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
Mayville Engineering (NYSE:MEC)
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Mayville Engineering (NYSE:MEC)
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