• Revenue: $88.7 million in Q2 2024, down 9.2% compared to Q2 2023.
• Sequential Revenue Growth: Increased 13.6% from Q1 2024 to Q2 2024.
• Gross Margin: 20% in Q2 2024, up from 17% in Q1 2024 and 14.8% in Q4 2023.
• Adjusted EBITDA: $11.6 million, representing 13% of sales in Q2 2024.
• Free Cash Flow: Over $16 million in the first half of fiscal 2024.
• Net Income: $6.4 million with diluted EPS of $0.73 per share in Q2 2024.
• SG&A Expenses: $10.2 million in Q2 2024.
• Net Interest Income: $38,000 in Q2 2024.
• Effective Tax Rate: 16.3% in Q2 2024.
• Cash and Cash Equivalents: $37.8 million as of June 30, 2024.
• Capital Expenditures: $4.8 million in the first six months of 2024.
• Debt to EBITDA Ratio: Less than 1 time as of June 30, 2024.
• Return on Capital Employed: 12.1% on a trailing 12-month basis.
• Share Buyback: Approximately 24,000 shares repurchased at an average price of $16.41 per share in Q2 2024.
• New Business Awards: $42 million in new business awarded in the first six months of 2024.

• Warning! GuruFocus has detected 2 Warning Signs with VREX.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Core Molding Technologies Inc (CMT) received the 2023 PACCAR 10 PPM Quality Award and the 2023 BRP Gold Supplier Award, highlighting their exceptional quality standards.
• The company reported a sequential increase in net sales by 13.6% compared to the first quarter of 2024, indicating a positive trend despite year-over-year declines.
• Gross margin improved to 20% in the second quarter of 2024, up from 17% in the first quarter, showcasing enhanced operational efficiency.
• CMT generated solid free cash flows of over $16 million in the first half of fiscal 2024, demonstrating strong cash management.
• The company has been awarded $42 million in new business in diverse end markets, reflecting successful strategic initiatives for growth.

Negative Points

• Net sales for the second quarter of 2024 were down 9.2% compared to the same period in 2023, primarily due to end market headwinds.
• Operating income decreased to 8.4% of sales from 10.3% in the year-ago period, indicating pressure on profitability.
• The company expects full-year 2024 net sales to be down approximately 15% from 2023, with margins likely at the lower end of their forecasted range.
• Volvo's transition to a new business model is expected to impact CMT's revenue, with significant effects anticipated in the second half of 2024 and beyond.
• The M&A market is currently slow, presenting challenges for CMT in finding suitable acquisition targets to support strategic growth.

Q & A Highlights

Q: Can you expand on the investments in sales execution and the potential lag of return on those investments? A: David Duvall, President and CEO, explained that the company is focusing on increasing sales to leverage operational improvements. They are investing now to grow the business over the next 10 to 12 months, despite a typical lag of 12 to 18 months for returns. They are also exploring opportunities for earlier business gains, such as mold transfers or working with troubled suppliers.

Q: How should we think about greenfield opportunities versus growing wallet share, particularly in the truck and powersports sectors? A: David Duvall noted that growing wallet share is a significant focus, with many wins coming from existing customers and new programs. They see opportunities to convert truck interiors to thermoplastics and are in discussions with customers. Existing relationships make these sales more attainable, as they are already integrated with these customers.

Q: Can you provide more color on the financial outlook, particularly regarding the Volvo transition and seasonality? A: John Zimmer, CFO, stated that the Volvo transition is expected to impact revenue by around $10 million this year, with the majority affecting next year. While seasonality has returned, overall demand is slower due to economic factors. They anticipate growth with customers as the economy rebounds, but the back half of the year remains softer than initially expected.

Q: What are you seeing in terms of M&A opportunities, and are there any specific geographic areas of interest? A: John Zimmer mentioned that they have hired an outside banker to focus on buy-side opportunities and have identified targets. While the market is currently slow, they are actively pursuing acquisitions that align with their strategic goals, particularly in the Southwest region.

Q: How is the company managing its cash generation and what are the plans for capital allocation? A: John Zimmer highlighted that the company is generating strong cash flows and has no net debt. Their capital allocation strategy includes investments in organic growth, share buybacks, acquisitions, and net debt repayments. They are disciplined in their approach to acquisitions, ensuring strategic fit and financial thresholds are met.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.