Core Molding (CMT) Q2 Revenue Falls 11%

Core Molding Technologies (CMT -1.68%), a leading manufacturer of engineered structural plastics and composites, reported results for Q2 FY2025 on August 5, 2025. The headline news: while beating both top- and bottom-line analyst estimates (Q2 2025 adjusted EPS of $0.53 vs. $0.46 expected; GAAP revenue of $79.2 million vs. $75.5 million expected), Revenue and net income (GAAP) declined year over year, pressured by ongoing weakness in its core truck and powersports end-markets. The results show cost discipline and strong execution, but also highlight the business’s heavy reliance on a few large customers and cyclical industries in the period.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Priorities

Core Molding Technologies specializes in designing and producing structural plastic components for customers in sectors like transportation, powersports, and industrials. Its products include molded parts used in trucks, powersport vehicles, and building products, using proprietary processes like sheet molding compound (SMC) and reaction injection molding (RIM). The company’s business revolves around converting traditional metal components to lighter composite solutions, improving performance and weight for customers.

Innovation, customer relationships, and operational investment are central to its recent focus. The company continues to invest in new material development and expanded manufacturing capabilities, as evidenced by FY2024’s $1.9 million research and development spend. Its growth plan emphasizes winning business with new and existing customers, diversifying its end-markets, and operating efficiently to protect margins as sales mix and market conditions change.

Quarterly Performance: Financial Results and Key Developments

The period saw revenue and profit shrink year over year, as expected, but both came in ahead of forecasts. GAAP revenue of $79.2 million beat consensus by $3.7 million, and adjusted earnings per share (non-GAAP) exceeded estimates by $0.07. Despite these surprises, both results declined from the same quarter last year—GAAP sales down 10.7%, and GAAP net income down over 27%.

The company’s two largest segments, which supply medium and heavy-duty truck makers and powersports brands, accounted for roughly 75% of total revenue. Both segments experienced double-digit declines. Truck segment revenue (GAAP) was $31.2 million, down 33% year-over-year, and powersports revenue fell 32% year-over-year to $14.2 million (GAAP). A large customer’s truck program phase-out and continued soft demand weighed on sales. Tooling sales soared to $17.6 million, a 267% jump, temporarily offsetting some of the decline in product revenue, which dropped 27% year-over-year to $61.6 million, and while it can boost revenue, it is typically lower margin and less recurring than product sales.

The business continued to win new customer programs across several markets, including building products, electric vehicle transportation, and aerospace. In the first half of FY2025, the company secured $47 million in new program awards, including a major deal with Volvo Mexico expected to generate $150 million in revenue over the next seven to ten years. To support new contracts and future growth, Core Molding Technologies is investing $25 million into plant expansions in Matamoros and a new facility in Monterrey, Mexico, enhancing its ability to serve blue-chip customers and add molding and painting capacity for new programs.

Margins contracted from the prior year, but remained within management’s communicated range of 17% to 19%. Gross margin (GAAP) decreased to 18.1%, down from last year’s 20.0%, impacted by an unfavorable sales mix and lower fixed cost leverage due to reduced production volumes. Price and cost management helped contain the margin compression, with management noting net positive changes in selling price offsetting some raw material cost inflation. Operating cash flow (GAAP) for the first six months of FY2025 was $9.6 million. Free cash flow (non-GAAP) totaled $5.2 million for the first six months of FY2025, compared to $16.1 million for the prior-year period.

Disciplined management was evident in cost reduction: selling, general, and administrative expenses (SG&A) dropped to $9.1 million, down $1.1 million compared to Q2 FY2024. Adjusted EBITDA, a profitability measure before interest, taxes, depreciation, and amortization and excluding certain charges, was $9.5 million, or 12.0% of sales, but remained near recent historical levels.

The company ended the quarter with $43.2 million in cash and total available liquidity of $93.2 million as of June 30, 2025, giving it ample flexibility for operations and investment. Term debt was $20.6 million as of quarter end, keeping the debt-to-adjusted-EBITDA ratio at a conservative 0.68 times for the trailing twelve months ended Q2 FY2025 (non-GAAP). Management continued its share repurchase program, buying 88,207 shares at an average price of $15.07.

Understanding the Business Model and Competitive Position

Core Molding Technologies remains one of the largest molders and compounders of engineered materials in North America, serving industries that value lighter-weight, durable parts. Its expertise is in processes like SMC and RIM, which involve combining special plastics and resins to achieve strength and weight targets that meet demanding customer requirements. Recent years have seen a push into adjacent markets such as EV batteries and medical equipment, diversifying beyond traditional truck and powersport applications.

A key risk is the company’s customer concentration, with the top five customers making up more than half of sales. The long-term supply agreements with major original equipment manufacturers offer some protection, but underline the business’s exposure to customer-specific trends and market volatility. To reduce this risk, management continues targeting business wins in new verticals, with early signs of success in building products, industrials, and EV transportation. Efficient capacity utilization and managing swings in raw material costs, like those for resins and fiberglass, are ongoing operational priorities.

Looking Ahead: Guidance and Investor Focus Points

For the second half of FY2025, management expects the year-over-year sales decline to moderate to a projected range of 4% to 6%. While the first half of FY2025 saw GAAP sales drop 15.7%, leadership projects a more modest 4% to 6% year-over-year sales decline for the second half. This projection depends on continued success in winning new programs and stabilizing demand in cyclical core segments. Tooling revenue is likely to remain elevated, supporting total revenue but creating margin headwinds if product sales remain soft. Management’s ongoing target is to maintain gross margins in a 17% to 19% range for the full fiscal year, as capacity investments and cost control balance against pricing and mix effects.

No formal profit or full-year revenue guidance was provided by management for fiscal 2025.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.