Executive Summary / Key Takeaways

• Strategic Transformation Underway: Mayville Engineering Company (MEC) is actively transforming from a cyclical metal fabricator to a diversified, high-margin manufacturing partner, driven by its MBX operational excellence framework and strategic M&A into secular growth markets.
• Accu-Fab Acquisition as a Catalyst: The recent $140.5 million acquisition of Accu-Fab, specializing in critical power and data center infrastructure, significantly expands MEC's serviceable addressable market by 60% to $8 billion, promising substantial revenue synergies of $5 million to $10 million by 2026 and up to $20 million by 2028.
• Operational Discipline Mitigates Cyclical Headwinds: Despite a challenging macroeconomic environment and persistent destocking in core markets (commercial vehicles, powersports, agriculture), MEC's MBX framework has delivered tangible benefits, including a 5% reduction in manufacturing square footage, a 12% headcount reduction, over $5 million in cost savings, and improved inventory turns from 6.2 to 9.1.
• Financial Resilience and Capital Allocation: MEC maintains a strong balance sheet with a net leverage ratio of 1.4x (pro forma 3.1x post-acquisition), prioritizing debt repayment to target below 2x by end of 2026, alongside consistent share repurchases.
• Long-Term Growth Ambition: While 2026 targets were withdrawn due to market uncertainty, MEC aims for $1 billion in revenue and adjusted EBITDA margins exceeding 15% long-term, leveraging its U.S. domestic footprint and custom fabrication expertise to capitalize on reshoring trends and high-growth adjacent markets.

A Fabricator's Evolution and Strategic Reorientation

Mayville Engineering Company, Inc. (MEC), founded in 1945, has long been a cornerstone of American manufacturing. As a leading Tier I U.S. supplier, MEC provides a comprehensive suite of vertically-integrated, value-added manufacturing solutions, from initial design and prototyping to fabrication, aluminum extrusion, coating, assembly, and aftermarket components. This full-spectrum capability positions MEC as a true one-stop partner for its original equipment manufacturer (OEM) customers across diverse end markets, including heavy- and medium-duty commercial vehicles, construction access equipment, powersports, agriculture, and military applications.

MEC's foundational strength lies in its engineering expertise and technical know-how, which enable it to add significant value through its customers' product redevelopment cycles. This deep engagement fosters long-standing relationships with blue-chip customers, a testament to the company's commitment to "Unmatched Excellence." Its 100% U.S.-based manufacturing footprint, with over 95% of inputs sourced domestically, is a critical competitive differentiator, particularly as reshoring trends gain momentum. This domestic presence allows MEC to offer superior value in its customers' supply chains, especially for those seeking to de-risk international dependencies.

The company's competitive landscape includes larger, more diversified players like Magna International (MGA), Martinrea International (MRE), Worthington Industries (WOR), and Parker Hannifin (PH). While these rivals often boast greater scale and broader global reach, MEC differentiates itself through its specialized custom fabrication expertise and adaptability. For instance, MEC's ability to provide tailored solutions and comprehensive manufacturing services can appeal to customers seeking bespoke projects, potentially offering greater flexibility and innovation speed in niche applications compared to the high-volume, standardized production models of some larger competitors.

MEC's operational efficiency has been significantly enhanced by its proprietary MBX value creation framework, launched in late 2022. This continuous improvement methodology is a core technological differentiator, driving substantial benefits across the organization. For example, the implementation of MBX at Mid-States Aluminum (MSA), an earlier acquisition, dramatically improved its adjusted EBITDA margins from approximately 20% to over 30% within two years, far exceeding initial expectations. This demonstrates the framework's tangible impact on profitability and operational leverage.

Operational Excellence: The MBX Advantage

The MBX framework is more than just an initiative; it is a cultural bedrock for MEC, fostering continuous improvement and cost discipline. Since its inception in late 2022, the company has completed over 275 MBX Kaizen events, yielding impressive, quantifiable results. These efforts have led to a 5% reduction in legacy manufacturing square footage and a 12% reduction in headcount, alongside the removal of over $5 million in other fixed costs.

The impact of MBX is also profoundly evident in MEC's working capital management. Inventory turns, a critical measure of efficiency, improved significantly from 6.2 in 2022 to approximately 9.1 by Q3 2024. This focus on lean manufacturing practices, coupled with strategic adjustments to receivable collection and payable terms, has been a primary driver of MEC's robust free cash flow generation. For investors, this operational rigor means a leaner cost structure, enhanced agility in dynamic demand environments, and a stronger platform for margin expansion when volumes recover.

Despite a challenging Q2 2025, where manufacturing margins declined to 10.3% from 13.6% in the prior year due to lower customer demand and reduced fixed cost absorption, the MBX framework helped mitigate the impact. In Q3 2024, for instance, the manufacturing margin rate actually increased by 60 basis points year-over-year to 12.6%, even as net sales declined by over 14%. This was achieved through MBX initiatives, strategic pricing, and decisive cost rationalization, resulting in a decremental rate of under 10%, significantly below the historical average of 17%. This demonstrates MEC's enhanced ability to preserve profitability during downturns.

Strategic Expansion: Accu-Fab and High-Growth Markets

MEC's strategic evolution took a significant leap forward with the acquisition of Accu-Fab, LLC, completed on July 1, 2025, for $140.5 million in cash. This transaction is a pivotal moment in MEC's transformation, directly addressing its strategic priority of diversification into high-growth adjacent end markets. Accu-Fab brings specialized capabilities in design, engineering, sheet metal fabrication, integration, and finishing for critical power infrastructure, data center, and renewable energy sectors.

The addition of Accu-Fab immediately expands MEC's estimated serviceable addressable market by approximately 60% to $8 billion, positioning the company in segments with compelling long-term secular tailwinds. Management has already secured its first cross-selling win for data center fabrications, launching in Q3 2025, demonstrating the immediate potential for revenue synergies. MEC anticipates generating $5 million to $10 million in revenue synergies from Accu-Fab in 2026, two years ahead of schedule, with total revenue synergies projected to reach $15 million to $20 million by 2028, driven by expected double-digit growth in these new markets.

This acquisition also leverages MEC's proven integration playbook, applying the MBX framework to Accu-Fab's operations to drive both revenue and cost synergies. The success with MSA, where margins improved significantly post-acquisition, provides a strong precedent. For investors, Accu-Fab represents not just incremental revenue but a strategic reorientation towards higher-value, less cyclical markets, enhancing MEC's long-term growth profile and margin potential.

Financial Performance: Resilience Amidst Headwinds

MEC's financial performance in recent periods reflects a company executing its strategy amidst significant macroeconomic headwinds. In Q2 2025, net sales decreased 19.1% year-over-year to $132.3 million, primarily due to softer customer demand and channel inventory destocking across most core end markets. This led to a GAAP net loss of $1.1 million for the quarter, compared to a net income of $3.8 million in Q2 2024. For the first six months of 2025, net sales were $267.9 million, a 17.5% decrease from the prior year, resulting in a net income of $1.1 million, down from $7.0 million.

Despite these top-line challenges, MEC's operational discipline is evident. Adjusted EBITDA for Q2 2025 was $13.7 million, with an Adjusted EBITDA margin of 10.3%. While lower than the prior year, this represented a sequential improvement of 130 basis points from Q1 2025, underscoring the effectiveness of cost management initiatives. For the first six months of 2025, Adjusted EBITDA was $26.7 million, with a margin of 10.0%.

The company's liquidity and capital allocation remain strong. As of June 30, 2025, total debt stood at $72 million, down from $125.4 million a year prior, resulting in a healthy net leverage ratio of 1.4x. Following the Accu-Fab acquisition, the pro forma net leverage increased to approximately 3.1x, but MEC is prioritizing debt repayment, targeting a return below 2x by the end of 2026. The company also expanded its revolving credit facility to $350 million, providing ample liquidity. Free cash flow generation remains robust, with $12.5 million generated in Q2 2025, representing a 92% conversion of Adjusted EBITDA. For the first six months of 2025, free cash flow was $17.9 million. MEC also repurchased $4.6 million of common stock year-to-date in 2025, nearing its annual commitment to offset stock compensation dilution.

Outlook and Risks: Charting a Course Through Uncertainty

MEC has updated its 2025 financial guidance to reflect both the contribution of the Accu-Fab acquisition and the persistent softness in its core end markets. The company now expects full-year 2025 net sales to be between $528 million and $562 million, including $28 million to $32 million from Accu-Fab. Adjusted EBITDA is projected to be between $49 million and $55 million, with Accu-Fab contributing $6 million to $8 million. Free cash flow is anticipated to be between $25 million and $31 million, with capital expenditures in the range of $13 million to $17 million.

A key assumption underlying this revised guidance is that MEC no longer expects a second-half recovery in market demand for its legacy end markets. Specifically, Q3 revenue is projected to decline low single-digits sequentially, followed by a high single-digit decline in Q4. The commercial vehicle market, representing 38% of MEC's revenue, faces significant headwinds, with the latest ACT forecast projecting a 24% decline in 2025 production compared to 2024. Management explicitly does not anticipate a pre-buy in 2025 or 2026 due to uncertainty surrounding 2027 EPA regulations. The agriculture market is expected to remain in a trough, with recovery not likely until mid-2026, while powersports remains sensitive to interest rates.

To counter these challenges, MEC is implementing a restructuring plan to consolidate three warehouses and one manufacturing facility over the next 6 to 18 months. This initiative is expected to incur one-time costs of $5 million to $7 million but yield approximately $2 million in annual fixed cost savings. The company's "playbook" for potential recessionary environments or regulatory changes underscores its proactive approach to preserving margins through flexible production scheduling and targeted cost reductions.

Risks to this outlook include a prolonged period of elevated interest rates, further deterioration in end-user demand, and continued volatility in trade policy. While MEC's domestic sourcing and pass-through contracts largely insulate it from direct tariff impacts on material costs, the uncertainty can delay customer decisions on reshoring steel fabrications. Customer concentration also remains a vulnerability, though MEC's consistent new business wins, tracking ahead of its $100 million annual goal for 2025, help mitigate this.

Conclusion

Mayville Engineering Company is undergoing a profound strategic transformation, repositioning itself from a traditional, cyclical metal fabricator to a more diversified, operationally excellent, and technologically adept manufacturing partner. The MBX framework has proven its efficacy in driving efficiency and margin resilience, enabling MEC to weather significant macroeconomic headwinds and demand softness in its core markets. This operational discipline, coupled with a strong balance sheet, provides a solid foundation.

The acquisition of Accu-Fab is a game-changer, strategically diversifying MEC into high-growth critical power and data center end markets with compelling secular tailwinds. This move, alongside a robust pipeline of new business wins and a clear long-term vision for $1 billion in revenue and 15%+ Adjusted EBITDA margins, underscores a compelling investment thesis. While near-term market conditions remain challenging, MEC's U.S.-based manufacturing footprint and specialized expertise position it uniquely to capitalize on reshoring trends and emerging industrial opportunities, making it a compelling long-term play for discerning investors.