Acquisition Overview - MEC will acquire Accu-Fab for $140.5 million, plus customary adjustments, funded through MEC's existing $250 million Credit Facility[8] - The transaction is expected to close in 3Q25, subject to customary closing conditions[8] - Accu-Fab's 2024 Adjusted EBITDA margin was approximately 23%, with net sales growth exceeding 20%[9] - MEC plans to retain all approximately 250 Accu-Fab employees[9,14] Strategic Rationale - Accu-Fab diversifies MEC's revenue into higher-value, emerging end-markets like critical power infrastructure, data centers, and renewable energy[6,8] - Accu-Fab's premium markets drive increased margins and over 50% FCF conversion[11] - Identified $4-$6 million in potential annual revenue and cost synergies over the next 24 months[9] - Accretive profitability, synergies, and growth trajectory support an IRR of approximately 15%[11] Financial Impact - Accu-Fab's revenue was approximately $61 million in FY2024 with Adjusted EBITDA of approximately $14 million[14] - Pro-forma combined annual sales are approximately $643 million with Adjusted EBITDA of approximately $78 million[25] - Expects pro-forma, TTM net leverage of approximately 3.0x at closing[9]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Mayville Engineering (MEC) as a strong stock opportunity based on various valuation metrics. Group 1: Value Investing - Value investing is a preferred strategy for identifying strong stocks, utilizing fundamental analysis and traditional valuation metrics to find undervalued stocks [2] - The Zacks Rank and Style Scores system can help investors identify stocks with specific traits, particularly in the "Value" category [3] Group 2: Mayville Engineering (MEC) Valuation Metrics - MEC has a Zacks Rank of 2 (Buy) and an A for Value, with a Forward P/E ratio of 13.31, significantly lower than the industry average of 19.17 [4] - The P/B ratio for MEC is 1.24, compared to the industry's average of 3.49, indicating a solid valuation [5] - MEC's P/S ratio stands at 0.56, well below the industry's average of 1.37, suggesting strong revenue performance [6] - The P/CF ratio for MEC is 5.20, much lower than the industry's average of 14.45, indicating an attractive valuation based on cash flow [7] - These metrics collectively suggest that MEC is likely undervalued, supported by a strong earnings outlook [8]

Group 1 - The core viewpoint is that Mayville Engineering (MEC) is showing solid improvement in earnings estimates, which may lead to continued stock price momentum [1][2] - The rising trend in estimate revisions reflects growing analyst optimism regarding the company's earnings prospects, which is expected to influence its stock price positively [2][3] - The Zacks Rank system indicates that Mayville Engineering has a favorable ranking of 2 (Buy), suggesting strong potential for outperformance compared to the S&P 500 [8] Group 2 - For the current quarter, Mayville Engineering is expected to earn $0.10 per share, a decrease of 44.44% from the previous year, but the Zacks Consensus Estimate has increased by 300% due to positive revisions [6] - For the full year, the expected earnings are $0.72 per share, representing a decline of 41.94% from the prior year, yet there has been a positive trend in estimate revisions [7] - Over the past four weeks, Mayville Engineering shares have increased by 23.9%, indicating investor confidence in the company's earnings growth prospects [9]

Financial Performance - Net sales for the three months ended March 31, 2025, were $135,579, a decrease of $25,690 or 15.9% compared to $161,269 for the same period in 2024, driven by lower customer demand and inventory destocking [114]. - EBITDA for the three months ended March 31, 2025, was $11,060, a decrease of $5,825 or 34.5% compared to $16,885 in 2024 [114]. - Adjusted EBITDA for the same period was $12,161, down $6,360 or 34.3% from $18,521 in 2024 [114]. - Net income and comprehensive income for the three months ended March 31, 2025, was $20, a decrease of $3,221 or 99.4% compared to $3,241 in 2024 [114]. Margins and Expenses - Manufacturing margins decreased to $15,324 for the three months ended March 31, 2025, down $5,609 or 26.8% from $20,933 in 2024, primarily due to lower customer demand [115]. - Manufacturing margin percentage decreased to 11.3% for the three months ended March 31, 2025, down from 13.0% in 2024, reflecting reduced ability to absorb fixed costs [116]. - Other selling, general and administrative expenses increased to $8,689 for the three months ended March 31, 2025, an increase of $920 or 11.8% compared to $7,769 in 2024, mainly due to wage inflation and higher compliance costs [118]. - The provision for income taxes was ($10) for the three months ended March 31, 2025, a decrease of $1,044 from $1,034 in 2024, primarily due to lower income before taxes [120]. Cash Flow and Investments - Free cash flow for the three months ended March 31, 2025, was $5,371, a decrease of $2,479 or 31.6% compared to $7,850 in 2024, primarily due to lower cash provided by operating activities [112]. - Net cash provided by operating activities decreased by 22% to $8,333 million for the three months ended March 31, 2025, compared to $10,625 million in the prior year [122]. - Cash used in investing activities increased by 11% to $2,959 million for the three months ended March 31, 2025, driven by higher capital expenditures [123]. - Cash used in financing activities decreased by 35% to $5,397 million for the three months ended March 31, 2025, primarily due to lower debt repayments [124]. - Capital expenditures for the three months ended March 31, 2025, were $2,962 million, a marginal increase of $187 million compared to $2,775 million in the prior year [132]. Debt and Credit - Interest expense decreased to $1,567 for the three months ended March 31, 2025, down $1,789 or 53.3% from $3,356 in 2024, attributed to reduced borrowings and lower interest rates [119]. - The interest coverage ratio was 4.93 to 1.00 as of March 31, 2025, exceeding the required minimum of 3.00 to 1.00 [129]. - The consolidated total leverage ratio was 1.39 to 1.00 as of March 31, 2025, below the maximum limit of 3.50 to 1.00 [129]. - The company had $172,521 million available under its revolving credit facility as of March 31, 2025 [127]. Future Outlook and Risks - The company expects full-year capital expenditures for 2025 to be between $13,000 million and $17,000 million [132]. - A hypothetical 100-basis-point increase in interest rates would result in an additional $0.2 million of interest expense based on variable rate debt as of March 31, 2025 [140]. - The company has no commodity hedging instruments in place as of March 31, 2025, exposing it to price fluctuations in raw materials [141].

Financial Data and Key Metrics Changes - Total sales for the first quarter decreased by 15.9% year over year to $135.6 million, primarily due to softer customer demand and inventory destocking [21][22] - Manufacturing margin was $15.3 million, down from $20.9 million in the prior year, with a manufacturing margin rate of 11.3% compared to 13% previously [21][22] - Adjusted EBITDA for the first quarter was $12.2 million, down from $18.5 million year over year, with an adjusted EBITDA margin of 9% [23][24] - Free cash flow was $5.4 million, down from $7.9 million in the prior year, reflecting lower sales [25] Business Line Data and Key Metrics Changes - Commercial vehicle market sales were $50.9 million, a decrease of 13.7% year over year, outperforming the broader market by 300 basis points [7] - Powersports market revenue decreased by 26.5% year over year, driven by inventory destocking and soft demand [8][9] - Construction and access market revenue decreased by 31.4% year over year, reflecting soft demand across non-residential and public infrastructure markets [9] - Agricultural market revenue decreased by 26.9% year over year, with uncertainty in demand due to trade policy impacts [10] Market Data and Key Metrics Changes - The commercial vehicle market is expected to see a decrease of 22.9% in Class eight vehicle production in 2025, with a potential recovery in 2026 [7][8] - The military market is expected to increase by mid-teens, while other end markets are projected to grow by high teens [26][27] Company Strategy and Development Direction - The company is maintaining its full-year guidance, driven by strong execution and demand in less cyclical military and other end markets [5][26] - The focus remains on operational efficiency and cost discipline, with a commitment to debt repayment and share repurchases [15][17] - The company is actively pursuing M&A opportunities to diversify its customer base and expand into high-growth adjacent markets [17][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to expand market share despite a dynamic macroeconomic environment [19] - The company is closely monitoring regulatory and macroeconomic developments that could impact demand in the second half of the year [5][19] - A playbook has been developed to navigate potential recessionary scenarios and regulatory changes [28][53] Other Important Information - The company generated $5.4 million in free cash flow, resulting in a free cash flow conversion of 44% of adjusted EBITDA [13] - The company has returned $9.6 million to shareholders through share repurchases over the last two years [16] Q&A Session Summary Question: What is the outlook for end markets in the second half? - Management indicated a slight uptick in the commercial vehicle market in the second half, while powersports and agriculture are expected to remain steady [31][32] Question: Are there opportunities related to tariffs and reshoring? - Management noted ongoing discussions with customers regarding tariffs and reshoring, with a focus on domestic manufacturing [33][34] Question: What is the expected recovery for agriculture and powersports? - Agriculture is expected to decline mid-twenties, while powersports is projected to decrease mid-single digits to mid-teens [42][70] Question: What is the progress on the $100 million new business target? - The company is ahead of schedule, with $35 to $40 million of new business booked by April, primarily from existing customers [75][78] Question: What are the priorities for M&A? - The top priority is diversification of end markets, followed by maintaining an accretive margin profile and geographic proximity to customers [85][86]

Financial Data and Key Metrics Changes - Total sales for Q1 2025 decreased by 15.9% year over year to $135.6 million, attributed to softer customer demand and inventory destocking [21][22] - Adjusted EBITDA for Q1 was $12.2 million, down from $18.5 million in the prior year, with an adjusted EBITDA margin of 9% compared to 11.5% [23][24] - Free cash flow for the quarter was $5.4 million, down from $7.9 million in the prior year [24] Business Line Data and Key Metrics Changes - Net sales to the commercial vehicle market decreased by 13.7% year over year to $50.9 million, outperforming the broader market by 300 basis points [7] - Powersports market revenue decreased by 26.5% year over year, driven by inventory destocking and soft demand [9] - Construction and access market revenue decreased by 31.4% year over year, reflecting weak demand across non-residential and public infrastructure markets [10] - Agricultural market revenue decreased by 26.9% year over year, with uncertainty in demand due to interest rates and inventory destocking [11] Market Data and Key Metrics Changes - The commercial vehicle market is expected to see a decrease of 22.9% in production in 2025, with a potential recovery in 2026 [7][8] - The military market is projected to increase by mid-teens, while other end markets are expected to see high-teens growth [27] - The agriculture market is anticipated to decline by mid-twenties percentage in 2025, with a gradual recovery expected in 2026 [27][66] Company Strategy and Development Direction - The company is maintaining its full-year guidance, driven by strong execution and demand in less cyclical military and other end markets [5] - The focus remains on operational efficiency and cost discipline through the MBX framework, which has contributed to margin improvements [4][14] - M&A activity is a cornerstone of the company's strategy to diversify its customer base and expand into high-growth adjacent markets [17][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to expand market share despite a dynamic macroeconomic environment [19] - The company is closely monitoring regulatory and macroeconomic developments that could impact demand in the second half of the year [5][27] - A contingency plan has been developed to manage potential demand shifts and maintain profitability [19][28] Other Important Information - The company repurchased $1.7 million of common stock during the quarter, with a commitment to return capital to shareholders [16] - The company expects to be below one times net debt leverage by the end of 2025, excluding M&A activity [15][29] Q&A Session Summary Question: What is the outlook for end markets in the second half? - Management indicated a slight uptick in the commercial vehicle market in the second half, driven by potential regulation changes and pre-buys [31][32] Question: Are there opportunities related to tariffs and reshoring? - Management noted ongoing discussions with customers regarding tariffs and reshoring, with a strong domestic sourcing position [33][36] Question: What is the expected recovery for agriculture and powersports? - Agriculture is expected to decline mid-twenties, while powersports is forecasted to decrease mid-single to mid-teens [41][66] Question: How is the company progressing towards the $100 million new business target? - The company is ahead of schedule, with $35 to $40 million booked by April, primarily from existing customers [71][74] Question: What are the priorities for M&A activity? - The top priority is diversification of end markets, followed by maintaining an accretive margin profile [82]

Financial Performance - Net sales decreased by 15.9% year-over-year to $135.6 million in 1Q25, primarily due to customer channel inventory destocking[5, 17, 20] - Adjusted EBITDA decreased year-over-year to $12.2 million, with an Adjusted EBITDA margin of 9.0%, a 140bps increase compared to 4Q24[8, 10] - Free Cash Flow was $5.4 million in 1Q25, supported by working capital efficiency initiatives[8, 10] - Adjusted Diluted EPS was $0.04 in 1Q25[8, 10] Capital Allocation and Balance Sheet - The company ended 1Q25 with a net leverage of 1.4x, down from 2.0x at the end of 1Q24[8] - $1.7 million of shares were repurchased during the quarter[8] - Total cash and available liquidity stood at $203 million[30] Outlook and Guidance - The company maintained FY25 guidance, supported by strong year-to-date execution and stronger than expected demand within the Military and Other end markets[7] - Revenue for 2025 is projected to be between $560 million and $590 million, representing a decrease of (4%) to 1% year-over-year[32] - Adjusted EBITDA for 2025 is projected to be between $60 million and $66 million, representing a decrease of (7%) to 2% year-over-year[32] - Free cash flow for 2025 is projected to be between $43 million and $50 million, representing a decrease of (45%) to (36%) year-over-year[32] End-Market Outlook - The company anticipates subdued customer demand in the first half of 2025, with gradual improvement in the second half as channel inventory levels normalize[12] - The company expects year-over-year net sales changes in 2025 for the following end markets: Commercial Vehicle: (1%) – (5%), Construction & Access: 0% – (5%), Powersports: (5%) – (15%), Agriculture: (22%) – (28%), Military: 10% – 15%, Other: 18% – 20%[13, 32]

Group 1 - Mayville Engineering (MEC) reported quarterly earnings of $0.04 per share, exceeding the Zacks Consensus Estimate of $0.01 per share, but down from $0.16 per share a year ago, representing an earnings surprise of 300% [1] - The company posted revenues of $135.58 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.38%, but down from $161.27 million year-over-year [2] - Over the last four quarters, Mayville Engineering has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Group 2 - The stock has underperformed, losing about 16% since the beginning of the year compared to the S&P 500's decline of 3.9% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The current consensus EPS estimate for the coming quarter is $0.05 on revenues of $136.55 million, and for the current fiscal year, it is $0.65 on revenues of $571.1 million [7] Group 3 - The Zacks Industry Rank indicates that the Engineering - R and D Services sector is currently in the top 13% of over 250 Zacks industries, suggesting strong potential for outperformance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors or through tools like the Zacks Rank [5][6]

Financial Performance - Net sales for Q1 2025 were $135.6 million, a decrease of 15.9% year-over-year due to lower customer demand and inventory de-stocking[5]. - Adjusted EBITDA was $12.2 million, representing 9.0% of net sales, down from $18.5 million or 11.5% in the prior year[9]. - Free cash flow generated in Q1 2025 was $5.4 million, compared to $7.9 million in the prior year, reflecting a decrease in net cash from operating activities[11]. - Net sales for Q1 2025 were $135,579, a decrease of 16% compared to $161,269 in Q1 2024[38]. - EBITDA for Q1 2025 was $11,060, down 34.5% from $16,885 in Q1 2024, resulting in an EBITDA margin of 8.2%[42]. - Adjusted EBITDA for Q1 2025 was $12,161, a decline of 34.5% from $18,521 in Q1 2024, with an adjusted EBITDA margin of 9.0%[42]. - Net income for Q1 2025 was $20, significantly lower than $3,241 in Q1 2024, leading to diluted EPS of $0.00 compared to $0.16[38][44]. - Free cash flow for Q1 2025 was $5,371, down from $7,850 in Q1 2024[46]. Market Performance - The military end market saw a 6.7% increase in net sales to $8.5 million, driven by higher service and after-market demand[22]. - The commercial vehicle market reported net sales of $50.9 million, a decrease of 13.7% year-over-year, while overall demand fell by 16.7%[14]. Guidance and Future Outlook - The company maintained its full-year 2025 guidance with net sales forecasted between $560 million and $590 million[25]. - The company aims to secure $100 million in new project awards in 2025, supported by strong engagement from customers[2]. Balance Sheet and Cash Flow - Total current assets increased to $122,011 as of March 31, 2025, compared to $112,944 at December 31, 2024[36]. - Total liabilities rose to $197,745 as of March 31, 2025, compared to $193,817 at December 31, 2024[36]. - Cash and cash equivalents decreased to $183 at the end of Q1 2025 from $206 at the end of Q4 2024[36]. - Accounts payable increased to $49,749 as of March 31, 2025, compared to $39,119 at December 31, 2024[36]. - The company reported a net cash provided by operating activities of $8,333 for Q1 2025, down from $10,625 in Q1 2024[40]. Shareholder Actions - The company repurchased $1.7 million of common stock during the first quarter, with $17.4 million remaining under the share repurchase program[4]. - The ratio of net debt to trailing twelve-month Adjusted EBITDA was 1.4x as of March 31, 2025[24]. Manufacturing Performance - Manufacturing margin was $15.3 million, or 11.3% of net sales, down from $20.9 million or 13.0% in the prior year[6].

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