Mayville Engineering Company Inc

PERFORMANCE SUMMARY

Net sales increased by 17.7% on a year-over-year basis in the second quarter 2024, driven in part by the acquisition of Mid-States Aluminum (MSA) in the third quarter of 2023 and increased organic volumes in our powersports, commercial vehicle and construction & access end markets because of new project volumes resulting from the Company’s focus on growing its market share with new and existing customers. The Company’s above-market growth in its powersports, commercial vehicle and construction & access markets was partly offset by softening demand in our legacy agriculture end market and the foreseen roll-off of certain military aftermarket programs at the end of 2023.

Manufacturing margin was $22.3 million in the second quarter of 2024, or 13.6% of net sales, as compared to $16.1 million, or 11.6% of net sales, in the prior year period. The year-over-year increase in manufacturing margin was driven by the increased organic sales volumes, the MSA acquisition, MBX initiatives and commercial pricing initiatives.

Other selling, general and administrative expenses were $8.3 million in the second quarter of 2024 as compared to $7.4 million for the same prior year period. The increase in these expenses during the second quarter primarily reflects the increase in legal costs associated with litigation against the former fitness customer, incremental expense associated with the MSA acquisition and higher costs related to compliance requirements.

Interest expense was $3.0 million in the second quarter of 2024, as compared to $2.0 million in the prior year period due to 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 second quarter of 2024 was $3.8 million, or $0.18 per diluted share, versus $1.6 million, or $0.08 per diluted share, in the prior-year period.

MEC reported Adjusted EBITDA of $19.6 million in the second quarter of 2024, or 12.0% of net sales, versus $15.3 million, or 11.0% of net sales, in the prior-year period. The increase in Adjusted EBITDA and Adjusted EBITDA margin, when compared to the prior year, reflects the benefit of the MSA acquisition, continued execution of the Company’s MBX strategic initiatives, improved commercial pricing and higher volumes, partially offset by higher SG&A expenses.

Second quarter Adjusted net income was $5.5 million, or $0.26 per diluted share, versus $4.1 million, or $0.20 per diluted share, in the prior year period. The increase in adjusted net income reflects an increase in income from operations, which was partially offset by higher interest expense.

Free cash flow during the second quarter of 2024 was $19.2 million as compared to ($3.7) million in the prior year period. The increase in free cash flow was primarily attributable to a $23.1 million increase in net cash provided by operating activities due to improved working capital efficiency and the payout of deferred compensation to a retired Company executive made in the prior year period.