MEC Mayville Engineering Company Inc

Mayville Engineering Company (NYSE: MEC) (the “Company” or “MEC”), a leading value-added provider of design, prototyping and manufacturing solutions serving diverse end-markets, today announced results for the three months ended September 30, 2023.

THIRD QUARTER 2023 RESULTS

(All comparisons versus the prior-year period)

• Net sales of $158.2 million, or +16.1% y/y including organic growth of 6.2% y/y
• Net income of $1.4 million, or $0.07 per diluted share
• Non-GAAP Adjusted Diluted EPS of $0.21
• Adjusted EBITDA of $19.2 million, including the $1.7 million impact from the ramp-up of production at Hazel Park
• Adjusted EBITDA margin of 12.1% of net sales, including a 110 basis point impact from the ramp-up of production at Hazel Park
• Record quarterly Free Cash Flow of $16.1 million, an increase of $10.9 million y/y
• Net debt leverage ratio finished slightly below 2.5x

MANAGEMENT COMMENTARY

“We delivered significant year-over-year growth in revenue, Adjusted EBITDA and free cash flow in the third quarter, while continuing to demonstrate focused execution under our MBX value creation framework,” stated Jag Reddy, President and Chief Executive Officer. “We generated organic sales growth across our commercial vehicle, powersports and military markets during the third quarter. Our collective focus on driving improved cost absorption and price discipline resulted in strong Adjusted EBITDA margins and record free cash flow generation during the quarter, even as our Hazel Park facility continued to ramp up utilization.”

“At our inaugural Investor Day event in September, we introduced three-year performance targets that highlight the significant value creation potential of our business,” continued Reddy. "Our value creation roadmap seeks to drive margin expansion and improved free cash flow conversion through sustained volume growth, value-based pricing, improved asset optimization and process improvements, all of which were evident in our strong third quarter performance. In combination, these initiatives are expected to deliver between $105 to $135 million of annual Adjusted EBITDA, 14% to 16% Adjusted EBITDA margins and $65 to $75 million of annual free cash flow generation by year-end 2026.”

“Customer indications of interest and order activity remained healthy entering the fourth quarter,” continued Reddy. “Even so, we remain mindful of the potential for a macroeconomic slowing entering 2024, including expectations for a general slowing in commercial vehicle demand, all of which were contemplated in our 2026 financial forecast shared at the Investor Day.”

“From a capital allocation perspective, debt reduction remains our top near-term priority, followed by the opportunistic open-market purchase of our common stock under our share repurchase authorization,” continued Reddy. “We generated a record $16.1 million in free cash flow in the third quarter, allowing us to repay $17.1 million of debt from the MSA acquisition, while also repurchasing $1.0 million of stock. As previously communicated, we intend to reduce our net leverage to between 1.5x to 2.0x by year-end 2024. At the same time, we continue to build a longer-term pipeline of acquisition targets that provide us entry into high-value market adjacencies, including those equipped to capitalize on energy transition, reshoring and outsourcing themes.”

PERFORMANCE SUMMARY

Net sales increased by 16.1% on a year-over-year basis in the third quarter 2023, driven in part by the recent acquisition of Mid-States Aluminum (“MSA”) and increased organic volumes in our commercial vehicle, military and powersports end markets, partially offset by softening demand in our construction and agriculture end markets. Excluding the impact of the MSA acquisition, net sales increased organically by 6.2% year-over-year.

Manufacturing margin was $19.0 million in the third quarter 2023, or 12.0% of net sales, versus $15.5 million, or 11.3% of net sales, in the prior year period. The year-over-year increase in manufacturing margin was driven by the increased organic volumes, MBX initiatives and the MSA acquisition, partially offset by unabsorbed fixed costs associated with new project launches and non-recurring inventory step-up expense associated with the MSA acquisition.

Profit sharing, bonus and deferred compensation expense increased $2.2 million to $2.3 million in the third quarter of 2023. Other selling, general and administrative expenses were $8.6 million in the third quarter of 2023 as compared to $6.5 million for the same prior year period. The increase in these expenses during the third quarter primarily reflects the lower stock-based compensation expense in the prior year due to forfeitures of unvested awards, transaction costs associated with the acquisition of MSA, an increase in legal costs associated with litigation against a former customer and increased salaries, wages and benefits.

Interest expense was $3.9 million in the third quarter of 2023, as compared to $0.8 million in the prior year period, due to higher interest rates and an increase in borrowings. The increase in borrowings relative to the prior year is due to the acquisition of MSA, which closed on July 1, 2023.

Net income for the third quarter of 2023 was $1.4 million, or $0.07 per diluted share, versus $6.6 million, or $0.32 per diluted share, in the prior-year period.

MEC reported Adjusted EBITDA of $19.2 million in the third quarter 2023, or 12.1% of net sales, versus $16.1 million, or 11.8% of net sales, in the prior-year period. Third quarter 2023 Adjusted EBITDA reflects $1.7 million of losses associated with the ramp-up of production at our Hazel Park facility as compared to $1.3 million of losses in the prior year period. Excluding the impact of the ramp-up of the Hazel Park facility, Adjusted EBITDA margin for the third quarter of 2023 would have been 13.2%.

Adjusted net income for the third quarter of 2023 was $4.2 million, or $0.21 per diluted share, versus $6.7 million, or $0.33 per diluted share, in the prior year period. The decrease in adjusted net income reflects an increase in selling, general and administrative costs, the impact of unabsorbed fixed costs from new project launches and higher interest expense, which offset an increase in manufacturing margins.

Free cash flow during the third quarter 2023 was $16.1 million as compared to $5.2 million in the prior year period. The increase in free cash flow was primarily attributable to an $8.9 million decrease in capital expenditures associated with the completion of the Hazel Park facility and an increase in net cash provided by operating activities.

END-MARKET UPDATE

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,

 

 

2023

 

2022

Commercial Vehicle

 

$

57,264

 

$

53,714

Construction & Access

 

 

26,296

 

 

26,918

Powersports

 

 

25,143

 

 

23,344

Agriculture

 

 

15,029

 

 

14,373

Military

 

 

10,960

 

 

6,436

Other

 

 

23,525

 

 

11,490

Net Sales

 

$

158,217

 

$

136,276

Commercial Vehicles

MEC is a Tier 1 supplier to many of the country’s top original equipment manufacturers (OEM) of commercial vehicles providing exhaust & aftertreatment, engine components, cooling, fuel and structural systems for both heavy- and medium-duty commercial vehicles.

Net sales to the commercial vehicle market were $57.3 million in the third quarter of 2023, an increase of 6.6% versus the prior-year period. The increase in sales was primarily the result of volume increases and strengthened end market demand due to a 3.5% year-over-year increase in class 8 commercial vehicle production.

Construction & Access

MEC manufactures thousands of parts for the construction & access market including fenders, hoods, supports, frames, platforms, frame structures, doors and tubular products such as exhaust & aftertreatment, engine components, cooling system components, handrails and full electro-mechanical assemblies.

Net sales to the construction & access market were $26.3 million in the third quarter 2023, a decrease of 2.3% versus the prior-year period. The decrease in sales was primarily driven by lower residential construction demand.

Powersports

MEC manufactures stampings and complex metal assemblies and coatings for the marine propulsion, all-terrain vehicles (ATV), multi-utility vehicles (MUV) and motorcycle markets. MEC’s powersports expertise includes axle housings, steering columns, swing arms, fenders, suspension components, ATV/MUV racks, cowl assemblies and vehicle frames.

Net sales to the powersports market were $25.1 million in the third quarter of 2023, an increase of 7.7% versus the prior-year period. The increase in sales was the result of higher volumes from new project wins and share gains from both new and existing customers.

Agriculture

MEC is an integral partner in the supply chain of the world’s leading agriculture OEMs manufacturing thousands of parts including fenders, hoods, supports, frames, platforms, frame structures, doors, and tubular products such as exhaust, engine components, cooling system components, handrails and full electro-mechanical assemblies.

Net sales to the agriculture market were $15.0 million during the third quarter of 2023, an increase of 4.6% versus the prior-year period. The increase in sales was driven mostly by the acquisition of MSA and was slightly offset by continued demand softness in our legacy business.

Military

MEC holds the International Traffic in Arms Regulations (ITAR) certification and produces components for the United States military. Products include exhaust, engine components, cooling, fuel, suspension, structural systems, and chemical agent resistant coating (CARC) painting capabilities.

Net sales to the military market were $11.0 million in the third quarter of 2023, an increase of 70.3% versus the prior-year period. Contributions from new programs, new vehicle introductions and demand associated with the conflict in Ukraine, contributed to the year-over-year sales growth.

Other

MEC also produces a wide variety of components and assemblies for customers in the power generation, industrial equipment, mining, forestry, communications, and medical markets.

Net sales to other end markets for the third quarter of 2023 were $23.5 million, an increase of 104.7% year-over-year. The increase is primarily attributable to sales from MSA, which was acquired on July 1, 2023. Sales in this market primarily relate to MEC Outdoors, tooling, and additional miscellaneous markets.

STRATEGIC UPDATE

During the third quarter, MEC continued the rigorous implementation of its MEC Business Excellence (MBX) initiative, a value-creation framework designed to drive sustained operational and commercial excellence execution across all aspects of the organization. Upon full implementation, MEC expects MBX to drive Adjusted EBITDA margin expansion to between 14% to 16% of net sales and total net sales of between $750 to $850 million by year-end 2026.

• Drive a High-Performance Culture. The Company is focused on effectuating cultural change across the organization by implementing performance-based metrics, daily lean management and other process-oriented strategies. Through these efforts, the Company is building a high-performance culture capable of driving improved performance, asset utilization and cost optimization. During the third quarter, the Company continued the implementation and alignment of processes and best-practices across the enterprise to drive strategic execution. As part of the implementation, the Company has updated its organizational mission statement to align with a culture of standardization and consistency; One MEC. One Mission.
• Drive Operational Excellence. The Company is focused on leveraging technologies and capabilities to increase productivity and reduce costs across the value chain. The Company intends to achieve this objective through the implementation of lean initiatives such as value stream mapping, sales, inventory, and operations planning (SIOP), and further optimization of its supply chain and procurement strategies. The Company’s operational excellence initiatives also focus on improving fixed cost absorption, labor productivity and inventory efficiency by leveraging its recent investments in advanced manufacturing capabilities and automation. As of the end of the third quarter, the Company had held 100 MBX lean events and continues to estimate that its operational excellence initiatives will generate 200 to 300 bps of Adjusted EBITDA margin improvement by 2026.
• Drive Commercial Expansion. The Company is focused on driving commercial growth through an integrated, solutions-oriented approach that leverages its full suite of design, prototyping, and aftermarket services; an expansion of its fabrication capabilities beyond steel, with an emphasis on lightweight aluminum, plastics and composites; diversification within high-growth energy transition markets; further market penetration within existing end-markets; and the implementation of value-based pricing. During the third quarter, the Company closed the acquisition of MSA, which positions MEC to capitalize on revenue synergies within its existing legacy customer base and is now positioned to grow organically by pursuing demand for light-weight aluminum products in high-growth EV and energy transition markets. During the third quarter, MEC secured an agreement with an existing customer to leverage MSA’s aluminum extrusion capabilities, which will begin during 2024.
• Drive Human Resource Optimization. The Company remains focused on the recruitment and retention of skilled, experienced employees to support the growth of its business. This component of the MBX value creation framework is designed to provide competitive, performance-based incentives; develop high-potential candidates for internal development and advancement; ensure business continuity through multi-tiered succession planning; and to ensure a stable recruiting pipeline. As part of this effort, the Company announced during the third quarter that it intends to relocate its corporate headquarters to Milwaukee beginning in early 2024.

BALANCE SHEET UPDATE

As of September 30, 2023, MEC had net debt outstanding of $169.6 million and total cash and availability on its senior secured revolving credit facility of $250.01 million. During the third quarter 2023, the Company utilized free cash flow to repay $17.1 million of debt that it incurred in conjunction with the MSA acquisition. At the end of the third quarter, the ratio of net debt to trailing twelve-month Adjusted EBITDA was 2.46x.

_________________

1 This amount is reduced to approximately $81.6 million after taking into account the $168.4 million of outstanding borrowings under the credit facility as of September 30, 2023.

FINANCIAL GUIDANCE

Today, the Company reaffirmed its financial guidance for the full year 2023. All guidance is current as of the time provided and is subject to change.

 

 

 

 

 

 

 

FY 2022

 

FY 2023

(in Millions)

 

Actual

 

Forecast

Net Sales

 

$539.4

 

$580 - $610

Adjusted EBITDA

 

$60.8

 

$66 - $71

Capital Expenditures

 

$58.6

 

$15 - $20

The Company’s 2023 guidance includes the pro-rata contribution of the MSA acquisition, including $30 to $35 million of incremental net sales and $4 to $6 million of incremental Adjusted EBITDA. The Company continues to expect that Net Sales and Adjusted EBITDA margin in the second half of the year will be favorably impacted by improved capacity utilization, relative to the first half of the year. Full-year 2023 guidance excludes the potential impact from the United Auto Workers strikes within the CV and Auto industries, which is currently estimated to negatively impact net sales by approximately $6 to $7 million and Adjusted EBITDA by approximately $1 to $2 million per month beginning in November.

As before, the Company continues to expect net sales for 2023 to reflect raw material pass-through costs of between negative 4% to negative 5% of total net sales for the year, as compared to positive 5% of net sales for the full year 2022. The Company’s Adjusted EBITDA guidance reflects scrap income of between $13 million and $15 million, as compared to $13 million in the full year 2022. The guidance for full year 2023 Adjusted EBITDA also reflects $5 million to $7 million of under-absorbed overhead costs associated with the ramp-up of production at the Company’s Hazel Park, Michigan manufacturing facility. The Company expects the unfavorable impact from the ramp-up of production at Hazel Park to be partially offset by a 40 to 70 basis point improvement in manufacturing margins resulting from the MBX initiatives, which will directly benefit Adjusted EBITDA.

THIRD QUARTER 2023 RESULTS CONFERENCE CALL

The Company will host a conference call on Wednesday, November 1, 2023 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).

For a live webcast of the conference call and to access the accompanying investor presentation, please visit www.mecinc.com and click on the link to the live webcast on the Investors page.

For telephone access to the conference, call (833) 470-1428 within the United States, or call (833) 950-0062 within Canada and please use the Access Code: 116929.

FORWARD-LOOKING STATEMENTS

This press-release includes forward-looking statements that reflect plans, estimates and beliefs. Such statements involve risk and uncertainties. Actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors. Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to: macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing supply chain challenges, labor availability and cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including future uncertain impacts); risks relating to developments in the industries in which our customers operate; risks related to scheduling production accurately and maximizing efficiency; our ability to realize net sales represented by our awarded business; failure to compete successfully in our markets; our ability to maintain our manufacturing, engineering and technological expertise; the loss of any of our large customers or the loss of their respective market shares; risks related to entering new markets; our ability to recruit and retain our key executive officers, managers and trade-skilled personnel; volatility in the prices or availability of raw materials critical to our business; manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements; our ability to successfully identify or integrate acquisitions; our ability to develop new and innovative processes and gain customer acceptance of such processes; risks related to our information technology systems and infrastructure; geopolitical and economic developments, including foreign trade relations and associated tariffs; results of legal disputes, including product liability, intellectual property infringement and other claims; risks associated with our capital-intensive industry; risks related to our treatment as an S Corporation prior to the consummation of our initial public offering; risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan; and other factors described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q. This discussion should be read in conjunction with our audited consolidated financial statements included in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.

ABOUT MAYVILLE ENGINEERING COMPANY

Founded in 1945, 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. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Along with process engineering and development services, MEC maintains an extensive manufacturing infrastructure with 22 facilities across seven states. These facilities make it possible to offer conventional and CNC (computer numerical control) stamping, shearing, fiber laser cutting, forming, drilling, tapping, grinding, tube bending, machining, welding, assembly, and logistic services. MEC also possesses a broad range of finishing capabilities including shot blasting, e-coating, powder coating, wet spray and military grade chemical agent resistant coating (CARC) painting. For more information, please visit www.mecinc.com.

NON-GAAP FINANCIAL MEASURES

This press release contains financial information calculated in a manner other than in accordance with U.S generally accepted accounting principles (“GAAP”).

The non-GAAP measures used in this press release are EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Diluted EPS, and Free Cash Flow.

EBITDA represents net income before interest expense, provision for income taxes, depreciation, and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period. Adjusted EBITDA represents EBITDA before CEO transition costs, stock-based compensation expense, MSA acquisition related costs, loss on debt extinguishment, field replacement claim, Hazel Park transition and legal costs due to the former fitness customer, costs recognized on step-up of MSA acquired inventory and impairment charges on long-lived assets and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. Adjusted Net Income and Diluted EPS represent net income before the aforementioned Adjusted EBITDA addback items which do not reflect our core operating performance. Free Cash Flow represents net cash provided by, or used in, operating activities, less cash flows used in the purchase of property, plant and equipment. We present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Diluted EPS, and Free Cash Flow as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or cash flow provided by, or used in, operating activities, or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. These measures may not be comparable to the similarly named measures reported by other companies and have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Please reference our reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to EBITDA, Adjusted EBITDA, Adjusted Net Income and Diluted EPS, Free Cash Flow and the calculation of EBITDA Margin and Adjusted EBITDA Margin included in this press release.

Mayville Engineering Company, Inc.

Consolidated Balance Sheet

(in thousands, except share amounts)

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

2023

 

2022

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,305

 

 

$

127

 

Receivables, net of allowances for doubtful accounts of $672 at September 30, 2023 and $545 at December 31, 2022

 

 

72,069

 

 

 

58,001

 

Inventories, net

 

 

73,311

 

 

 

71,708

 

Tooling in progress

 

 

5,664

 

 

 

7,938

 

Prepaid expenses and other current assets

 

 

4,513

 

 

 

3,529

 

Total current assets

 

 

157,862

 

 

 

141,303

 

Property, plant and equipment, net

 

 

178,014

 

 

 

145,771

 

Assets held for sale

 

 

81

 

 

 

83

 

Goodwill

 

 

92,650

 

 

 

71,535

 

Intangible assets, net

 

 

60,760

 

 

 

43,809

 

Operating lease assets

 

 

32,725

 

 

 

36,073

 

Other long-term assets

 

 

2,705

 

 

 

2,007

 

Total assets

 

$

524,797

 

 

$

440,581

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

53,366

 

 

$

53,735

 

Current portion of operating lease obligation

 

 

5,079

 

 

 

4,857

 

Accrued liabilities:

 

 

 

 

 

 

Salaries, wages, and payroll taxes

 

 

8,601

 

 

 

7,288

 

Profit sharing and bonus

 

 

1,627

 

 

 

6,860

 

Current portion of deferred compensation

 

 

266

 

 

 

18,062

 

Other current liabilities

 

 

12,520

 

 

 

11,646

 

Total current liabilities

 

 

81,459

 

 

 

102,448

 

Bank revolving credit notes

 

 

168,412

 

 

 

72,236

 

Operating lease obligation, less current maturities

 

 

28,550

 

 

 

31,891

 

Deferred compensation, less current portion

 

 

3,495

 

 

 

3,132

 

Deferred income tax liability

 

 

12,773

 

 

 

11,818

 

Other long-term liabilities

 

 

3,066

 

 

 

1,189

 

Total liabilities

 

$

297,755

 

 

$

222,714

 

Commitments and contingencies

 

 

 

 

 

 

Common shares, no par value, 75,000,000 authorized, 21,851,249 shares issued at September 30, 2023 and 21,645,193 at December 31, 2022

 

 

—

 

 

 

—

 

Additional paid-in-capital

 

 

204,664

 

 

 

200,945

 

Retained earnings

 

 

31,891

 

 

 

26,274

 

Treasury shares at cost, 1,542,893 shares at September 30, 2023 and 1,472,447 at December 31, 2022

 

 

(9,513

)

 

 

(9,352

)

Total shareholders’ equity

 

 

227,042

 

 

 

217,867

 

Total

 

$

524,797

 

 

$

440,581

 

Mayville Engineering Company, Inc.

Consolidated Statement of Net Income

(in thousands, except share amounts and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2023

 

2022

 

2023

 

2022

Net sales

 

$

158,217

 

 

$

136,276

 

 

$

439,843

 

 

$

410,865

 

Cost of sales

 

 

139,197

 

 

 

120,812

 

 

 

388,351

 

 

 

362,782

 

Amortization of intangible assets

 

 

2,173

 

 

 

1,738

 

 

 

5,649

 

 

 

5,214

 

Profit sharing, bonuses, and deferred compensation

 

 

2,346

 

 

 

166

 

 

 

8,037

 

 

 

3,921

 

Employee stock ownership plan expense (income)

 

 

—

 

 

 

(152

)

 

 

—

 

 

 

1,668

 

Other selling, general and administrative expenses

 

 

8,608

 

 

 

6,533

 

 

 

22,969

 

 

 

18,653

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

(1,737

)

 

 

—

 

 

 

(4,346

)

Income from operations

 

 

5,893

 

 

 

8,916

 

 

 

14,837

 

 

 

22,973

 

Interest expense

 

 

(3,907

)

 

 

(830

)

 

 

(7,533

)

 

 

(2,163

)

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

(216

)

 

 

—

 

Income before taxes

 

 

1,986

 

 

 

8,086

 

 

 

7,088

 

 

 

20,810

 

Income tax expense

 

 

554

 

 

 

1,490

 

 

 

1,471

 

 

 

4,464

 

Net income and comprehensive income

 

$

1,432

 

 

$

6,596

 

 

$

5,617

 

 

$

16,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.32

 

 

$

0.28

 

 

$

0.80

 

Diluted

 

$

0.07

 

 

$

0.32

 

 

$

0.27

 

 

$

0.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

20,439,602

 

 

 

20,390,221

 

 

 

20,416,914

 

 

 

20,457,001

 

Diluted

 

 

20,622,864

 

 

 

20,394,386

 

 

 

20,644,915

 

 

 

20,545,983

 

Mayville Engineering Company, Inc.

Consolidated Statement of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2023

 

2022

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

5,617

 

 

$

16,346

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

19,849

 

 

 

16,342

 

Amortization

 

 

5,649

 

 

 

5,214

 

Allowance for doubtful accounts

 

 

127

 

 

 

(29

)

Inventory excess and obsolescence reserve

 

 

277

 

 

 

(2

)

Stock-based compensation expense

 

 

3,755

 

 

 

2,854

 

Loss (gain) on disposal of property, plant and equipment

 

 

(342

)

 

 

11

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

(4,346

)

Deferred compensation

 

 

(17,433

)

 

 

(5,368

)

Loss on extinguishment of debt

 

 

216

 

 

 

—

 

Non-cash lease expense

 

 

3,348

 

 

 

3,006

 

Other non-cash adjustments

 

 

202

 

 

 

259

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(6,819

)

 

 

(11,961

)

Inventories

 

 

7,818

 

 

 

(4,762

)

Tooling in progress

 

 

2,348

 

 

 

(2,745

)

Prepaids and other current assets

 

 

(769

)

 

 

(1,093

)

Accounts payable

 

 

(4,134

)

 

 

10,241

 

Deferred income taxes

 

 

1,017

 

 

 

5,491

 

Operating lease obligations

 

 

(3,119

)

 

 

(2,698

)

Accrued liabilities

 

 

(3,911

)

 

 

6,555

 

Net cash provided by operating activities

 

 

13,696

 

 

 

33,315

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(9,814

)

 

 

(38,808

)

Proceeds from sale of property, plant and equipment

 

 

753

 

 

 

7,736

 

Payment for acquisition, net of cash acquired

 

 

(88,593

)

 

 

—

 

Net cash used in investing activities

 

 

(97,654

)

 

 

(31,072

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from bank revolving credit notes

 

 

454,587

 

 

 

327,170

 

Payments on bank revolving credit notes

 

 

(358,411

)

 

 

(323,410

)

Repayments of other long-term debt

 

 

(5,877

)

 

 

(825

)

Payments of financing costs

 

 

(1,206

)

 

 

—

 

Purchase of treasury stock

 

 

(2,661

)

 

 

(4,947

)

Payments on finance leases

 

 

(296

)

 

 

(237

)

Net cash provided by (used in) financing activities

 

 

86,136

 

 

 

(2,249

)

Net increase (decrease) in cash and cash equivalents

 

 

2,178

 

 

 

(6

)

Cash and cash equivalents at beginning of period

 

 

127

 

 

 

118

 

Cash and cash equivalents at end of period

 

$

2,305

 

 

$

112

 

Mayville Engineering Company, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

 

September 30,

September 30,

 

 

2023

 

2022

 

2023

 

2022

Net income and comprehensive income

 

$

1,432

 

$

6,596

 

$

5,617

 

$

16,346

 

Interest expense

 

 

3,907

 

 

830

 

 

7,533

 

 

2,163

 

Provision for income taxes

 

 

554

 

 

1,490

 

 

1,471

 

 

4,464

 

Depreciation and amortization

 

 

9,608

 

 

7,105

 

 

25,498

 

 

21,556

 

EBITDA

 

 

15,501

 

 

16,021

 

 

40,119

 

 

44,529

 

CEO transition costs

 

 

—

 

 

861

 

 

—

 

 

1,512

 

Loss on extinguishment of debt

 

 

—

 

 

—

 

 

216

 

 

—

 

MSA acquisition related costs

 

 

499

 

 

—

 

 

1,398

 

 

—

 

Stock-based compensation expense

 

 

1,336

 

 

141

 

 

3,756

 

 

2,855

 

Field replacement claim

 

 

—

 

 

—

 

 

490

 

 

—

 

Hazel Park transition and legal costs due to former fitness customer

 

 

984

 

 

862

 

 

1,479

 

 

4,678

 

Costs recognized on step-up of MSA acquired inventory

 

 

891

 

 

—

 

 

891

 

 

—

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

(1,737

)

 

—

 

 

(4,346

)

Adjusted EBITDA

 

$

19,211

 

$

16,148

 

$

48,349

 

$

49,228

 

Net sales

 

$

158,217

 

$

136,276

 

$

439,843

 

$

410,865

 

EBITDA Margin

 

 

9.8

%

 

11.8

%

 

9.1

%

 

10.8

%

Adjusted EBITDA Margin

 

 

12.1

%

 

11.8

%

 

11.0

%

 

12.0

%

Mayville Engineering Company, Inc.

Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Diluted EPS

(in thousands, except share amounts and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2023

 

 

2022

 

2023

 

 

2022

 

 

Earnings

 

Diluted EPS

 

 

Earnings

 

Diluted EPS

 

Earnings

 

Diluted EPS

 

 

Earnings

 

Diluted EPS

Net income and comprehensive income

 

$

1,432

 

 

$

0.07

 

 

 

$

6,596

 

 

$

0.32

 

 

$

5,617

 

 

$

0.27

 

 

 

$

16,346

 

 

$

0.80

 

CEO transition costs

 

 

—

 

 

 

—

 

 

 

 

861

 

 

 

0.04

 

 

 

—

 

 

 

—

 

 

 

 

1,512

 

 

 

0.07

 

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

216

 

 

 

0.01

 

 

 

 

—

 

 

 

—

 

MSA acquisition related costs

 

 

499

 

 

 

0.02

 

 

 

 

—

 

 

 

—

 

 

 

1,398

 

 

 

0.07

 

 

 

 

—

 

 

 

—

 

Stock-based compensation expense

 

 

1,336

 

 

 

0.06

 

 

 

 

141

 

 

 

0.01

 

 

 

3,756

 

 

 

0.18

 

 

 

 

2,855

 

 

 

0.14

 

Field replacement claim

 

 

—

 

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

490

 

 

 

0.02

 

 

 

 

—

 

 

 

—

 

Hazel Park transition and legal costs due to former fitness customer

 

 

984

 

 

 

0.05

 

 

 

 

862

 

 

 

0.04

 

 

 

1,479

 

 

 

0.07

 

 

 

 

4,678

 

 

 

0.23

 

Costs recognized on step-up of MSA acquired inventory

 

 

891

 

 

 

0.04

 

 

 

 

—

 

 

 

—

 

 

 

891

 

 

 

0.04

 

 

 

 

—

 

 

 

—

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

—

 

 

 

 

(1,737

)

 

 

(0.09

)

 

 

—

 

 

 

—

 

 

 

 

(4,346

)

 

 

(0.21

)

Tax effect of above adjustments

 

 

(899

)

 

 

(0.04

)

 

 

 

(30

)

 

 

(0.00

)

 

 

(1,993

)

 

 

(0.10

)

 

 

 

(1,115

)

 

 

(0.05

)

Adjusted net income and comprehensive income

 

$

4,243

 

 

$

0.21

 

 

 

$

6,693

 

 

$

0.33

 

 

$

11,854

 

 

$

0.57

 

 

 

$

19,930

 

 

$

0.97

 

Mayville Engineering Company, Inc.

Reconciliation of Free Cash Flow

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net cash provided by operating activities

 

$

19,562

 

 

$

17,632

 

 

$

13,696

 

 

$

33,315

 

Less: Capital expenditures

 

 

3,494

 

 

 

12,457

 

 

 

9,814

 

 

 

38,808

 

Free cash flow

 

$

16,068

 

 

$

5,175

 

 

$

3,882

 

 

$

(5,493

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231031492710/en/

Stefan Neely or Noel Ryan (615) 844-6248 MEC@val-adv.com