Good morning, and welcome to the Core Molding Technologies Fourth Quarter and Fiscal Full-Year 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded today. I would now like to turn the call over to Sandy Martin with Three Part Advisors. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us for the Core Molding Technologies conference call to review fourth quarter and full-year results for 2022. Joining me on the call today are Core Molding's President and CEO, Dave Duvall; and the company's EVP & CFO, John Zimmer. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section at coremt.com. Today's call, including the Q&A session, will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance, are forward-looking statements, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, by their nature, are uncertain and outside the company's control. Actual results may differ materially from those expressed or implied. Please refer to the earnings press release that was issued today for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in the company's filings with the Securities and Exchange Commission. Core Molding Technologies assumes no obligation to publicly update or revise any forward-looking statements. Management will refer to non-GAAP measures, including adjusted EBITDA, free cash flow, return on capital employed. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Finally, the earnings press release we issued earlier today is posted on the Investor Relations section of our website at coremt.com. A copy of the release has been included in an 8-K submitted with the SEC. And now, I would like to turn the call over to Dave Duvall. Dave?

Thank you, Sandy. Good morning, and welcome to our fourth quarter and full-year earnings call. I'd like to start by congratulating our teams across the company for a year of record-breaking great performance. It's exciting to see our clear business strategy and focus on people, processes, and execution, is gaining momentum. As always, this is best demonstrated in the results of the game. We had a year of record-breaking by the Core Molding team. We had record-breaking revenue at $377 million, a 23% increase from prior year, record-breaking EBITDA at $32 million, and record-breaking net income of $12.2 million. Thank you to the entire Core Molding team for making this happen. You can see and feel the difference as we continually improve, build, and institutionalize our business, organizational, and operational systems. The process of improvement is never complete, and we still have many opportunities for improvement, but what is important is that we are a winning team, and we are seeing this accelerate, which is demonstrated by continually improving results. This is exciting and rewarding for all of us at Core Molding. So, thank you again to the entire Core Molding team for all the hard work that went into making this happen. Before we dive deeper into our results and outlook for this year, I first want to review a few other important 2022 achievements. We are excited and proud to announce the launch of Core Molding's first sustainability report by the end of this month. Many people contributed to this major endeavor, but a special thanks goes to Marshall Starr, our sustainability leader, who spearheaded this project and will continue to drive progress on our efforts moving forward. We continue to invest in our people and organizational capabilities. We graduated 16 more people from our year-long management leadership…

Thank you, Dave, and good morning, everyone. Before I go through our quarter and full-year results, I wanted to discuss changes to our long-term tax structure resulting from the company's business transformation. In the fourth quarter of 2022, we completed an analysis of the value each plant receives from our integrated operating systems, integrated sales, and corporate engineering solutions group, and determined the appropriate charge for each plant. The timing of this analysis directly related to us completing integration of all of our plants. Completion of this integration took several years due to the company's operational turnaround, the impacts of COVID, and supply chain challenges that took priority. As a result of the analysis, the company's tax structure is more reflective of the value received by each plant. As a result, in Q4 of 2022, the company was able to release tax-related allowance reserves of $2.4 million from previous years net operating losses. We expect to utilize the net operating losses over the next three years. With the new structure, we expect the company's effective tax rate will be in the mid to upper 20% range, depending on the mix of our business. Now turning to our results, fourth quarter 2022 net sales totaled $86.4 million, up 18.1% versus a year ago. And as Dave mentioned, product sales increased 22% versus the prior year period. Revenue increases were largely driven by higher customer demand in our truck and power sports industries, price increases, and new program launches. Gross profit for the fourth quarter was $11.5 million or 13.4% of sales compared to $8.5 million or 11.6% of sales in the prior year quarter. During the quarter, we worked to further stabilize margins, and we are pleased to report that most material prices have leveled out, with some material prices even…

Thank you, John. We were pleased to recognize our first Core Molding plan to reach over $100 million in annual sales during 2022, another record. This is an awesome accomplishment, and this milestone helps us gauge future growth in each of our plants. As John mentioned, we are strategically focused on improving operational performance, and specifically improving the productivity and profitability at all of our operations to carry this momentum forward. As I mentioned, we hired Mike Gayford to lead and support our operational teams in the United States. Just like price recovery was a must-win battle for 2022, our must-win battle for 2023 is to fully embed our operational excellence processes in our operations. We estimate that this will increase our capacity by 20% in some of our underperforming plants, and it better enables our solution sales approach. For our solution sales delivery to be effective, we require a high level of performance and capabilities from all of our processes. We've made significant productivity and capacity improvements, but we have known opportunities to continue driving additional improvements. When we discuss throughput, we also know that embedded in this metric are labor productivity, overhead spending, scrap, and operational efficiencies. We have put key processes in place to calculate our successes, and these improvements are our number one goal this year. It is a must-win battle for our company. As we've discussed in the past, we're continually automating and applying robotics to reduce costs, increase throughput, and improve efficiencies. We focus on profitability and asset utilization, while monitoring changing order forecasts. For Core, we will continue to diversify revenue by end markets and reduce concentration risks in both customers and industries. Our dedication and work here will significantly affect our business of further stabilizing and growing gross margins, especially as we…

[Operator Instructions] Our first question is from Chip Moore with EF Hutton. Please go ahead.

Good morning. Hey, Dave. John, congratulations on the great year. Yes, great job. I wanted to ask about the $500 million longer-term goal. Maybe you could expand a little bit on the potential path there. Dave, you talked about, I think some plants being able to increase their capacity by 20%. Do you think you can get there with your current footprint? Just do you contemplate maybe any M&A or investment in that to get there, or how do you think about that?

Yes. Right now, we wouldn't be able to get to $500 million with our current footprint. We'd probably get close, and it would depend on the work, the type of work that we're bringing in. Right now, part of when we talk about the must-win battle, we know that we have some older presses where we need to do some work and we have known opportunities. So, we estimate a 20% improvement in overall throughput in those, which would essentially get you - it's about 20 machines in those two plants that would get you about four presses. So, really getting the operational system in place, getting the plants operating at the highest level possible before doing acquisition, is really in preparation as we start looking forward into next year on what we would do, whether that would be brick and mortar or an acquisition.

Got it. That's helpful. And in terms of that timeline, you think that's sort of a 12 to 18-month process to optimize those assets, or how do you think about that timeline?

We better be faster than that. Our goal is to have it this year. I mean, to me, you're looking at six to nine months with - if I draw a linear curve, finishing it in say nine, 10 months. We'll be getting improvements all along.

Yes. Chip, the one thing that - knowing our business is, we - kind of our programs that we're launching today were won probably about a year ago, maybe 18 months ago. And so, as we open up that capacity, what we're looking to do is making sure that we're ready to sell today for what needs to be sold or launched next year at some time. So, that's the reason it's really critical, as Dave said, to get that capacity open today. So, we feel very comfortable that we can go ahead and sell it.

That's, yes, perfect. And I guess to that point, visibility further out, I think, right, you've got some programs launching even into ‘25 at this point. And so, how is that aligning, I guess, with expansion? It sounds like pretty well. And then maybe you can talk about the opportunity pipeline in general.

Yes, I mean, right now, we're probably - like we said, we're probably being more selective with some of the business just because we've taken on - we have, what, $75 million two years ago, and a lot of that's coming into the launch phase, putting that in. So, we’ve got to be a little more selective on where we do have the capacity and we don't. But we definitely look at when programs will be ending and when we want to bring in new programs for that. We are seeing - I think more than half of our wins in Q4 were in the utility section.

Okay, great. And maybe if I can do one last one just on that CapEx. I think it was $13 million this year. Where is that going, particularly in terms of capacity versus new programs and things like that? Thank you.

Yes, the majority of that is going to be sustaining, but sustaining in a way that you will get additional capacity. Again, as Dave made a comment about as we improve our throughput, but we also change controls on equipment, those types of things, what will end up happening when you change controls is that you'll get a press that goes up and down faster, more stable, those types of things. And so, the last couple of years, we've done some pretty good capacity expansion. I think during this past year, we obviously added three presses over the last - four presses over the last two years. And so, I think this year is more of a focus on how do we make sure that we've got the sustainable or sustaining CapEx being spent, make sure the business stays very stable, those types of things.

Yes. Maybe one point, Chip, to elaborate a little more on your prior question. When we talk about getting the operational to a high level and really gaining the capacity out of what we know that we can do and getting operational systems in place, a lot of that really is preparing when you start looking at expanding so that when you do an acquisition, you're able to come in and put the operational systems in and integrate them as quickly as possible.

Yes, makes sense.

Yes. Fix yourself before you try fixing somebody else.

That's right. All right. Thanks very much. I appreciate it.

[Operator instructions]. Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Dave Duvall for any closing remarks.

Good. Thank you for your continued interest in our company, and we do look forward to providing an update of our progress when we report first quarter results in a couple of months. Thank you, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.