Company Overview
Mayville Engineering Company (MEC) is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. The company's diverse customer base operates across various end markets, such as heavy- and medium-duty commercial vehicles, construction access equipment, powersports, agriculture, and military.
Founded in 1945 and headquartered in Milwaukee, Wisconsin, Mayville Engineering has established itself as a Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets. The company started as a corporation focused on tool and die manufacturing and has since evolved into a comprehensive manufacturing partner. In 1985, MEC formed the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (ESOP), which owned 100% of the company's outstanding shares until its initial public offering (IPO) in 2019. Throughout its nearly 80-year history, MEC has developed long-standing relationships with its blue-chip customers based upon its commitment to "Unmatched Excellence." In 2023, MEC completed the acquisition of Mid-States Aluminum (MSA), an industry-leading, vertically-integrated manufacturer of custom aluminum extrusions and fabrications, enabling the company to secure an attractive entry point within lightweight materials fabrication and providing significant new cross-selling opportunities with both new and existing customers.
Business Segment
Mayville Engineering's one operating segment focuses on producing metal components used in a broad range of end products. The company's financial performance has been impacted by macroeconomic conditions, including inflation, elevated interest rates, labor availability, material cost pressures, and inconsistent customer demand, which have had a negative effect on its business, financial condition, cash flows, and results of operations.
MEC's product portfolio spans several key areas, including fabrication, performance structures, tubes, tanks, and outdoor sports. Fabrication makes up the largest portion of the company's net sales at 52.7% in 2024, encompassing a diverse range of custom metal fabrication solutions. Performance structures, which include engineered structures and suspension components, accounted for 29.7% of net sales. Tube products, including round, square, and oval tubes, contributed 12.0% to total net sales. The tanks segment, providing engineered fuel, hydraulic, and other specialty tanks, made up 7.6% of net sales. Finally, the outdoor sports category, which includes components for powersports vehicles, represented 1.4% of the company's revenue in 2024.
Financials
In 2024, Mayville Engineering reported net sales of $581.6 million, a 1.2% decrease compared to the prior year. This decline was primarily due to softening demand in the second half of 2024 across the company's key end markets, including commercial vehicles, construction equipment, and agriculture, as well as the roll-off of certain military aftermarket programs. The company's manufacturing margin for the year was $71.1 million, up from $69.7 million in 2023, representing a manufacturing margin rate of 12.2%, an increase of 40 basis points. Adjusted EBITDA for 2024 was $64.4 million, compared to $66.1 million in 2023, resulting in an adjusted EBITDA margin of 11.1% for the year, down slightly from 11.2% in the prior year.
The company's EBITDA margin increased to 14.1% in 2024 from 9.4% in 2023, benefiting from the gain on a lawsuit settlement of $25.5 million. Gross margins improved to 12.2% in 2024, up from 11.8% in 2023, driven by MBX operational initiatives, commercial pricing actions, and cost reduction efforts.
For the most recent fiscal year, MEC reported annual revenue of $581.60 million, annual net income of $25.97 million, annual operating cash flow of $89.81 million, and annual free cash flow of $77.71 million. In the most recent quarter, revenue was $121.31 million, with net income of $15.97 million. The year-over-year growth in the most recent quarter was -18.4%, primarily driven by customer destocking activities and weaker end-user demand, which was partially offset by new project launches.
Liquidity
The company's free cash flow generation was a bright spot, reaching $77.7 million in 2024, up from $23.8 million in 2023. This significant increase was primarily due to the $25.5 million received from a legal settlement, as well as the company's continued focus on net working capital efficiency. Mayville Engineering's net debt to adjusted EBITDA ratio improved to 1.3x at the end of 2024, well below the company's targeted range of 1.5x to 2.0x.
MEC's balance sheet remains strong, with a debt-to-equity ratio of 0.10, cash on hand of $206,000, and an available credit line of $170.28 million under the $250 million revolving credit facility. The company's current ratio stands at 1.75, while its quick ratio is 0.90, indicating a solid liquidity position.
Future Outlook
Looking ahead to 2025, Mayville Engineering provided guidance for net sales between $560 million and $590 million, adjusted EBITDA of $60 million to $66 million, and free cash flow in the range of $43 million to $50 million. The company's outlook assumes demand conditions will gradually recover during the second half of 2025, with customer destocking activities and consumer demand normalizing.
Mayville Engineering's diversified end market exposure has helped mitigate the impact of downturns in individual markets. However, the company's powersports market, which represented approximately 17% of 2024 revenue, is expected to see a low single-digit decrease in 2025 due to its high interest rate sensitivity and current channel inventory levels.
Capital expenditures for 2025 are expected to be in the range of $13 million to $17 million. MEC expects to be below 1 times net debt leverage by the end of 2025, excluding any M&A activity. Embedded in the 2025 adjusted EBITDA guidance is $1 million to $3 million of cost improvement driven by MBX operational excellence and strategic value-based pricing initiatives, net of inflationary pressure.
Strategic Initiatives
The company has been actively executing its MBX value creation framework, which focuses on high-performance culture, operational excellence, commercial excellence, disciplined capital deployment, and human resource optimization. These initiatives have led to cost savings and productivity improvements, positioning Mayville Engineering to weather the current demand challenges.
Capital Allocation
Mayville Engineering's balance sheet strength and free cash flow generation have enabled the company to maintain a disciplined capital allocation strategy, prioritizing debt reduction, opportunistic share repurchases, and strategic acquisitions. The company repaid over $31 million in debt during the fourth quarter of 2024, reducing its net leverage ratio to 1.3x, well below its target range.
In 2024, MEC generated free cash flow of nearly $78 million, including $25.5 million from a legal settlement. Excluding the settlement, organic free cash flow more than doubled versus 2023 levels. For the full year 2024, MEC repurchased $5.9 million of their common stock, partially offsetting the dilution from shares awarded under their stock-based compensation program.
Geographic Presence
Mayville Engineering operates solely in the United States, focusing on serving domestic customers across various industries.
Conclusion
Despite the near-term headwinds, Mayville Engineering remains committed to its long-term growth strategy, which includes diversifying its end market exposure, expanding its presence in high-growth sectors, and pursuing accretive acquisitions. The company's experienced management team and focus on operational excellence position it well to navigate the current industry challenges and capitalize on future opportunities. With a strong balance sheet, improving free cash flow generation, and strategic initiatives in place, MEC is poised to drive long-term shareholder value as market conditions normalize.