mec(MEC) - 2025 Q2 - Quarterly Results

Executive Summary Introduction & Q2 2025 Highlights MEC reported Q2 2025 net sales of $132.3 million and a net loss of $1.1 million amid a challenging demand environment Second Quarter 2025 Key Financial Highlights | Metric | Value | | :--- | :--- | | Net sales | $132.3 million | | GAAP Net loss | $1.1 million | | GAAP Diluted EPS | ($0.05) | | Non-GAAP Adjusted Net Income | $2.1 million | | Adjusted Diluted EPS | $0.10 | | Adjusted EBITDA | $13.7 million | | Adjusted EBITDA margin | 10.3% | | Free Cash Flow | $12.5 million | | Ratio of net debt to trailing twelve-month Adjusted EBITDA (as of June 30, 2025) | 1.4x | Management Outlook & Strategic Priorities Management addresses soft demand, focuses on operational efficiency, and updates guidance following the Accu-Fab acquisition - Customer demand remained soft throughout Q2 2025 due to elevated uncertainty across most end markets, with limited visibility for the second half of the year, particularly in Commercial Vehicle, Powersports, and Agriculture[3] - Operational focus includes strategic pricing, new project wins (ahead of full-year target), and working capital efficiency, alongside initiatives to reduce fixed costs and rationalize asset capacity[3] - The acquisition of Accu-Fab was completed shortly after quarter-end, marking a key milestone in strategic diversification, with integration expected by year-end[3][5] - MEC updated its full-year 2025 guidance to reflect the Accu-Fab acquisition and soft industry demand in legacy markets, while withdrawing 2026 financial targets due to the uncertain macroeconomic environment[5] - Long-term vision is to build MEC into a scaled, diversified domestic fabricator with $1.0 billion in revenue, supported by organic growth, disciplined M&A, and consistent operational execution[5] About Mayville Engineering Company MEC is a leading U.S.-based manufacturing partner serving diverse end markets with extensive capabilities - MEC is a leading U.S.-based, vertically-integrated manufacturing partner providing design, prototyping, tooling, fabrication, aluminum extrusion, coating, assembly, and aftermarket components[33] - Customers operate in diverse end markets including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military, and other markets[33] - MEC maintains an extensive manufacturing infrastructure with 27 facilities (26 in use) across nine states, offering a broad range of manufacturing processes and finishing capabilities[33][34] Second Quarter 2025 Financial Performance Consolidated Financial Results Overview Net sales and profitability declined year-over-year due to lower demand, though cost reductions provided a partial offset Q2 2025 vs. Q2 2024 Financial Performance | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $132.3M | $163.6M | -19.1% | | GAAP Net loss (income) | ($1.1M) | $3.8M | N/A | | GAAP Diluted EPS | ($0.05) | $0.18 | N/A | | Adjusted Net Income | $2.1M | $5.5M | -61.8% | | Adjusted Diluted EPS | $0.10 | $0.26 | -61.5% | | Adjusted EBITDA | $13.7M | $19.6M | -30.1% | | Adjusted EBITDA margin | 10.3% | 12.0% | -1.7 pp | | Free Cash Flow | $12.5M | $19.2M | -34.8% | - The decrease in net sales was primarily due to lower customer demand across most key end markets and customer channel inventory de-stocking, partially offset by new projects and increased after-market demand in Military[6] Detailed Performance Analysis Manufacturing Margin Manufacturing margin decreased in Q2 2025 due to lower customer demand, partially offset by cost reduction efforts Manufacturing Margin Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Manufacturing margin | $13.6 million | $22.3 million | | % of net sales | 10.3% | 13.6% | | YoY Decrease | $8.7 million | 3.3 pp | Operating Expenses Operating expenses were impacted by lower bonus costs and higher non-recurring acquisition and transition expenses Operating Expenses (Q2 2025 vs. Q2 2024) | Expense Category | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Bonuses and deferred compensation | $1.5 million | $4.1 million | -63.4% | | Other selling, general and administrative expenses | $10.3 million | $8.3 million | +24.1% | - Increase in other SG&A expenses primarily reflects non-recurring costs related to the Accu-Fab acquisition and CFO transition[8] Interest Expense Interest expense decreased significantly year-over-year due to reduced borrowings and lower interest rates Interest Expense (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Interest expense | $1.4 million | $3.0 million | -53.3% | - The decrease in interest expense was due to a decrease in borrowings and lower interest rates relative to the prior year period[9] End Market Performance Overall End Market Sales Most end markets saw sales declines due to reduced demand, with Military and Other markets showing positive growth Net Sales by End Market (Three Months Ended June 30, in thousands) | End Market | 2025 | 2024 | YoY Change ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Commercial Vehicle | $49,134 | $62,130 | ($12,996) | -20.9% | | Construction & Access | $20,173 | $27,230 | ($7,057) | -25.9% | | Powersports | $19,625 | $30,306 | ($10,681) | -35.2% | | Agriculture | $9,233 | $14,639 | ($5,406) | -36.9% | | Military | $8,342 | $6,579 | $1,763 | +26.8% | | Other | $25,821 | $22,752 | $3,069 | +13.5% | | Total Net Sales | $132,328 | $163,636 | ($31,308) | -19.1% | Commercial Vehicle Commercial vehicle net sales declined 20.9% year-over-year due to reduced customer demand and regulatory uncertainty Commercial Vehicle Net Sales | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $49.1 million | $62.1 million | -20.9% | - Decrease attributed to reduction in customer demand resulting from regulatory uncertainty and reduced order volumes[15] Construction & Access Construction & access market sales fell 25.9% from the prior year, driven by lower demand and inventory de-stocking Construction & Access Net Sales | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $20.2 million | $27.2 million | -25.9% | - Decrease primarily attributable to lower customer demand and channel inventory de-stocking[17] Powersports Powersports market sales decreased substantially by 35.2% due to reduced consumer demand and product rationalization Powersports Net Sales | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $19.6 million | $30.3 million | -35.2% | - Decrease resulted from reduced consumer demand, customer product rationalization, and channel inventory de-stocking[19] Agriculture Agriculture market net sales declined 36.9% year-over-year, reflecting lower demand and customer inventory de-stocking Agriculture Net Sales | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $9.2 million | $14.6 million | -36.9% | - Decrease reflects lower customer demand across both large-ag and small-ag end markets as customers de-stock their inventory[21] Military The military market demonstrated growth with a 26.8% year-over-year increase in net sales from after-market demand Military Net Sales | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $8.3 million | $6.6 million | +26.8% | - Increase primarily attributable to higher service and after-market demand[23] Other End Markets Other end markets grew 13.5% year-over-year, driven by new customer projects and increased automotive demand Other End Markets Net Sales | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $25.8 million | $22.8 million | +13.5% | - Increase primarily attributable to new customer projects within industrial equipment & fixtures and power generation end markets, and higher demand for aluminum extrusions within the automotive end market[25] Financial Position & Guidance Balance Sheet Update MEC maintained a healthy balance sheet with a net debt to Adjusted EBITDA ratio of 1.4x as of June 30, 2025 Balance Sheet Highlights (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Debt outstanding | $72.0 million | | Total cash and availability on senior secured revolving credit facility | $185.21 million | | Debt repaid during Q2 2025 | $8.7 million | | Shares repurchased during Q2 2025 | $2.9 million | | Ratio of net debt to trailing twelve-month Adjusted EBITDA | 1.4x | Full-Year 2025 Financial Guidance Full-year 2025 guidance was revised to reflect the Accu-Fab acquisition and continued softness in legacy markets Full-Year 2025 Financial Guidance Update (in Millions) | Metric | FY 2024 Actual | FY 2025 Forecast (Low-Mid-High) | Prior FY 2025 Forecast (Low-Mid-High) | | :--- | :--- | :--- | :--- | | Net Sales | $581.6 | $528 - $545 - $562 | $560 - $575 - $590 | | Adjusted EBITDA | $64.4 | $49 - $52 - $55 | $60 - $63 - $66 | | Free Cash Flow | $77.7 | $25 - $28 - $31 | $43 - $47 - $50 | - The 2025 guidance reflects the acquisition of Accu-Fab (completed July 1, 2025) and the impact of continued soft end market demand in legacy markets[28] - Free Cash Flow guidance includes capital expenditures of $13-$17 million and non-recurring costs of $5-$6 million related to the CFO transition and Accu-Fab acquisition[29] Supplemental Information Non-GAAP Financial Measures This section defines non-GAAP financial measures used by management as key performance indicators for investors - Non-GAAP measures used include EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow[35] - These measures are used by management as key performance indicators and are believed to be frequently used by securities analysts and investors to evaluate companies in the industry[36] - Non-GAAP measures are supplemental and should not be considered as alternatives to GAAP measures or as substitutes for analysis of GAAP results[36] Condensed Consolidated Financial Statements Balance Sheets The balance sheet shows MEC's financial position as of June 30, 2025, compared to December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $113,728 | $112,944 | | Property, plant and equipment, net | $147,313 | $156,528 | | Goodwill | $92,650 | $92,650 | | Total assets | $433,745 | $445,570 | | Total current liabilities | $69,596 | $64,592 | | Bank revolving credit notes | $69,280 | $79,725 | | Total liabilities | $186,902 | $193,817 | | Total shareholders' equity | $246,843 | $251,753 | Statements of Net Income (Loss) The income statement details financial performance for Q2 and H1 2025, showing a decline in net sales and net income Condensed Consolidated Statements of Net Income (Loss) (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $132,328 | $163,636 | $267,907 | $324,905 | | Income from operations | $76 | $8,150 | $1,654 | $15,780 | | Net income (loss) | ($1,097) | $3,782 | ($1,077) | $7,023 | | Diluted EPS | ($0.05) | $0.18 | ($0.05) | $0.34 | Statements of Cash Flows The cash flow statement illustrates sources and uses of cash, showing lower operating cash flow in H1 2025 Condensed Consolidated Statements of Cash Flows (in thousands, Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,307 | $33,900 | | Net cash used in investing activities | ($5,402) | ($6,767) | | Net cash used in financing activities | ($17,905) | ($27,491) | | Net increase (decrease) in cash and cash equivalents | $0 | ($358) | | Cash and cash equivalents at end of period | $206 | $314 | Reconciliation of Non-GAAP Measures EBITDA and Adjusted EBITDA Reconciliation This table reconciles GAAP net income (loss) to non-GAAP EBITDA and Adjusted EBITDA for Q2 and H1 2025 Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | ($1,097) | $3,782 | ($1,077) | $7,023 | | EBITDA | $9,679 | $17,541 | $20,740 | $34,425 | | Adjusted EBITDA | $13,675 | $19,639 | $26,667 | $38,159 | | Adjusted EBITDA Margin | 10.3% | 12.0% | 10.0% | 11.7% | Adjusted Net Income and Diluted EPS Reconciliation This table reconciles GAAP net income (loss) and diluted EPS to their non-GAAP adjusted counterparts Reconciliation of Net Income (Loss) and Diluted EPS to Adjusted Net Income and Diluted EPS (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | ($1,097) | $3,782 | ($1,077) | $7,023 | | Diluted EPS | ($0.05) | $0.18 | ($0.05) | $0.34 | | Adjusted net income | $2,100 | $5,497 | $3,909 | $10,103 | | Adjusted Diluted EPS | $0.10 | $0.26 | $0.17 | $0.48 | Free Cash Flow Reconciliation This table reconciles net cash from operating activities to Free Cash Flow for Q2 and H1 2025 Reconciliation of Free Cash Flow (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $14,976 | $23,275 | $23,307 | $33,900 | | Less: Capital expenditures | $2,446 | $4,099 | $5,408 | $6,874 | | Free cash flow | $12,530 | $19,176 | $17,899 | $27,026 | Conference Call Details Details are provided for the Q2 2025 results conference call scheduled for August 6, 2025 - Conference call scheduled for Wednesday, August 6, 2025, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time)[30] - Live webcast and investor presentation available on www.mecinc.com (Investors page)[30] - Telephone access: (833) 470-1428 (US) or (833) 950-0062 (Canada), Access Code: 584482[31] Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements and associated risks - The press release includes forward-looking statements reflecting plans, estimates, and beliefs, which involve risks and uncertainties[32] - Actual results may differ materially from forward-looking statements due to various factors, including macroeconomic conditions, industry developments, competition, raw material volatility, and integration of acquisitions[32] - The company undertakes no obligation to update or revise any forward-looking statements after the date made, except as required by federal securities laws[32]