Executive Summary / Key Takeaways

• Transformative Growth Trajectory: Core Molding Technologies (CMT) has undergone a remarkable turnaround from financial distress in 2019 to a robust, cash-generative enterprise, now aggressively pursuing profitable growth through its "Invest For Growth" strategy.
• Proprietary Technology as a Moat: CMT's advanced molding processes, including proprietary Sheet Molding Compound (SMC) formulations, DCPD molding, and new top coat paint capabilities, provide significant competitive advantages in delivering lightweight, high-strength, and cost-effective structural products.
• Strong New Business Momentum: The company secured an impressive $47 million in new business in the first half of 2025, exceeding all of 2024's wins, highlighted by the strategic Volvo (VOLVY) Mexico truck business award and over $200 million in addressable SMC opportunities.
• Resilient Financials and Strategic Investments: Despite market headwinds and a projected 4-6% revenue decline in H2 2025, CMT maintains gross margins within its 17-19% target, boasts $93.2 million in liquidity, and is investing $25 million in Mexico to expand capacity and capabilities.
• Positive Long-Term Outlook: With a clear path to over $300 million in annual product revenues in the coming years and a projected truck market rebound in 2026, CMT is well-positioned for significant top-line growth and improved asset utilization.

The Engineered Materials Powerhouse: Setting the Scene

Core Molding Technologies, Inc. (CMT) stands as a specialized molder of thermoplastic and thermoset structural products, serving a diverse array of critical industries across North America. Headquartered in Columbus, Ohio, the company operates six production facilities spanning the United States, Canada, and Mexico. CMT's core business revolves around delivering highly engineered composite solutions for demanding applications in medium and heavy-duty trucks, power sports, building products, industrial, utilities, aerospace, and electric vehicles.

The company's overarching strategy, dubbed "Invest For Growth," is a deliberate evolution from years of internal operational refinement. This strategy aims to leverage CMT's foundational strengths in operational excellence and differentiated technology to capture significant market share. CMT has achieved industry-leading metrics, including 99% on-time delivery and an exceptional 62 parts per million (PPM) quality performance, underscoring its reliability as a supply partner. The broader industry landscape is characterized by cyclical demand in key sectors like trucking, emerging opportunities in electrification, and ongoing shifts influenced by global trade policies and macroeconomic uncertainties.

A Phoenix Rises: CMT's Transformative Journey

CMT's current strength is a testament to a remarkable transformation initiated around 2018-2019 under President and CEO Dave Duvall. At that time, the company faced considerable financial instability, reporting an $11.5 million EBIT loss on $284 million in revenue in 2019 and navigating bank default. This challenging period spurred a series of "must-win battles" focused on internal improvements, including organizational, operational, and product line profitability.

These efforts yielded significant results, with CMT generating $15.8 million in EBIT on $240 million in revenue by Q3 2024, representing a $27 million improvement on $40 million less revenue compared to 2019. This turnaround was achieved despite navigating unprecedented macroeconomic challenges, including the COVID-19 pandemic, rapid interest rate increases, and supply chain disruptions. The company successfully capitalized on a "COVID bump" in 2022-2023, quickly ramping up production to meet surging demand and seizing overflow business, demonstrating its agility and capacity. This period of internal strengthening has cultivated a robust execution culture, improved employee retention (annualized turnover below 9%), and earned CMT prestigious supplier awards like the PACCAR (PCAR) 10 PPM and BRP (DOOO) Gold.

Looking ahead, the company has a well-defined leadership succession plan, with COO Eric Palomaki set to succeed Dave Duvall as President and CEO in May 2026. This planned transition, years in the making, signals confidence in the continuity of CMT's strategic direction and operational discipline.

The Technological Edge: Composites as a Competitive Moat

CMT's core competitive advantage is deeply rooted in its diverse portfolio of proprietary molding technologies and engineered materials expertise. The company specializes in compression molding of Sheet Molding Compound (SMC), Resin Transfer Molding (RTM), liquid molding of Dicyclopentadiene (DCPD), Direct Long-Fiber Thermoplastics (DLFT), and structural foam and structural web injection molding. These processes enable CMT to produce complex, large, and ultra-large structural composite parts that offer tangible benefits over traditional materials like metal.

The company's proprietary SMC formulations are a key differentiator. Recent advancements in SMC operations have significantly improved capacity, consistency, and performance, providing a clear competitive advantage. These improvements have translated into quantifiable benefits, cutting annual costs by over $1 million and generating an additional $500,000 in savings through extended shelf life and reduced waste. For investors, this means higher margins and a more reliable, cost-effective product for customers.

CMT is also strategically expanding its capabilities. The addition of top coat paint at its Matamoros facility, and planned for its new Monterrey plant, allows CMT to offer a fully molded, assembled, and painted product. This "full-service partner model" directly addresses customer needs, particularly in industries like construction, agricultural machinery, and aerial lifts, enhancing CMT's value proposition and deepening customer integration. The launch of DCPD molding in Monterrey further positions CMT closer to large customers who value this process, reducing their logistics costs and opening new avenues for growth.

These technological differentiators enable CMT to solve complex customer problems, offering solutions that are lightweight, high-strength, corrosion-resistant, and ultimately lower the total cost for the end-user. For example, CMT is one of the few competitors capable of molding ultra-large turf protection mats in a single piece, a critical advantage in the growing construction industry. This ability to deliver unique, high-value solutions strengthens CMT's competitive moat, supports premium pricing, and drives long-term customer loyalty.

Strategic Growth Pillars: Fueling Future Expansion

The "Invest For Growth" strategy, CMT's "must-win battle" for 2025, is built upon three fundamental pillars designed to leverage its operational excellence into profitable revenue expansion.

First, sales force development is paramount. The appointment of Alex Bantz as Chief Commercial Officer underscores a commitment to transforming the sales and marketing function. The focus is on growing wallet share with existing large customers by engaging early in the design phase and cross-selling CMT's full portfolio of thermoplastic and thermoset processes. This customer-centric approach, informed by the "Voice of the Customer" program, directly led to the investment in top coat paint capabilities.

Second, business diversification is actively being pursued across new and emerging industries. CMT successfully won $47 million in new business in the first half of 2025, with 99% being incremental, surpassing the $45 million secured in all of 2024. Key wins include the significant Volvo Mexico truck business, projected to generate $150 million in revenues over the next 7 to 10 years. New market entries span aerospace (satellite receiver bases), EV cars and buses (pickup box panels, battery trays), construction (ultra-large turf protection mats, SMC for building products), medical (hospital bed frames), and energy (generator bases). CMT is also aggressively marketing its proprietary SMC, identifying over $200 million in "immediately addressable opportunities" through AI-driven lead generation.

Third, strategic M&A efforts remain a critical component of the long-term growth plan. With a rapidly growing pipeline, CMT is actively pursuing acquisitions that align with its criteria: new sales channel access, geographic expansion, and complementary technologies. The company expects to execute at least one acquisition in 2025, aiming to accelerate growth and further diversify its business.

To support this ambitious growth, CMT is making substantial capital investments. A $25 million investment is planned over the next 18 months for an expansion of its Matamoros plant and the establishment of a new 150,000 square foot facility in Monterrey, Mexico. This new Monterrey plant, replacing a smaller, landlocked leased facility, will add DCPD molding and top coat paint capabilities, allowing CMT to serve other large customers more efficiently and offer a comprehensive "full-service partner model."

Financial Performance: Resilience Amidst Transition

CMT's recent financial performance demonstrates remarkable resilience in a challenging market. For the second quarter of 2025, net sales totaled $79.24 million, a 10.7% decrease from the prior year, primarily due to lower demand in power sports and the medium and heavy-duty truck markets, including the ongoing Volvo transition. Year-to-date (H1 2025) net sales were $140.69 million, down 15.7% year-over-year. However, tooling sales significantly offset this, growing over 3.5x in Q2 2025 compared to the prior year, reaching $17.61 million for the quarter and $18.04 million for the first half.

Despite these top-line pressures, CMT maintained strong profitability. Gross margin for Q2 2025 was 18.1%, and 18.5% for H1 2025, remaining within the company's targeted 17-19% range. This was achieved through operational efficiencies, lower raw material costs, and margin optimization, partially offsetting the impact of lower fixed cost leverage. Q2 2025 adjusted EBITDA stood at $6.5 million, representing a healthy 12% margin.

The company's balance sheet remains robust. As of June 30, 2025, CMT boasted a total liquidity position of $93.2 million, comprising $43.21 million in cash and $50 million available under its revolving and capital credit lines.

Term debt was a manageable $20.6 million, resulting in a debt-to-EBITDA ratio of less than 1x for the trailing 12 months. Cash flow from operations for H1 2025 was $9.59 million, leading to a positive free cash flow of $5.2 million after $4.39 million in capital expenditures.

Return on Capital Employed (ROCE) was 7.2% (9.6% excluding cash), with management expecting this metric to improve as new business ramps up and asset utilization increases. CMT also continues its share repurchase program, buying back 151,584 shares in H1 2025 at an average price of $14.82.

Competitive Landscape: Differentiating in a Dynamic Market

CMT operates in a competitive landscape against larger, more diversified players like Magna International Inc. (MGA), Owens Corning (OC), and Hexcel Corporation (HXL), as well as numerous smaller, specialized firms and indirect competitors offering alternative materials or manufacturing methods.

Magna International, a global automotive supplier, operates on a significantly larger scale with a broader range of integrated services. While Magna benefits from its sheer size in terms of cost efficiency and global reach, CMT differentiates itself through specialized molding processes and a focus on custom solutions for niche markets. CMT's agility in product customization and its deep expertise in specific manufacturing techniques provide a unique value proposition, particularly for complex, large-part applications.

Owens Corning, a leader in insulation, roofing, and composites, primarily serves construction and automotive markets with fiberglass-based materials. CMT's thermoset and thermoplastic molding processes offer greater product versatility and adaptability for custom designs, allowing it to compete effectively in applications where Owens Corning's offerings may be less flexible. CMT's hands-on approach to manufacturing and specialized molding techniques provide superior performance in high-stress environments, though Owens Corning's brand recognition and distribution networks offer scale advantages.

Hexcel Corporation specializes in advanced, high-performance composites, primarily for aerospace. While Hexcel excels in cutting-edge material science and innovation for demanding applications, CMT provides more accessible and cost-effective molding options for a broader range of industrial and automotive uses. CMT's diverse manufacturing methods offer operational flexibility and efficiency in volume production for its target markets.

CMT's competitive advantages, or moats, are its proprietary molding technologies and cost leadership in certain processes. Its advanced SMC formulations, for instance, lead to higher production efficiency and superior margins. This technological edge, combined with its ability to mold ultra-large parts, allows CMT to differentiate itself and secure customer loyalty in specialized segments. However, CMT's smaller scale compared to its larger rivals can lead to higher operating costs and greater vulnerability to supply chain dependencies. The company mitigates these by focusing on high-value parts, engaging early in customer design cycles, and offering a full-service partner model. Barriers to entry, such as specialized expertise and regulatory compliance, further protect CMT's market position.

Outlook and Risks: Charting a Course for Rebound

CMT's outlook is characterized by a strategic focus on growth amidst near-term market uncertainties. For the second half of 2025, the company anticipates revenues to decrease by approximately 4-6% compared to 2024, reflecting ongoing market softness and the Volvo transition. However, CMT expects tooling revenues to comprise a higher percentage of total sales in 2025 as new programs launch, partially offsetting product revenue declines. Raw material pricing is projected to remain flat or see a slight increase relative to 2024. The company remains committed to its gross margin target of 17-19% for the full year 2025, a testament to its operational discipline.

Capital expenditures for fiscal 2025 are expected to be between $10 million and $12 million for pre-planned projects, with an additional $8-10 million anticipated by year-end for the $25 million Volvo Mexico investment. This significant investment underscores management's confidence in long-term organic growth.

Looking further ahead, CMT projects a return to over $300 million in annual product revenues in the next few years, even if current truck and power sports demand remains subdued. The company's existing capacity can support top-line growth up to $450 million. Industry analysts and ACT forecasts suggest a cyclical upturn in the truck market beginning in the second half of 2025, with 2026 expected to be a peak year, projecting approximately 350,000 trucks compared to 310,000-316,000 in 2025. This rebound, coupled with new program launches, positions 2026 as a potentially "really good year" for CMT.

Key risks include customer concentration, particularly with major customers like Volvo, International (NAV), PACCAR, BRP, and Yamaha (YAMHF). Volatility in input costs (raw materials, labor) and foreign currency exchange rates (Mexican Peso, Canadian Dollar) could impact operating margins, although CMT has established mechanisms to pass through tariff-related costs. Market uncertainty, described by one major truck customer as "the great pause" due to tariff discussions, continues to delay customer decision-making and program awards. However, CMT's USMCA-compliant products in Canada and Mexico mitigate some tariff risks, and its diversified growth strategy aims to reduce reliance on any single market or customer.

Conclusion

Core Molding Technologies has successfully transformed from a company in financial distress to a lean, efficient, and strategically focused engineered materials leader. Its "Invest For Growth" strategy, underpinned by a robust operational foundation and proprietary composite technologies, positions CMT for a significant rebound in revenue and profitability. The company's ability to secure substantial new business, make targeted capital investments in expanded capabilities, and maintain strong margins amidst market headwinds demonstrates its execution prowess.

While short-term macroeconomic and industry-specific challenges persist, CMT's technological leadership in specialized molding, its aggressive pursuit of diversification into high-growth markets like EV and construction, and the anticipated cyclical upturn in the truck market provide a compelling long-term investment thesis. With a strong balance sheet, ample liquidity, and a clear roadmap for leveraging its unique capabilities, Core Molding Technologies is poised to engineer a new era of profitable growth, making it a compelling consideration for discerning investors.