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Mayville Engineering Company, Inc. (MEC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered mixed results: revenue fell 19.1% YoY to $132.3M while Adjusted EBITDA margin improved sequentially to 10.3% amid broad end‑market softness .
  • Versus S&P Global consensus, MEC posted a revenue miss ($132.3M vs $138.0M*) but an EPS beat (Adjusted Diluted EPS $0.10 vs $0.06*) — highlighting cost discipline and MBX execution despite lower volumes. Bold: Revenue miss; EPS beat. Values retrieved from S&P Global*.
  • Full‑year 2025 guidance was cut: net sales lowered to $528–$562M (from $560–$590M), Adjusted EBITDA to $49–$55M (from $60–$66M), and Free Cash Flow to $25–$31M (from $43–$50M), reflecting Accu‑Fab integration plus weaker demand in Commercial Vehicle, Powersports, and Agriculture .
  • Strategic catalysts: completion of Accu‑Fab acquisition ($140.5M cash), new end‑market exposure to critical power/data centers, and footprint rationalization with $2M annual fixed‑cost savings targeted; 2026 Investor Day targets withdrawn given macro uncertainty .

What Went Well and What Went Wrong

What Went Well

  • Sequential margin improvement: Adjusted EBITDA margin rose to 10.3% in Q2 from 9.0% in Q1, driven by MBX framework cost actions and pricing discipline .
  • New program momentum and diversification: ahead of pace toward $100M in new project wins; Accu‑Fab integration underway with early cross‑selling win in data center fabrications; new critical power/data center reporting to begin Q3 .
  • Strong cash generation and deleveraging: Q2 Free Cash Flow of $12.5M; net leverage 1.4x pre‑Accu‑Fab close; repaid $8.7M of debt and repurchased $2.9M of stock in Q2 .

What Went Wrong

  • Broad end‑market demand softness: net sales down 19.1% YoY; Commercial Vehicle (-20.9%), Powersports (-35.2%), Construction & Access (-25.9%), Agriculture (-36.9%) offset by Military (+26.8%) and Other (+13.5%) .
  • Guidance cuts and visibility: FY25 net sales, Adjusted EBITDA, and FCF lowered; management withdrew 2026 Investor Day targets due to macro uncertainty and CV regulatory timing .
  • SG&A higher due to non‑recurring items: $10.3M in Q2 vs $8.3M prior year, reflecting Accu‑Fab transaction costs and CFO transition; manufacturing margin rate decreased to 10.3% on lower fixed‑cost absorption .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$121.3 $135.6 $132.3
GAAP Diluted EPS ($USD)$0.76 $0.00 ($0.05)
Adjusted Diluted EPS ($USD)($0.07) $0.04 $0.10
Adjusted EBITDA ($USD Millions)$9.2 $12.2 $13.7
Adjusted EBITDA Margin %7.6% 9.0% 10.3%
Free Cash Flow ($USD Millions)$35.6 $5.4 $12.5
Consensus vs ActualQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD Millions)$124.1*$134.5*$138.0*
Revenue Actual ($USD Millions)$121.3 $135.6 $132.3
Primary EPS Consensus Mean ($USD)($0.081)*$0.015*$0.060*
Primary EPS Actual ($USD)($0.07) $0.04 $0.10

Values retrieved from S&P Global*.

Segment Breakdown (Net Sales)

End MarketQ2 2024 ($M)Q2 2025 ($M)
Commercial Vehicle$62.130 $49.134
Construction & Access$27.230 $20.173
Powersports$30.306 $19.625
Agriculture$14.639 $9.233
Military$6.579 $8.342
Other$22.752 $25.821
Total Net Sales$163.636 $132.328

KPIs

KPIQ2 2025
Debt Outstanding ($M)$72.0
Net Debt / TTM Adjusted EBITDA (x)1.4x
Share Repurchases ($M, Q2)$2.9
Capital Expenditures ($M, Q2)$2.446
Cash + Revolver Availability ($M)$185.21 (pre‑Accu‑Fab, reduces to ~$115.9 after $69.3M borrowings)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)FY 2025$560–$590 $528–$562 Lowered
Adjusted EBITDA ($M)FY 2025$60–$66 $49–$55 Lowered
Free Cash Flow ($M)FY 2025$43–$50 $25–$31 Lowered
Capex ($M)FY 2025$13–$17 $13–$17 Maintained
Non‑recurring Integration/CFO Costs ($M)FY 2025Not specified$5–$6 (added back to Adjusted EBITDA) New disclosure
2026 Investor Day TargetsFY 2026Previously in placeWithdrawn Withdrawn
End‑Market ReportingBeginning Q3 2025Legacy segmentationAdd “Critical Power & Data Center” (~10% of TTM revenue) New segment

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
MBX operational excellence, pricing, leverageEmphasis on MBX actions, stable margins despite demand, targeting margin expansion Sequential margin expansion to 10.3%; cost reduction initiatives and pricing discipline reiterated Improving margin execution
Critical power/data centers diversificationSought exposure; pipeline building Accu‑Fab closed; early cross‑sell win; new reporting starting Q3 Accelerating diversification
Commercial Vehicle demand and EPA 2027Muted near‑term; de‑stocking headwind No H2 recovery expected; ACT forecast cut to ~252K units; no 2025/2026 pre‑buy expected Weaker outlook
Powersports inventory and SKU rationalizationDe‑stocking; elevated financing rates pressured demand Channel inventories aligning; potential recovery with rate cuts; SKU rationalization monitored Stabilizing
Agriculture demandDe‑stocking pressured volumes In trough; recovery likely 2026/mid‑2026 Bottoming
Tariffs/reshoringExpect benefit from evolving trade policy; onshoring tailwinds Uptick in aluminum extrusions reshoring; steel decisions delayed amid tariff uncertainty Mixed, aluminum positive
Footprint optimizationQ4 facility closure Consolidating 3 warehouses + 1 plant; $5–$7M one‑time costs; ~$2M annual fixed‑cost savings Ongoing optimization

Management Commentary

  • “Our MBX framework continues to guide our disciplined focus on lean operations and cost management, enabling us to enhance operating leverage and generate strong free cash flow.” — Jag Reddy, CEO .
  • “We have launched initiatives aimed at reducing fixed costs and rationalizing asset capacity to optimize our manufacturing footprint.” — Jag Reddy, CEO .
  • “We are updating our 2025 financial guidance to reflect the expected impact of the Accu‑Fab acquisition and the current demand environment within our legacy end markets.” — Rachele Lehr, CFO .
  • “Given the uncertain macroeconomic environment and continued market demand softness, we are withdrawing the 2026 financial targets presented at our 2023 Investor Day.” — Jag Reddy, CEO .
  • “We anticipate a smooth integration [of Accu‑Fab] and are excited about the long‑term value we’ll create for our customers and shareholders.” — Jag Reddy, CEO .

Q&A Highlights

  • Commercial Vehicle outlook reduction driven by OEM down days, lower run rates, and ACT forecast cuts; management does not expect a 2025/2026 pre‑buy tied to EPA 2027, pointing to persistent elevated inventories and regulatory uncertainty .
  • Powersports inventories are aligning with end‑market demand; modest rate cuts could spark recovery; SKU rationalization being monitored but not expected to materially worsen demand vs cyclicality .
  • Footprint consolidation plan (3 warehouses + 1 plant) over 6–18 months with $5–$7M one‑time cost, yielding ~$2M annual fixed‑cost savings; leverage holiday allows up to 4x max net leverage post‑acquisition for four quarters .
  • Reshoring trends: aluminum extrusions seeing strong reshoring benefit and RFQ inflows; steel fabrications decisions delayed due to tariff uncertainty across multiple countries .

Estimates Context

  • Q2 2025 revenue came in below consensus ($132.3M actual vs $138.0M*), driven by demand softness across CV, Powersports, Construction & Access, and Agriculture with partial offsets in Military and Other end markets .
  • Q2 2025 EPS exceeded consensus (Adjusted EPS $0.10 actual vs $0.06*), reflecting cost rationalization and MBX execution despite lower fixed‑cost absorption .
  • Prior quarters: Q1 2025 slightly beat revenue and beat EPS; Q4 2024 missed revenue but beat EPS versus negative expectation. Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Mix of a top‑line miss and EPS beat underscores effective cost control but fragile demand; near‑term revisions likely lower on revenue and EBITDA given guidance reset and management’s no‑recovery stance for H2 CV demand .
  • Strategic diversification via Accu‑Fab is progressing faster than planned (early cross‑sell; new end‑market reporting next quarter), providing secular tailwinds from data centers and critical power infrastructure .
  • Expect ongoing footprint consolidation and fixed‑cost reduction to support margins through the downcycle; watch for ~$2M annual savings and one‑time $5–$7M costs through 6–18 months .
  • Balance sheet posture remains disciplined: FCF generation, repurchases, and deleveraging are priorities; note leverage holiday and pro forma leverage increase post‑Accu‑Fab, with target <2x by 2026 .
  • End‑market lens: CV likely weaker into 2025; Powersports stabilizing; Agriculture trough; Construction benefits from infrastructure/data center activity; monitor tariffs and reshoring momentum (aluminum positive, steel pending) .
  • Modeling: incorporate FY25 guidance cuts (sales $528–$562M, EBITDA $49–$55M, FCF $25–$31M) and integration costs; consider EPS resilience from MBX and cost actions, but revenue risk skew remains to downside through H2 .