Mayville Engineering Company Inc

PERFORMANCE SUMMARY

Net sales decreased by 14.4% on a year-over-year basis in the third quarter 2024, due to a decrease in customer demand across all the Company’s key end-markets and customer de-stocking channel inventory, partly offset by incremental volumes associated with ongoing new project ramp-ups.

Manufacturing margin was $17.1 million in the third quarter of 2024, or 12.6% of net sales, as compared to $19.0 million, or 12.0% of net sales, in the prior year period. The year-over-year decrease in manufacturing margin was primarily attributable to lower customer demand, partially offset by the Company’s MBX initiatives, commercial pricing actions and self-help initiatives, most notably, a 12% reduction in its labor force. These efforts resulted in a 60 basis-point improvement in manufacturing margin as a percentage of net sales.

Other selling, general and administrative expenses were $7.6 million in the third quarter of 2024 as compared to $8.6 million for the same prior year period. The decrease in these expenses during the third quarter primarily reflects the reduction in legal costs associated with litigation with the former fitness customer and non-recuring costs associated with the acquisition of Mid-States Aluminum in the prior year period.

Interest expense was $2.7 million in the third quarter of 2024, as compared to $3.9 million in the prior year period, due to a decrease in borrowings and lower interest rates relative to the prior year period.

Net income for the third quarter of 2024 was $3.0 million, or $0.14 per diluted share, versus $1.4 million, or $0.07 per diluted share, in the prior-year period.

MEC reported Adjusted EBITDA of $17.1 million in the third quarter of 2024, or 12.6% of net sales, versus $19.2 million, or 12.1% of net sales, in the prior-year period. The decrease in Adjusted EBITDA reflects the impact of reduced customer demand, while the increase in Adjusted EBITDA margin was driven by the Company’s efforts to reduce costs in response to customer demand.

Third quarter Adjusted net income was $4.5 million, or $0.21 per diluted share, versus $4.2 million, or $0.21 per diluted share, in the prior year period. Adjusted net income reflects a decrease in income from operations, which was partially offset by lower interest expense and a lower tax rate.

Free cash flow during the third quarter of 2024 was $15.1 million as compared to $16.1 million in the prior year period. The decrease in free cash flow was primarily attributable to a $1.6 million decrease in net cash provided by operating activities, partially offset by a $0.6 million reduction in capital expenditures.