Core Molding Technologies(US:CMT)2024-05-07 19:39Financial Data and Key Metrics Changes - Total net sales for Q1 2024 were $78.1 million, down 21.5% year-over-year, but up 5.9% sequentially from Q4 2023's $73.8 million [14][17][45] - Gross margin for Q1 2024 was 17%, compared to 17.8% in the prior year and up 220 basis points from 14.8% in Q4 2023 [40][43] - Net income totaled $3.8 million, or diluted EPS of $0.43, down from $5.9 million or diluted EPS of $0.66 in the comparable year period [45] - Adjusted EBITDA was $8.8 million, or 11.2% of sales, compared to $12.2 million or 12.3% of sales in the prior year [45] Business Line Data and Key Metrics Changes - Medium and heavy-duty truck sales shifted from 50% of sales in 2023 to 55% in Q1 2024, while power sports increased from 22% to 25% [43] - Building products sales were impacted by changes in customer orders, particularly from UFP sales through big-box retailers [62] Market Data and Key Metrics Changes - The company expects 2024 annual net sales to decline by 10% to 15% compared to 2023, influenced by cyclical demand slowdowns and stabilizing customer inventory [21] - Customer inventories are leveling down in certain end markets like power sports, potentially affected by prolonged high Fed rates [21] Company Strategy and Development Direction - The company is in an "invest-for-growth" phase, focusing on lead generation, sales resource expansion, and streamlining processes to maximize organic growth [12][22] - Sustainability is a core value, with goals to reduce energy consumption, greenhouse gas emissions, and landfill waste by 30% by 2030 [39] - The company is exploring acquisition opportunities that align with strategic growth criteria, focusing on footprint expansion and customer diversification [85][86] Management's Comments on Operating Environment and Future Outlook - Management acknowledged end market headwinds but emphasized a return to pre-pandemic demand levels and a strong pipeline of opportunities [22][50] - The company is preparing for increased truck demand driven by upcoming 2027 emissions regulations, with expectations for a peak in 2026 [81][98] Other Important Information - The company ended Q1 2024 with $26.6 million in cash and cash equivalents, and total outstanding liquidity of $76.6 million [20][46] - Capital expenditures for 2024 are expected to be approximately $13 million, with free cash flows improving to $3.2 million from $2.5 million in the prior year [20] Q&A Session Summary Question: What are the growth opportunities in the pipeline? - Management discussed increased lead optimization and the composition of the opportunity pipeline, noting shifts due to changes in end markets [27] Question: What are the impacts on the Building Products category? - Management noted that UFP sales through big-box retailers have decreased, affecting overall sales in the Building Products category [62] Question: How does the company view gross margin expectations for the year? - Management indicated that gross margin is expected to be in the 17% to 19% range, with volume being a key driver for achieving the higher end [57][58] Question: What is the outlook for acquisitions in the current market? - Management expressed caution regarding acquisition valuations, noting that sellers are still seeking high multiples despite increased financing costs [86][89]