Mayville Engineering Company Inc

PERFORMANCE SUMMARY

Net sales decreased by 18.4% on a year-over-year basis in the fourth quarter of 2024, due to a decrease in customer demand across all of the Company’s key end-markets and de-stocking of customer channel inventories, partially offset by growth in the Other end-market due to incremental volumes associated with new customer projects.

Manufacturing margin was $10.8 million in the fourth quarter of 2024, or 8.9% of net sales, versus $18.2 million, or 12.3% of net sales, in the prior year period. The year-over-year decrease in manufacturing margin was primarily attributable to lower fixed cost absorption due to the decrease in customer demand, fewer working days in the quarter and the completion of cost reduction activities.

Profit sharing, bonus and deferred compensation expense was $3.6 million in the fourth quarter of 2024, which was unchanged compared to the prior year period. Other selling, general and administrative expenses were $7.9 million in the fourth quarter of 2024 as compared to $7.2 million for the same prior year period. The increase in these expenses during the fourth quarter primarily reflects higher costs related to compliance requirements and annual wage inflation, partially offset by a decrease in legal costs associated with litigation against the former fitness customer.

Interest expense was $2.0 million in the fourth quarter of 2024, as compared to $3.6 million in the prior year period, due to lower borrowings under the Company’s revolving credit facility and lower interest rates.

Net income for the fourth quarter of 2024 was $16.0 million, or $0.76 per diluted share, versus $2.2 million, or $0.11 per diluted share, in the prior-year period. Net income in the fourth quarter of 2024 reflects a $25.5 million, or $0.92 per diluted share, gain on lawsuit settlement associated with the settlement of the Company’s litigation with the former fitness customer.

MEC reported Adjusted EBITDA of $9.2 million in the fourth quarter of 2024, or 7.6% of net sales, versus $17.7 million, or 11.9% of net sales, in the prior-year period. The decrease in Adjusted EBITDA and Adjusted EBITDA margin relative to the prior-year period reflects the decrease in customer demand and corresponding under absorption of fixed costs.

Fourth quarter Adjusted net loss was ($1.6) million, or ($0.07) per diluted share, versus Adjusted net income of $4.4 million, or $0.21 per diluted share, in the prior year period. The decrease in adjusted net income reflects a decrease in income from operations, which was partially offset by lower interest expense.

Free cash flow during the fourth quarter of 2024 was $35.6 million as compared to $19.9 million in the prior year period. The increase in free cash flow was primarily attributable to the receipt of $25.5 million associated with the Agreement with the former fitness customer during the fourth quarter of 2024. When excluding the impact of the settlement agreement, fourth quarter 2024 free cash flow would have been $10.1 million, a decrease of $9.8 million compared to the prior year period.