Mayville Engineering Company, Inc.

Previous wording

The broader market dynamics over the past few years have resulted in impacts to the Company, material cost inflation and inflationary pressures on wages and benefits due to labor availability. The Company expects some of these dynamics to continue in 2024 and could continue to have an impact on demand, material costs and labor. Specifically for the three months ended September 30, 2024, net sales reflected a significant decline in demand across all the Company’s key end markets as customers implemented channel inventory de-stocking activities to reduce from near historic high levels and is expected to continue for the remainder of 2024.

Current wording

Over the past few years, the broader market dynamics, combined with recent geopolitical and economic developments, including foreign trade relations and associated tariffs, have resulted in impacts to the Company. These influences have contributed to elevated interest rates, inconsistent customer demand, material cost inflation and labor availability. The Company expects some of these dynamics to continue through 2025 and could continue to have an impact on demand, material costs and labor.

Previous wording

Other Selling, General, and Administrative Expenses. Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and certain corporate level administrative expenses such as incentive compensation, audit, accounting, legal and other consulting and professional services, travel, and insurance.

Current wording

Other Selling, General, and Administrative Expenses. Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and certain corporate level administrative expenses such as audit, accounting, legal and other consulting and professional services, travel, and insurance.

Previous wording

EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin

Current wording

EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow

Previous wording

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.

Current wording

EBITDA represents net income before interest expense, provision (benefit) for income taxes, depreciation and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period.

Previous wording

Adjusted EBITDA represents EBITDA before stock-based compensation expense, loss on extinguishment of debt, Mid-States Aluminum (MSA) acquisition related costs, field replacement claim, legal costs due to the former fitness customer and costs recognized on step-up of MSA acquired inventory. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. 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 any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin 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 measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Current wording

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 any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin 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 measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Previous wording

Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to the similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions.

Current wording

Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow may not be comparable to the similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions.

Previous wording

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Current wording

Free Cash Flow Analysis Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Previous wording

Net Sales. Net sales were $135,392 for the three months ended September 30, 2024 as compared to $158,217 for the three months ended September 30, 2023, a decrease of $22,825, or 14.4%. This decrease was driven by a decrease in demand across all key end markets and customer de-stocking channel inventory, partly offset by incremental volumes associated with new project wins.

Current wording

Net Sales. Net sales were $135,579 for the three months ended March 31, 2025 as compared to $161,269 for the three months ended March 31, 2024, a decrease of $25,690, or 15.9%. This decrease was driven by lower customer demand across the majority of the Company’s key end markets and customer de-stocking channel inventory. This was partially offset by volume from new projects in our Other end market and increased after-market demand in our Military end market.

Previous wording

Manufacturing Margins. Manufacturing margins were $17,095 for the three months ended September 30, 2024 as compared to $19,020 for the three months ended September 30, 2023, a decrease of $1,925, or 10.1%. The decrease was primarily driven by the lower end market demand, partially offset by the Company’s MEC Business Excellence (MBX) initiatives, commercial pricing actions and cost reduction actions, most notably a 12% reduction in the Company’s labor force.

Current wording

Manufacturing Margins. Manufacturing margins were $15,324 for the three months ended March 31, 2025 as compared to $20,933 for the three months ended March 31, 2024, a decrease of $5,609, or 26.8%. The decrease was primarily driven by the lower customer demand, partially offset by cost reduction actions.

Previous wording

Manufacturing margin percentages were 12.6% for the three months ended September 30, 2024, as compared to 12.0% for the three months ended September 30, 2023, an increase of 0.6%. The increase was attributable to the offsetting items discussed in the preceding paragraph.

Current wording

Manufacturing margin percentages were 11.3% for the three months ended March 31, 2025, as compared to 13.0% for the three months ended March 31, 2024, a decrease of 1.7%. The decrease was attributable to less of an ability to absorb fixed costs as a result of lower sales and the items discussed in the preceding paragraph.

Previous wording

Amortization of Intangibles Assets. Amortization of intangible assets were $1,733 for the three months ended September 30, 2024 as compared to $2,173 for the three months ended September 30, 2023, a decrease of $440, or 20.2%. The decrease was due to the full amortization of certain intangible assets in prior periods.

Current wording

Amortization of Intangibles Assets. Amortization of intangible assets were $1,733 for the three months ended March 31, 2025 and 2024.

Previous wording

Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit-sharing, bonuses, and deferred compensation expenses were $2,076 for the three months ended September 30, 2024 as compared to $2,346 for the three months ended September 30, 2023, a decrease of $270, or 11.5%. The decrease was primarily driven by lower bonus accruals aligning with Company financial performance, slightly offset by deferred compensation expense during the current year period versus deferred compensation income during the prior year period due to fluctuations in the financial markets.

Current wording

Bonuses and Deferred Compensation Expenses. Bonuses and deferred compensation expenses were $3,325 for the three months ended March 31, 2025 as compared to $3,800 for the three months ended March 31, 2024, a decrease of $475, or 12.5%. The decrease was primarily driven by deferred compensation income during the current year period versus deferred compensation expense during the prior year period due to fluctuations in the financial markets.

Previous wording

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $23,589 for the nine months ended September 30, 2024 as compared to $22,969 for the nine months ended September 30, 2023, an increase of $620 or 2.7%. The increase was predominantly attributable to higher costs related to compliance requirements and annual wage inflation, partially offset by lower legal fees associated with the litigation against the former fitness customer and non-recurring professional fees related to the MSA acquisition during the prior year period.

Current wording

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $8,689 for the three months ended March 31, 2025 as compared to $7,769 for the three months ended March 31, 2024, an increase of $920, or 11.8%. The increase was predominantly attributable to normal wage inflation, and higher costs related to compliance requirements, market analysis studies and other consulting fees.

Previous wording

Interest Expense. Interest expense was $2,653 for the three months ended September 30, 2024 as compared to $3,907 for the three months ended September 30, 2023, a decrease of $1,254, or 32.1%. The change is due to a decrease in borrowings and lower interest rates relative to the prior year period.

Current wording

Interest Expense. Interest expense was $1,567 for the three months ended March 31, 2025 as compared to $3,356 for the three months ended March 31, 2024, a decrease of $1,789, or 53.3%. The decrease is due to a decrease in borrowings and lower interest rates relative to the prior year period.

Previous wording

Provision for Income Taxes. Income tax expense was $2,532 for the nine months ended September 30, 2024 as compared to $1,471 for the nine months ended September 30, 2023. The increase of $1,061 is primarily due to higher net income and comprehensive income in the current year period, partially offset by an increased tax benefit associated with stock-based compensation items. Refer to Note 8 – Income Taxes of the Condensed Consolidated Financial Statements for further details.

Current wording

Provision (Benefit) for Income Taxes. Income tax expense (benefit) was ($10) for the three months ended March 31, 2025 as compared to $1,034 for the three months ended March 31, 2024. The decrease of $1,044 is primarily due to lower income before taxes in the current year period. Refer to Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for further details.

Previous wording

Due to the factors described in the preceding paragraphs, net income and comprehensive income, EBITDA Margin and Adjusted EBITDA Margin increased during the three months ended September 30, 2024, while EBITDA and Adjusted EBITDA decreased, as compared to the three months ended September 30, 2023.

Current wording

Due to the factors described in the preceding paragraphs, net income and comprehensive income, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin decreased during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Previous wording

Investing Activities. Cash used in investing activities was $9,645 for the nine months ended September 30, 2024, as compared to $97,654 for the nine months ended September 30, 2023. The $88,009 decrease in cash used in investing activities was mainly driven by the acquisition of MSA, which was completed on July 1, 2023.

Current wording

Investing Activities. Cash used in investing activities was $2,959 for the three months ended March 31, 2025, as compared to $2,668 for the three months ended March 31, 2024. The $291 increase in cash used in investing activities was driven by a slight increase in capital expenditures prioritizing investments in high-return, capital-light growth and automation.

Previous wording

Financing Activities. Cash used in financing activities was $42,696 for the nine months ended September 30, 2024, as compared to cash provided by financing activities of $86,136 for the nine months ended September 30, 2023. The $128,832 decrease is mainly due to the debt repayments in excess of borrowings during the current year period and the withdrawal of funds used to purchase MSA in the prior year period. Additionally, the Company purchased $1,996 of common stock in the first nine months of 2024 as compared to $2,661 in the prior year period. The Company’s decision to repurchase additional shares in 2024 will depend on business conditions, free cash flow generation, other cash requirements and stock price. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding share repurchases.

Current wording

Financing Activities. Cash used in financing activities was $5,397 for the three months ended March 31, 2025, as compared to $8,315 for the three months ended March 31, 2024. The $2,918 decrease was mainly due to lower debt repayments in excess of borrowings during the current year period in relation to the Company’s revolving credit facility. Additionally, under the share repurchase plan, the Company purchased $1,747 of common stock in the first three months of 2025 as compared to $0 in the prior year period. The Company’s decision to repurchase additional shares in 2025 will depend on business conditions, free cash flow generation, other cash requirements and stock price. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding share repurchases.

Previous wording

At September 30, 2024, the interest rate on outstanding borrowings under the Revolving Loan was 7.22%. We had availability of $138,955 under the revolving credit facility at September 30, 2024.

Current wording

At March 31, 2025, the interest rate on outstanding borrowings under the Revolving Loan was 5.67%. We had availability of $172,521 under the revolving credit facility at March 31, 2025.

Previous wording

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At September 30, 2024, our interest coverage ratio was 4.92 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 3.50 to 1.00. As of September 30, 2024, our consolidated total leverage ratio was 1.59 to 1.00.

Current wording

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At March 31, 2025, our interest coverage ratio was 4.93 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 3.50 to 1.00. As of March 31, 2025, our consolidated total leverage ratio was 1.39 to 1.00.

Previous wording

Additionally, the Company has a Fond du Lac County and Fond du Lac Economic Development Corporation term note (Fond du Lac Term Note). The Fond du Lac Term Note is secured by a security agreement, payable in annual installments of $500 plus interest at 2.00% and is due in full in December 2028. The balance outstanding as of September 30, 2024 was $2,375, with the short-term and long-term balance of $500 and $1,875, respectively, recorded in other current liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets.

Current wording

Additionally, the Company has a Fond du Lac County and Fond du Lac Economic Development Corporation term note (Fond du Lac Term Note). The Fond du Lac Term Note is secured by a security agreement, payable in annual installments of $500 plus interest at 2.00% and is due in full in December 2028. The balance outstanding as of March 31, 2025 was $1,875, with the short-term and long-term balance of $500 and $1,375, respectively, recorded in other current liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets.

Previous wording

During the nine months ended September 30, 2024 and 2023, our capital expenditures were $9,753 and $9,814 respectively. The marginal decrease of $61 was driven by the Company controlling its spend due to the end market demand softening. In turn, capital expenditures for the full year 2024 are expected to be between $13,000 and $15,000.

Current wording

During the three months ended March 31, 2025 and 2024, our capital expenditures were $2,962 and $2,775 respectively. The marginal increase of $187 was driven by investments in high return, capital-light growth and automation. Capital expenditures for the full year 2025 are expected to be between $13,000 and $17,000.

Previous wording

month trailing Consolidated EBITDA through an accordion feature under our Credit Agreement, subject to the covenants under the Credit Agreement. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2024 and the foreseeable future.

Current wording

We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. At March 31, 2025, we had immediate availability of $172,521 through our revolving credit facility and the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature under our Credit Agreement, subject to the covenants under the Credit Agreement. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2025 and the foreseeable future.