all that about, talking that truck good was was two piece So, Class the ones were One that that when actually, for for say is of during that was launched business

but was is program new one other some stuff The also. X, non-Class a that it was

those the definitely the majority future was – of of both So, stuff revenues both do for new of revenues. or

Mike Hughes

And business Okay. to year wins was last in I in date then net million. think $XX million XX year new

million just of business that in launched that's already? shy much net of So wins. has $XXX new How

John Zimmer

million XX So, in just QX, was it alone. in QX about that of

Dave Duvall

QX Yes, launches. actually in from revenues that's the the

of will So, so my these in but some speed, during form, majority down to quarters ramp those. is, to launches go up happen what up what I multiple here, is those take will speed, they will happen sheet programs get when launched in to have

so, what from in about were of we we out had [XX is that what in from can we're [ph]. just tell that revenues XX] that And the new of quarter QX for million tracking is that programs $XX

Mike Hughes

Okay.

million $XX annualize that? an additional leave the I if So, on XX million correct? to would $XX that's timeframe a launch, And million what's that

Dave Duvall

be will not or said, ramp, some ramped. launched, but launch these So, I these like of are

the again, start ramping expect year periods that additionally. And through would we they next would so what is

I the and what business don't eventually business. I of cautious [ph]. think with said. to I'll again, that impact were net when our am know wins, Fed trying XX what's to I on XXXX rest Now they're these But number business. they be like new million of they’ve will what slow on do down my going the it in on [one] from all were

haven't the seven and have sheet even are my six, five, of ramp programs just then that there like going launched yet. you across So, I would four, here, several think I'm definitely them

have. So, launch throughout will we year, launch actually some next year later they'll this as

these one I get of QX ahead. launches that think far OEMs actually programs because those is mean can that's award I there how programs my just far out will in some major XXXX. latest of one

Mike Hughes

about thinking on if that, just year I'm right? could But is business launch were potential decline about million. ramp There's Okay. to a that your that's XX% core the a $XX rate, current it offset next run the

Dave Duvall

Yes.

Mike Hughes

ramps Okay. a Putting some and program margin the – having discussed that's these that on big little you what's one are you? And issues? look issue the with launches aside, of the like ahead

Dave Duvall

conversion forward, whether that's material. move improving in being engineered is margins some with do industry goal Yes. that's able solution we or an I a to our or our mean, a from always traditional different to as

So, higher cycle is and solution. further move absolutely main into further the design and a integrated to customer's value goal the

Mike Hughes

Okay.

Steven Hooser	Three Part Advisors, LLC
Dave Duvall	President and Chief Executive Officer
John Zimmer	Executive Vice President and Chief Financial Officer
Chip Moore	EF Hutton
Mike Hughes	SGF Capital
JP Geygan	Global Value Investment Corporation

Core Molding (CMT) 12 Nov 222022 Q3 Earnings call transcript