MEC Mayville Engineering Company Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 5, 2024

Mayville Engineering Company, Inc.

(Exact name of registrant as specified in its charter)

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135 S. 84th Street, Suite 300

Milwaukee, Wisconsin 53214

(Address of principal executive offices, including zip code)

(414) 381-2860

(Registrant’s telephone number, including area code)

715 South Street, Mayville, Wisconsin 53050

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Item 2.02. Results of Operations and Financial Condition.

On March 5, 2024, Mayville Engineering Company, Inc. issued a press release announcing financial results for its three and twelve months ended December 31, 2023. A copy of such press release is furnished as Exhibit 99 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

EXHIBIT INDEX

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit 99

MAYVILLE ENGINEERING COMPANY ANNOUNCES

FOURTH QUARTER AND FULL-YEAR 2023 RESULTS

MILWAUKEE, Wis., March 5, 2024 – 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 and twelve-months ended December 31, 2023.

FOURTH QUARTER 2023 RESULTS

(All comparisons versus the prior-year period)

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FULL-YEAR 2023 RESULTS

(All comparisons versus the prior-year period)

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FULL-YEAR 2024 FINANCIAL GUIDANCE

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MANAGEMENT COMMENTARY

“In 2023, we demonstrated significant progress on our multi-year business transformation journey, while leveraging our position as the market leading U.S. based vertically integrated provider of best-in-class design, engineering, and fabrications solutions,” stated Jag Reddy, President and Chief Executive Officer.  “Last year, we sharpened our commercial focus, expanding within higher-value market adjacencies, while improving our operational discipline through increased automation and process efficiencies.  We introduced a balanced capital allocation strategy, investing in innovation and inorganic growth, while returning capital to shareholders through opportunistic open market share repurchases.”

“Following the recent acquisition of Mid-States Aluminum (“MSA”), MEC is uniquely positioned to capitalize on rising multi-sector demand for lightweight materials fabrication capabilities,” continued Reddy. “MSA positions us to grow our share-of-wallet with existing customers as they make investments in energy transition-related technologies, including those that support fleet electrification and infrastructure. Importantly, customer interest in our expanded capabilities has been strong with a quickly growing pipeline of lightweight materials fabrication bidding activity currently underway. We continue to expect that we will deliver at least $20 million of annual synergies resulting from the MSA acquisition by year-end 2026.”

“Our fourth quarter performance was a solid finish to the year,” noted Reddy. “We delivered organic net sales growth of more than 6% in the fourth quarter, while our Adjusted EBITDA margins finished the year at nearly 12%.

“In 2024, we anticipate that a combination of share gains, enhanced productivity, a higher-value sales mix and continued price discipline will position us to deliver another year of profitable growth,” continued Reddy.  “We expect that our Hazel Park facility will approach $100 million of annualized sales during the fourth quarter 2024, consistent with our prior forecast, while recently adopted MBX-related and commercial pricing initiatives are expected to deliver between $3 to $6 million of incremental Adjusted EBITDA benefit this year, net of inflationary pressures.”

“For the full-year 2024, these actions are expected to result in mid-to-high single digit organic net sales growth, between 40 to 80 basis points of Adjusted EBITDA margin expansion, and significant year-over-year growth in free cash flow generation, putting us on-pace to achieve the 2026 financial targets introduced at our 2023 Investor Day. While our 2024 outlook contemplates a potential softening in macroeconomic conditions, we continue to experience pronounced demand strength across our business which, together with the benefits of our MBX self-help actions, position MEC to deliver above-market growth through the cycle.”

“Looking ahead, our capital allocation strategy will continue to prioritize debt reduction, returns-focused organic growth investments, together with opportunistic open-market purchase of our common equity under our existing share repurchase authorization,” continued Reddy.  “We continue to expect that MEC will achieve our net leverage target of 1.5x to 2.0x by the end of 2024.”

PERFORMANCE SUMMARY

Net sales increased by 15.6% on a year-over-year basis in the fourth quarter 2023, driven in part by the recent acquisition of MSA and increased organic volumes in our construction, military, powersports and other end markets, partially offset by softening demand in our agriculture end markets. Net sales were unfavorably impacted by an estimated $5.0 million primarily in the Company’s commercial vehicle end market related to the UAW strikes during the fourth quarter. Excluding the impact of the MSA acquisition, net sales increased organically by 6.1% year-over-year in the fourth quarter 2023.

Manufacturing margin was $18.2 million in the fourth quarter 2023, or 12.3% of net sales, versus $13.0 million, or 10.1% of net sales, in the prior year period.  The year-over-year increase in manufacturing margin was driven

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by the increased organic sales volumes, the MSA acquisition and MBX initiatives, partially offset by fixed cost under-absorption associated with new project launches, operations restructuring expense and the impact of the UAW strikes.

Profit sharing, bonus and deferred compensation expense decreased $0.5 million to $3.6 million in the fourth quarter of 2023. Other selling, general and administrative expenses were $7.2 million in the fourth quarter of 2023 as compared to $6.0 million for the same prior year period.  The increase in these expenses during the fourth quarter primarily reflects the increase in legal costs associated with litigation against the former fitness customer.

Interest expense was $3.6 million in the fourth quarter of 2023, as compared to $1.2 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 fourth quarter of 2023 was $2.2 million, or $0.11 per diluted share, versus $2.4 million, or $0.12 per diluted share, in the prior-year period.

MEC reported Adjusted EBITDA of $17.7 million in the fourth quarter 2023, or 11.9% of net sales, versus $11.6 million, or 9.0% of net sales, in the prior-year period.  Fourth quarter 2023 Adjusted EBITDA reflects $1.3 million of losses associated with the ramp-up of production at the Hazel Park facility as compared to $1.8 million of losses in the prior year period. Fourth quarter 2023 Adjusted EBITDA also reflects an estimated $1.6 million impact from the UAW strikes.

Fourth quarter Adjusted net income was $4.4 million, or $0.21 per diluted share, versus $3.1 million, or $0.15 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 fourth quarter 2023 was $19.9 million as compared to ($0.7) million in the prior year period. The increase in free cash flow was primarily attributable to a $7.6 million increase in net cash provided by operating activities and a $13.0 million decrease in capital expenditures associated with the completion of the Hazel Park facility.

END MARKET UPDATE

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 $52.8 million in the fourth quarter of 2023, a decrease of 1.0% versus the prior-year period. The decrease in sales was primarily the result of the estimated $5.0 million impact related to the UAW strike. Excluding the estimated impact of the UAW strikes, net sales to the commercial vehicle

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market would have grown 8.4% versus the prior-year period. The increase in net sales when excluding the estimated UAW strike impact was primarily the result of new project start-ups, strong order volumes and the prior-year impact of customer supply chain challenges.

Construction & Access

MEC manufactures components and sub-assemblies 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 $25.9 million in the fourth quarter 2023, an increase of 1.7% versus the prior-year period. The increase in sales was primarily due to increased volumes for construction customers resulting from public infrastructure and non-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 $24.6 million in the fourth quarter of 2023, an increase of 27.7% versus the prior-year period. The increase in sales was the result of higher volumes from new project wins, share gains from both new and existing customers, and the prior-year impact of customer supply chain challenges.

Agriculture

MEC is an integral partner in the supply chain of the world’s leading agriculture OEMs manufacturing components and sub-assemblies 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 $14.3 million in the fourth quarter of 2023, an increase of 15.2% versus the prior-year period. The increase in sales was mostly driven by market share gains which were slightly offset by 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 $8.9 million in the fourth quarter of 2023, an increase of 12.9% 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 & fixtures, consumer tools, mining, forestry, automotive, and medical markets.

Net sales to other end markets for the fourth quarter 2023 were $22.2 million, an increase of 116.5% year-over-year. The increase is primarily attributable to MSA-related contributions, which was acquired on July 1, 2023. Legacy net sales to this end market category increased 20.8% year-over-year, primarily due to the launch of new customer projects.

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STRATEGIC UPDATE

During the fourth 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 across all aspects of the organization.  Upon full implementation, MEC expects MBX to drive total net sales of between $750 to $850 million, Adjusted EBITDA margin expansion to between 14% to 16% and free cash flow of between $65 to $75 million by year-end 2026.

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BALANCE SHEET UPDATE

As of December 31, 2023, MEC had net debt outstanding of $149.5 million and total cash and availability on its senior secured revolving credit facility of $250.0¹ million. During the fourth quarter 2023, the Company utilized free cash flow to repay $21.8 million of debt that it incurred in conjunction with the MSA acquisition. At the end of the fourth quarter, the ratio of net debt to trailing twelve-month Adjusted EBITDA was 2.1x.

FINANCIAL GUIDANCE

Today, the Company issued financial guidance for the full year 2024.  All guidance is current as of the time provided and is subject to change.

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The Company’s 2024 guidance reflects the expected softening in end market demand as the result of various macroeconomic factors, which the Company expects will be offset by the continued ramp-up of new project work with both new and existing customers. The Company’s 2024 financial guidance also reflects incremental contribution from the MSA acquisition, including $20 to $30 million of incremental net sales and $4 to $6 million of incremental Adjusted EBITDA.

The Company’s 2024 financial guidance reflects incremental contributions from MBX related initiatives of $3 to $6 million. The impact of these initiatives is net of normal annual cost inflation, representing the Company’s ability to improve efficiency and manage pricing, given higher labor and input costs.

The Company’s 2024 Free Cash Flow guidance reflects improved working capital utilization relative to 2023 and capital expenditures of between $15 and $20 million.

FOURTH QUARTER 2023 RESULTS CONFERENCE CALL

The Company will host a conference call on Wednesday, March 6, 2024 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: 431724.

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:

¹ This amount is reduced to approximately $102.5 million after taking into account the $147.5 million of outstanding borrowings under the credit facility as of December 31, 2023.

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macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing supply chain constraints affecting some of our customers, labor availability and material cost pressures, 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 23 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”).

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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.

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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. 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

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the former fitness customer, costs recognized on step-up of MSA acquired inventory, impairment charges on long-lived assets and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer and Chief Operating Officer restructuring costs. 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.  

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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.

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Mayville Engineering Company, Inc.

Consolidated Balance Sheet

(in thousands, except share amounts)

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Mayville Engineering Company, Inc.

Consolidated Statement of Net Income

(in thousands, except share amounts and per share data)

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Mayville Engineering Company, Inc.

Consolidated Statement of Cash Flows

(in thousands)

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Mayville Engineering Company, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(in thousands)

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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)

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Mayville Engineering Company, Inc.

Reconciliation of Free Cash Flow

(in thousands)

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