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Mayville Engineering Company, Inc. (MEC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered net sales of $144.3M (+6.6% YoY; +9.1% QoQ), an adjusted EPS of $0.10 and adjusted EBITDA of $14.1M; management reaffirmed full‑year 2025 guidance, citing stronger data center & critical power demand offsetting legacy end‑market softness .
  • Results beat S&P Global consensus on revenue by ~$3.8M and on adjusted EPS by ~$0.09; adjusted EBITDA was roughly in line to slightly above consensus (see Estimates Context) *.
  • Free cash flow was temporarily negative (−$1.1M) due to ~$3.5M non‑recurring items; leverage rose to 3.5x on Accu‑Fab acquisition, with a path to ≤3.0x by end‑2026 per CFO .
  • Strategic catalyst: rapid integration of Accu‑Fab and accelerating pipeline in data center & critical power (> $100M qualified opportunities), with 2026 revenue synergies raised to $20–$30M; management sees the vertical reaching 20–25% of total revenues over time .

What Went Well and What Went Wrong

What Went Well

  • Data center & critical power momentum: $22.6M Q3 net sales; >$100M qualified pipeline; raised 2026 revenue synergies to $20–$30M; cross‑selling wins across multiple products and plants .
  • Revenue and EPS vs Street: revenue beat consensus (~$140.5M*) with $144.3M actual; adjusted EPS of $0.10 vs ~$0.01* consensus; adjusted EBITDA came in modestly above consensus (see table) *.
  • Guidance reaffirmed: Full‑year 2025 ranges for net sales ($528–$562M), adjusted EBITDA ($49–$55M), and FCF ($25–$31M) maintained despite legacy end‑market headwinds .

What Went Wrong

  • Legacy end‑market softness pressured margins: manufacturing margin rate declined to 11.0% (from 12.6% YoY) on restructuring and inventory step‑up related to Accu‑Fab and weaker CV/ag demand; adjusted EBITDA margin compressed to 9.8% (from 12.6%) .
  • Free cash flow turned negative in Q3 (−$1.1M) due to ~$3.5M non‑recurring items; net debt rose to ~$214.9M post‑acquisition, increasing net leverage to 3.5x .
  • Commercial Vehicle and Agriculture declines: CV down 24% YoY; Ag down 21.8% YoY; management expects continued softness and under‑absorption to weigh into early 2026 .

Financial Results

MetricQ3 2024Q2 2025Q3 2025Q3 2025 Consensus
Net Sales ($USD Millions)$135.392 $132.328 $144.310 $140.538*
GAAP Diluted EPS ($USD)$0.14 $(0.05) $(0.13) —
Adjusted Diluted EPS ($USD)$0.27 $0.10 $0.10 $0.01*
Adjusted EBITDA ($USD Millions)$17.062 $13.675 $14.081 $13.624*
Adjusted EBITDA Margin %12.6% 10.3% 9.8% —
Manufacturing Margin ($USD Millions)$17.1 $13.6 $15.9 —
Free Cash Flow ($USD Millions)$15.068 $12.530 $(1.147) —
  • Values marked with * retrieved from S&P Global.

Segment breakdown (end markets)

End Market Net Sales ($USD Thousands)Q3 2024Q3 2025
Commercial Vehicle$51,612 $39,211
Construction & Access$20,110 $22,145
Powersports$21,605 $22,980
Data Center & Critical Power$4,658 $22,566
Agriculture$10,358 $8,098
Military$6,968 $7,433
Other$20,081 $21,877
Total Net Sales$135,392 $144,310

Selected KPIs

KPIQ3 2024Q2 2025Q3 2025
Manufacturing Margin Rate (%)12.6% 10.3% 11.0%
Other SG&A ($USD Millions)$7.559 $10.290 $10.545
Bonuses & Deferred Comp ($USD Millions)$2.076 $1.525 $2.221
Interest Expense ($USD Millions)$2.653 $1.398 $3.430
Net Debt ($USD Millions)—$72.0 (debt) $214.9 (net debt)
Net Leverage (x)—1.4x 3.5x
Cash + Revolver Availability ($USD Millions)—$185.21 $247.52

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY 2025$560–$590 $528–$562 Lowered
Adjusted EBITDA ($USD Millions)FY 2025$60–$66 $49–$55 Lowered
Free Cash Flow ($USD Millions)FY 2025$43–$50 $25–$31 Lowered
Capital Expenditures ($USD Millions)FY 2025$13–$17 $13–$17 Maintained
Non‑recurring Items (FCF impact)FY 2025$5–$6 (incl. CFO & Accu‑Fab) Q3 impact: $3.5 (actual) N/A (context)
  • Management reaffirmed FY 2025 guidance in Q3; Q2 had lowered ranges vs Q1 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Data Center & Critical PowerDiversification via Accu‑Fab; begin reporting as new end market; early cross‑selling, pipeline building $22.6M Q3 revenue; >$100M qualified pipeline; 2026 synergy raised to $20–$30M; vertical could reach 20–25% of total revenues Accelerating
Commercial Vehicle (CV)ACT forecast down; customers cutting production days; no pre‑buy expected in 2025/2026 Q3 CV −24% YoY; management remains conservative for 2026; under‑absorption a headwind into H1’26 Soft/Conservative
AgricultureDe‑stocking; trough; recovery likely 2026+ Q3 Ag −21.8% YoY; expect low single‑digit decline in 2026 Weak
PowersportsChannel alignment nearing completion; potential 2026 improvement with rates Q3 +6.4% YoY helped by one‑time aluminum work; 2026 expected flat to low single‑digit up Stabilizing
Construction & AccessDe‑stocking; mixed signals; some non‑res activity Q3 +10.1% YoY; supported by non‑res & data center construction; watch rental fleet spending Improving
Capital Allocation & LeveragePost‑deal leverage holiday; target <2x by 2026 Q3 net leverage 3.5x; path to ≤3.0x by end‑2026; FCF positive in Q4 prioritized to debt reduction Transition, Deleveraging

Management Commentary

  • CEO on transformation: “We are seeing considerable growth and a growing opportunity pipeline for data center & critical power...we have increased our expectations for 2026 revenue synergies from the Accu‑Fab acquisition to a range of $20 to $30 million” .
  • CEO on margin trajectory: “While subdued demand in legacy markets may constrain near‑term margin expansion, we expect the actions we are taking will improve asset utilization and support a more diversified and resilient earnings profile over time” .
  • CFO on leverage and cash: “We now expect to achieve a net leverage ratio of 3x or lower by the end of 2026…we expect to generate positive free cash flow in the fourth quarter…we plan to use that cash to reduce debt” .

Q&A Highlights

  • CV outlook and planning posture: Management is using conservative ACT assumptions (~205k Class 8 units) for 2026; upside if OEM volumes exceed ACT; recent experience led to prudent capacity reconfiguration toward data center programs .
  • Data center ramp and cross‑sell: Programs can move from bid to revenue in 8–12 weeks; $25M of cross‑selling wins already allocated to multiple MEC plants (e.g., Defiance, Mayville, Fond du Lac) across battery backup cabinets, STS components, busways .
  • CapEx and capacity: ~90% of assets already in place; 2026 CapEx expected at ~$15–$20M to support efficiency and speed (vs $13–$17M in 2025) .
  • Powersports and Construction & Access: Powersports expected flat to low single‑digit up in 2026; Access demand supported by non‑res and data center construction; watch rental fleet dynamics .
  • Working capital and margins: Expect near‑term margin pressure as legacy volumes remain soft while resources are retained to ramp data center programs; Q4 seasonal impact acknowledged .

Estimates Context

  • Q3 2025 beats/misses versus S&P Global consensus:

    • Revenue: $144.31M actual vs ~$140.54M* consensus — beat by ~$3.77M *.
    • Adjusted EPS: $0.10 actual vs ~$0.01* consensus — beat by ~$$0.09 *.
    • Adjusted EBITDA: $14.08M actual vs ~$13.62M* consensus — slight beat *.

  • FY 2025 consensus sits near guidance midpoints: revenue ~$544.74M* vs guidance mid $545M; adjusted EBITDA ~$50.50M* vs guidance $49–$55M; we expect modest upward revisions to Q4 trajectory within guidance ranges if data center ramps progress as described *.

  • Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Data center & critical power is the growth engine: accelerating pipeline, cross‑selling, and higher gross margin programs (30%+) should increasingly offset cyclical legacy weakness; management raised 2026 synergy targets to $20–$30M .
  • Near‑term margin pressure is transitory: capacity retention to support rapid data center ramps and CV under‑absorption weigh on Q4/H1’26, but mix shift and utilization should improve into 2026 .
  • Balance sheet in transition but manageable: net leverage 3.5x post‑deal with a credible path to ≤3.0x by end‑2026; positive Q4 FCF targeted to debt reduction .
  • CV outlook conservative with upside optionality: planning on ACT’s lower volume baseline provides risk control; any pre‑buy or stronger OEM schedules would be an upside to margins and revenue .
  • Execution catalyst: 8–12 week bid‑to‑revenue cycle in data center enables faster conversion and supports sequential momentum; watch for additional cross‑sell and new logo wins .
  • 2025 guidance reaffirmed: implies confidence in H2 mix and operational actions; Street estimates appear aligned with guidance midpoints *.
  • Trading implication: Lean into prints/updates highlighting data center award conversion, margin mix improvements, and deleveraging cadence; monitor legacy end‑market signals (CV/Ag) for timing of under‑absorption relief .
Note: All consensus/target values marked with * are retrieved from S&P Global.