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Mayville Engineering Company, Inc. (MEC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered sequential improvement with net sales up 12% q/q to $135.6M, adjusted EBITDA margin expanded 140 bps q/q to 9.0%, and free cash flow of $5.4M, despite broad end-market softness from inventory destocking and consumer demand headwinds .
  • The company maintained full-year 2025 guidance: net sales $560–$590M, adjusted EBITDA $60–$66M, and free cash flow $43–$50M; capex remains $13–$17M .
  • Mix resilience (Military +6.7% y/y; Other +13.7% y/y) offset weakness in Commercial Vehicle (-13.7%), Powersports (-26.5%), Construction & Access (-31.4%), and Agriculture (-26.9%) .
  • Estimate comparison: Q1 revenue modestly beat consensus and adjusted EPS beat consensus; management flagged second-half-weighted demand recovery and tariff/onshoring tailwinds as potential catalysts .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA margin expanded to 9.0% sequentially (+140 bps), driven by MBX operational discipline, cost reduction, and value-based pricing initiatives .
  • Strong performance in less cyclical end markets: Military sales rose 6.7% y/y on higher service/aftermarket demand; Other grew 13.7% y/y, including new project volumes .
  • Working capital efficiency sustained free cash flow generation ($5.4M) in a seasonally softer quarter; net leverage 1.4x and ongoing share repurchases ($1.7M in Q1, $17.4M remaining authorization) .

Quote: “We delivered 12% sequential sales growth, margin expansion and positive free cash flow, despite softer customer demand amid continued inventory de-stocking.” — CEO Jag Reddy .

What Went Wrong

  • Net sales declined 15.9% y/y to $135.6M amid broad end-market demand softness and channel destocking; GAAP diluted EPS was $0.00 vs $0.16 prior year .
  • Manufacturing margin rate compressed y/y to 11.3% from 13.0% due to lower fixed-cost absorption on reduced volumes; SG&A was elevated by compliance and consulting costs (6.4% of sales) .
  • Powersports (-26.5% y/y), Construction & Access (-31.4%), and Agriculture (-26.9%) remained pressured by high financing rates, destocking, and macro uncertainty; management does not expect Agriculture to recover in 2025 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$135.392 $121.306 $135.579
GAAP Diluted EPS ($)$0.14 $0.76 $0.00
Adjusted Diluted EPS ($)$0.21 ($0.07) $0.04
Adjusted EBITDA ($USD Millions)$17.062 $9.185 $12.161
Adjusted EBITDA Margin (%)12.6% 7.6% 9.0%
Manufacturing Margin ($USD Millions)$17.1 $10.8 $15.3
Manufacturing Margin (%)12.6% 8.9% 11.3%
Q1 2025 Actual vs ConsensusActualConsensus*
Revenue ($USD Millions)$135.579 $134.517*
Adjusted/Primary EPS ($)$0.04 $0.0153*

Values with asterisks (*) retrieved from S&P Global.

Segment Breakdown (Net Sales)

End Market ($USD Millions)Q3 2024Q4 2024Q1 2025
Commercial Vehicle$51.612 $47.215 $50.877
Construction & Access$20.110 $16.972 $19.524
Powersports$21.605 $17.414 $22.250
Agriculture$10.358 $7.660 $10.935
Military$6.968 $7.407 $8.487
Other$24.739 $24.638 $23.506
Total Net Sales$135.392 $121.306 $135.579

KPIs and Balance Sheet

KPIQ3 2024Q4 2024Q1 2025
Free Cash Flow ($USD Millions)$15.068 $35.614 (incl. $25.5M settlement) $5.371
Net Debt Leverage (x)1.6x 1.3x 1.4x
Interest Expense ($USD Millions)$2.653 $2.011 $1.567
Debt Outstanding ($USD Millions)$114.2 $82.3 $80.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY 2025$560–$590 $560–$590 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$60–$66 $60–$66 Maintained
Free Cash Flow ($USD Millions)FY 2025$43–$50 $43–$50 Maintained
Capex ($USD Millions)FY 2025$13–$17 $13–$17 Maintained
End-Market OutlookFY 2025CV flat-to-down; C&A flat-to-up low-single digits; Powersports low-single-digit decline; Ag down ~20–25%; Military comparable; Other low-to-mid single-digit increase CV low-single-digit decline; C&A flat-to-down low-single digits; Powersports mid-single to low-double-digit decline; Ag down mid-20%; Military mid-teens increase; Other high-teens increase Mixed (updated mix detail)

Earnings Call Themes & Trends

TopicQ3 2024 (Prev)Q4 2024 (Prev)Q1 2025 (Current)Trend
Tariffs/onshoringSettlement proceeds noted; focus on domestic manufacturing; early discussions on reshoring Minimal direct impact; pass-through raw material costs; potential long-term tailwind from reshoring 95% domestic sales, 92% sourcing U.S.; potential late-Q3/Q4 onboarding if tariffs become structural; strong customer engagement Improving tailwind awareness
Commercial Vehicle outlook/EPA 2027 (NOx)ACT forecast trough in 2025, recovery into 2026 CV flat-to-slightly down; second-half recovery expected; EPA-driven pre-buy narrative Guidance assumes slight H2 uptick; caveats: no recession, no repeal of NOx rules; detailed NOx vs GHG impact Cautious optimism with regulatory caveats
Powersports demandDestocking/high rates; share gains via new customer Low-single-digit decline expected in 2025 Down mid-single to low-double digits; rate-sensitive; next-gen launches could help Still pressured
Construction & AccessSoftness; destocking; facility closure actions Flat to low-single-digit increase expected Flat-to-down low-single digits; watching rates/infrastructure activity Mixed
AgricultureDownturn; uncertain recovery timing Down 20–25% in 2025; 2026 recovery likely Down mid-20% in 2025; gradual recovery expected in 2026 Prolonged softness
MBX execution/cost actions12% labor reduction; margin stabilization $1–$3M embedded cost improvements; SG&A resizing; plant closure Sequential margin expansion; contingency playbooks; continued pricing actions Ongoing leverage
New business wins~$80M YTD; pipeline in data centers/thermal Investor Day targets reiterated; mix diversification $35–$40M booked YTD by end of April; on track for $100M; mix includes data centers/electrical infrastructure Ahead of plan

Management Commentary

  • Strategic positioning: “Largest domestic metal fabricator… well positioned to benefit from OEM reshoring activity… relatively insulated from direct impact of tariffs.” — CEO Jag Reddy .
  • Demand cadence: “We are maintaining our full year guidance… stronger-than-expected demand within our less cyclical Military and other end markets… monitoring regulatory and macroeconomic environment.” — CEO Jag Reddy .
  • Operational playbooks: “We’ve proactively developed a set of operational contingency plans… to preserve agility and optimize our cost structure across a range of demand scenarios.” — CEO Jag Reddy .
  • MBX framework: “Embedded within our 2025 adjusted EBITDA guidance is $1–$3M of cost improvement driven by MBX operational excellence and strategic value-based pricing initiatives.” — CFO Rachele Lehr .

Q&A Highlights

  • Second-half cadence: Management expects slight CV uptick in H2 2025 driven by potential pre-buys ahead of 2027 regulations; Powersports/Ag remain soft with recovery skewed to 2026 .
  • Tariffs onboarding: If tariffs become structural by mid-year, MEC could onboard programs in 3–4 months, potentially impacting late-Q3/early-Q4 2025 .
  • Guidance caveats: FY25 guidance excludes recession and NOx rule repeal; management will revisit guidance upon material regulatory shifts .
  • New business progress: ~$35–$40M booked by end of April; targeting $100M in 2025; mix includes CV, Powersports, Construction/Access, and data center/electrical infrastructure programs .
  • Capital allocation: Plan for $5–$6M minimum buybacks to offset SBC dilution; returns-based approach for incremental repurchases; disciplined M&A pipeline focused on diversification and accretive margins .

Estimates Context

  • Q1 2025 revenue slightly above consensus; adjusted/primary EPS beat consensus. Drivers: sequential margin expansion (11.3% manufacturing margin; 9.0% adjusted EBITDA margin), lower interest expense ($1.6M vs $3.4M y/y), and MBX cost discipline .
  • Mix-wise, Military/Other offset CV, Powersports, C&A, and Ag headwinds; second-half recovery narrative and tariff/onshoring optionality could lead to modest upward adjustments if realized .

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential margin and FCF improvements amid weak macro signal MBX execution is working; sustained cost discipline should support further margin expansion into H2 2025 .
  • Guidance maintained; watch regulatory and macro caveats (recession risk, EPA NOx rule status) that could shift CV pre-buy dynamics and FY trajectory .
  • Tariff/onshoring tailwinds present late-2025 optionality; MEC’s domestic footprint and pass-through pricing mechanisms mitigate direct tariff risk while opening reshoring opportunities .
  • End-market mix: Military and Other provide relative resilience; Powersports and Ag remain challenged until rates normalize and destocking completes—recovery more likely in 2026 .
  • Capital allocation discipline (debt down to ~$80.6M; net leverage 1.4x) and buybacks provide flexibility; M&A aimed at diversification and margin accretion could catalyze medium-term EPS .
  • Near-term trading: Narrative is second-half weighted improvement with potential tariff reshoring wins; monitor quarterly order cadence, segment mix shifts, and MBX cost pull-through to validate trajectory .
  • Medium-term thesis: If EPA-driven CV pre-buys materialize and data center/electrical infrastructure wins scale, MEC can approach its 2026 margin and revenue targets, albeit timing remains volume-dependent .