Mayville Engineering Company (MEC) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $135.4M, down 14.4% year-over-year due to broad-based demand softness, customer inventory de-stocking, and high dealer inventories, partially offset by new project wins and ramp-ups.

• Net income for Q3 2024 rose to $3.0M, up from $1.4M in Q3 2023, driven by improved margins, cost actions, and lower interest and tax expenses.

• Adjusted EBITDA margin improved to 12.6% (up 50 bps year-over-year) due to cost management, operational discipline, and MBX initiatives.

• Free cash flow was $15.1M, slightly down from $16.1M last year, with $11M of debt repaid in the quarter.

• Announced permanent closure of Wautoma facility and a 12% workforce reduction to address demand softness, expected to yield $1M–$3M in annualized savings and $600K in restructuring expenses in Q4.

Financial highlights

• Q3 2024 net sales were $135.4M, down 14.4% year-over-year, with manufacturing margin at $17.1M (12.6% margin, up 60 bps year-over-year).

• Adjusted EBITDA was $17.1M (12.6% margin), down from $19.2M, but margin improved by 50 bps.

• Adjusted EPS was $0.21, flat year-over-year; net income was $3.0M, up 107.7%.

• Free cash flow for Q3 was $15.1M, down from $16.1M in Q3 2023.

• Interest expense fell to $2.7M from $3.9M year-over-year, reflecting lower borrowings and rates.

Outlook and guidance

• 2024 guidance revised: net sales $580M–$590M, adjusted EBITDA $63M–$66M, CapEx $13M–$15M, free cash flow $45M–$55M (excluding legal settlement impact).

• Q4 expected to be the cycle low, with sales down 4%–11% sequentially and adjusted EBITDA of $8M–$11M.

• 2026 targets reaffirmed: $750M–$850M revenue, 14%–16% adjusted EBITDA margin, $65M–$75M free cash flow.

• Organic net sales growth of 1.5%–2.5% expected, driven by new project launches and Hazel Park ramp-up.

• MBX and labor productivity initiatives expected to contribute $2M–$4M in adjusted EBITDA.