Good morning, everyone. Welcome to the Core Molding Technologies' First Quarter Fiscal 2023 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. Now I will turn the call over to Sandy Martin, 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 first quarter results for 2023. Joining me on the call today are Core Molding's President and CEO, Dave Duvall; and the company's EVP and 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 statements made in today's discussion that are not historical fact, including statements or expectations or future events or future financial performance, are forward-looking statements and are not made pursuant -- 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 of 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 detail 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 and 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 also been included in an 8-K submitted to 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 first quarter earnings call. I first want to thank the Core Molding team for our outstanding financial results. It is the direct result of a hard-working team of skilled people driving our business in a shared direction with a passion to improve every day. It is exciting to see our business transformation progressing, especially when you can feel the momentum of the change increasing. As we stated in March, one of our key strategic goals for 2023 is profitability improvement. The direct measurement of this is reflected in our gross margin. I'm excited to communicate that our gross margin for the quarter was 17.8%. That's the highest in over five years. This is a sequential improvement of 440 basis points from the fourth quarter and an increase of 180 basis points from Q1 of the prior year. This was driven by our continued focus on operational execution in our challenged plants, material cost recoveries and technical solution sales as we expand into newer markets. As we stated in March, our must-win battle for 2023 is to fully embed our operational excellence processes in all of our operations with a focus on our lower performing locations. We are strategically focused on improving operational performance and specifically improving the productivity and profitability at all of our operations to optimize our current capacity. This is always never ending, but we know that we have some short-term opportunities to capture that will both improve our margins and open more capacity within our sheet molding compound business. In Q1, we have increased our plant overall productivity by more than 8%. This is good progress, and I appreciate how focused our operational teams and plants are on supporting each other in driving our must-win battle for 2023.…

Thank you, Dave, and good morning, everyone. As Dave mentioned, sales growth and margin improvements, primarily driven by a combination of volume and strategic pricing actions, drove higher free cash flows when compared to last year's first quarter. First quarter 2023 net sales totaled $99.5 million, up 9.8% versus a year ago, and product sales increased 9.4% versus the prior year period. Revenue increases were largely driven by higher customer demand coupled with higher pricing to offset inflationary costs as well as new program launches. Gross profit for the first quarter was $17.7 million or 17.8% of sales compared to $14.5 million or 16% of sales in the prior year quarter. During the quarter, we saw that the combination of higher volumes and strategic pricing enhanced our overall margins, especially given the more stable labor environment and supply chains. We have also seen a weakening of the U.S. dollar, which had a negative impact on gross margins in the first quarter of 2023 of approximately 100 basis points. We actively hedge a portion of our exposure to the Mexican peso and the Canadian dollar, but we're still impacted by the change in the dollar. Selling, general and administrative expenses for the quarter were $9.7 million compared to $8.5 million in the prior year period. Increases were primarily due to year-over-year wage increases, primarily due to inflation and certain strategic conditions to improve operations. In the first quarter, the company reported operating income of $8.1 million, up 34.3% over the same period prior year. Net income was $7.8 million $5.9 million or $0.66 per share on a diluted basis versus the same period prior year diluted EPS of $0.46, an increase of 43%. Adjusted EBITDA for the quarter was $12.2 million or 12.3% of sales compared to $9.5 million of adjusted…

Thank you, John. As both John and I stated earlier, our must-win battle for 2023 is to fully embed our operational excellence processes into our operations with the largest opportunities coming from our SMC, or sheet molding compound, plants. We have communicated our strategic execution goals throughout the organization, which has placed a high level of focus and energy into driving speed and quality of event into our must-win battle mission. Improving our SMC plants is a strategic priority that will directly increase productivity, reduce costs and expand our large asset capacity by about 20%, which we believe will create a stronger foundation for success as we prepare for future growth investments. As we continue to grow the business, we plan on adding capacity and are currently investigating how best to add capacity, either through acquisition, facility expansion or greenfield site. The prerequisite to executing and expansion is the successful completion of our 2023 must-win battle, which creates both machine capacity and technical expertise availability to enable a flawless execution of our major growth objectives. Basically, it's just the five Ps of proper planning prevent poor performance. We are measuring what we want to improve and have achieved over 8% improvement in productivity in Q1 alone. And although this journey is never complete, we are making significant progress in 2023. We are also adding additional automation to support further production efficiencies, reduce costs and increase capacity. Our 2023 outlook includes carefully monitoring customer forecasts and adjusting assets and labor utilization accordingly. We plan for and value revenue diversification by industry, which serves to reduce our concentration risks in all of our end markets. We are driving to further increase gross margins to generate incremental cash flow. Our outlook this year continues to be optimistic and we are forecasting to be flat to slightly up on our product sales for the year. Our technical solution sales strategy positions us well to take advantage of opportunities in various industries that requires new solutions, including opportunities resulting from government-funded infrastructure and sustainability projects. We have seen an impact on our building products industry demand from macroeconomic efforts to slow inflation, but demand from our customers and other industries remains unchanged. We will continue to carefully watch for demand impacts from interest rate increases and other -- and macroeconomic headwinds, but believe our continued industry diversification progress will lessen the impact of any industry-specific downturn on our business. We again want to thank analysts and investors for their time and attention on this call, and we want to welcome your questions on today's call or in a follow-up call. With that, I would like to open up the line for questions. Operator?

[Operator Instructions] The first question comes from Chip Moore with EF Hutton.

Congrats to the whole team on a great quarter of execution. Wanted to start with margins. You sound fairly optimistic on the margin front. Obviously, a great quarter. Just maybe you can remind us of sort of seasonality mix and sort of ramp of new programs and any factors to take into account on margins for near term?

Yes. Chip, so margins first quarter, 17.8%. Obviously, we're pretty happy with those. We are seeing the benefits of a lot of the must-win battles that we talk about. Historically, seasonality, Q1, Q2 are always going to have the best margins just because of the product mix. But when you look at even versus last year, being up from 16%, I think, first quarter, which kind of indicates normal product mix, you can see some of the benefits that we're seeing from our operational improvements. So going forward, we would expect those operational improvements to kind of show up in every quarter and -- but have normal seasonality with that, where the back half of the year margins usually are just a little bit weaker than the first half just because of product mix. But a lot of the operational improvements that we've seen are sustainable ongoing operational improvements that we would expect to be there for the rest of the year.

Got it. That's great to hear. And then if I could ask another around sort of future capacity expansion, which you referenced, those potential efforts, macro notwithstanding, obviously, we're all watching that. But curious around maybe bidding pipeline, what you're seeing out there and how that's progressed and how that may impact some of those efforts?

Yes. Chip, this is Dave. So we're looking at that right now as far as developing the pipeline. We've outlined a strategy, working, looking at different individuals or companies, investment banks on how we want to proceed with that, but it's definitely in our interest to expand the business and being able to organically add the capacity with the rate that you can purchase machines is probably slower than what we want or is possible for us. So -- and we've really -- within all of our locations, we've filled all the spots or mostly all the spots that we have. So our next step is either brick-and-mortar acquisition. And I think what we want to do is we're probably looking more towards the acquisition side, just because of the speed and ability to implement.

Understood. Yes. And obviously, the balance sheet is in good position. I guess maybe a last one for me. On end market-wise, you referenced sort of seeing some impacts on the lattice and things like that. I guess curious other markets, if you're hearing anything, right, particularly powersports with a higher interest rate environment?

Yes, we had thought, just like you, especially at the beginning of the year that we were going to see a significant decline, but we have not. Right now, we still see orders strong. We are anticipating that near the end of this year, in the second half that, that would start having effect. But right now, we see strong volumes.

If we stay really close to our customers and to tell you the truth, we have been talking to them all the time, and they're pretty bullish still. We've had some small adjustments so far in personal watercraft, but nothing major. In ATV, we really haven't seen any major adjustments at this point. So we're staying close to the customer to get their data as fast as we can.

Perfect. Yes, and I was going to follow up and say based on your product sales outlook, it sounds like you have pretty good visibility then on that for the year?

Yes, I think we do. Again, most of our customers give us forecast out extended period of time. I think they're all in the same boat as us, though, they're watching the economy, but they can see in their distribution channels, their inventory levels, things like that. So they have probably a little bit more visibility. But again, I think they're all rational also. But right now, it seems like when people have jobs, they're going to still spend money. And so right now, I think customers are still spending money at least.

Great to hear. And sorry, maybe one last one, if I could. Sort of in the utilities, infrastructure world, are you seeing that -- or in the technical solution side, are you seeing that sort of those early opportunities start to grow? And would that be a potential source of acquisition opportunity?

No, absolutely. When we start looking at whether we want to grow processes or sales channels, that's what we're looking at. We definitely see industrial, utilities, infrastructure as a significant area for growth for us.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Dave Duvall for any closing remarks.

Thank you for your continued interest in our company, and we look forward to providing an update of our progress when we report second quarter results in a few months and if we have conference calls already scheduled later this week and next week. So thank you very much.

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