Mayville Engineering Company (MEC) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2025 were $135.6 million, down 15.9% year-over-year due to softer demand and inventory destocking, but up 12% sequentially, reflecting operational discipline and new project volumes.

• Adjusted EBITDA was $12.2 million (9.0% margin), down from $18.5 million (11.5%) year-over-year, but up 140 basis points sequentially, driven by cost rationalization.

• Free cash flow was $5.4 million, supported by working capital efficiency, though down from $7.9 million year-over-year.

• Maintained full-year 2025 guidance, citing strong execution and robust performance in Military and Other end markets.

• Returned $1.7 million to shareholders via share repurchases in Q1 2025; $17.4 million remains under authorization.

Financial highlights

• Net sales were $135.6 million in Q1 2025, down from $161.3 million in Q1 2024.

• Manufacturing margin was $15.3 million (11.3% margin rate), down from $20.9 million (13%) year-over-year.

• Adjusted EBITDA was $12.2 million (9.0% margin), down from $18.5 million (11.5%) year-over-year.

• Free cash flow was $5.4 million, with a 44% conversion of Adjusted EBITDA.

• Net leverage ratio improved to 1.4x, with debt reduced to $80.6 million from $143.1 million year-over-year.

Outlook and guidance

• Full-year 2025 guidance maintained: net sales of $560–$590 million, Adjusted EBITDA of $60–$66 million, and free cash flow of $43–$50 million.

• Capital expenditures for 2025 expected to be $13–$17 million, focused on automation and growth.

• Demand expected to gradually improve in H2 2025 as inventory normalizes; Military and Other end markets remain robust.

• Guidance does not factor in a potential recession or regulatory changes; contingency plans in place for demand shifts.

• Management expects to remain in compliance with credit facility covenants and believes liquidity is sufficient for 2025 and beyond.