mec(US:MEC)2025-03-05 20:11Financial Data and Key Metrics Changes - Total sales for Q4 2024 decreased by 18.4% year-over-year to $121.3 million, driven by customer destocking and weaker end-user demand [34][35] - Manufacturing margin for Q4 was $10.8 million, down from $18.2 million in the prior year, with a manufacturing margin rate of 8.9%, a decrease of 340 basis points [35][36] - Adjusted EBITDA for Q4 was $9.2 million, compared to $17.7 million in the same prior-year period, resulting in an adjusted EBITDA margin of 7.6%, down 430 basis points [38] - Full-year 2024 net sales were $581.6 million, a decrease of 1.2% compared to the prior year, while adjusted EBITDA was $64.4 million, down from $66.1 million in 2023 [39] Business Line Data and Key Metrics Changes - Commercial vehicle revenue decreased by 10.5% year-over-year in Q4, reflecting a similar trend in the broader market [15] - Powersports market revenue decreased by 29.1% year-over-year in Q4, driven by inventory destocking and soft consumer demand [17] - Construction and access revenues decreased by 34.5% year-over-year in Q4, with expectations of continued softness in demand [19] - Agricultural market revenue decreased by 46.5% year-over-year in Q4, with an uncertain outlook due to various economic factors [20] Market Data and Key Metrics Changes - North American Class 8 truck production decreased by 10.4% year-over-year, with forecasts predicting a further decline of 4.8% in 2025 [15][16] - The powersports market is expected to see a low single-digit decline in 2025, with significant uncertainty due to high financing rates [43] - The agricultural market is anticipated to decline by low to mid-twenty percentiles in 2025, reflecting ongoing challenges [43] Company Strategy and Development Direction - The company is focusing on diversifying into less cyclical, higher-value opportunities, particularly in industrial infrastructure investments [8][12] - A systematic approach to share repurchases and debt reduction is being prioritized, with $5.9 million of common stock repurchased in 2024 [10][11] - M&A remains a key part of the long-term strategy, targeting acquisitions in high-growth adjacent markets [29] Management's Comments on Operating Environment and Future Outlook - Management anticipates ongoing softness in demand through the first half of 2025, with a gradual recovery expected in the second half [7][13] - The company remains committed to achieving long-term targets despite current market challenges, with expectations for improved demand conditions in 2026 [31][85] - Management highlighted the importance of operational efficiencies and cost-saving initiatives to navigate the current demand cycle [26][68] Other Important Information - Free cash flow for 2024 was nearly $78 million, with organic free cash flow more than doubling compared to 2023 levels [9] - The company has a healthy financial position, enabling a focus on long-term strategy execution [28][46] Q&A Session Summary Question: Margin guidance for 2025 and MBX initiatives - Management indicated that $1 to $3 million of margin improvement is anticipated from MBX initiatives, with benefits expected to materialize more significantly in the second half of 2025 [49][51] Question: Exposure to potential tariffs - Management noted that only a small percentage of inputs are subject to tariffs, and costs are generally passed through to customers, limiting the impact on margins [54][56] Question: Guidance for Powersports market - Powersports market is expected to decline by low single digits, with a potential 20-25% year-over-year decline anticipated [60] Question: M&A strategy and target values - The company is targeting acquisitions with revenues between $50 million and $150 million, focusing on margin-accretive opportunities in high-growth markets [75][76] Question: Path to achieving EBITDA margin targets - Management acknowledged that achieving the 14% to 16% EBITDA margin targets will take longer due to current market conditions, but remains confident in the long-term potential [84][86]