MEC Mayville Engineering Company Inc

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 June 30, 2023.

SECOND QUARTER 2023 RESULTS

(All comparisons versus the prior-year period)

• Net sales of $139.0 million, or +0.5% y/y
• Net income of $1.6 million, or $0.08 per diluted share
• Non-GAAP Adjusted Diluted EPS of $0.20
• Adjusted EBITDA of $15.3 million, including a $1.4 million impact from Hazel Park facility ramp-up
• Adjusted EBITDA margin of 11.0%, including a 100 bps impact from Hazel Park facility ramp-up

MANAGEMENT COMMENTARY

“Our second quarter results demonstrate favorable demand conditions across our key end markets, together with the early benefits of targeted price actions and improved asset optimization, consistent with our MBX value creation strategy,” stated Jag Reddy, President and Chief Executive Officer. “Organic sales momentum across key customer accounts supported improved utilization across our network during the second quarter, resulting in 130 basis points of sequential EBITDA margin improvement. Given current order rates and anticipated activity levels, we expect stable volume growth in the second half of 2023.”

“Our MBX strategy has positioned MEC to become an increasingly cash generative business,” continued Reddy. “During the first half of the year, we’ve delivered more than $15 million in free cash flow excluding a one-time deferred compensation payout, positioning us to fund a combination of organic and inorganic growth investments, together with opportunistic, open market repurchases of our common equity. As we look to the second half of the year, we are projecting improved plant utilization resulting in Adjusted EBITDA margin expansion relative to the first half of the year. In addition, we expect to generate $25 to $35 million in free cash flow for the remainder of the year and will prioritize deploying incremental free cash flow to repay debt, consistent with our long-term net leverage target of at or below 2.5x.”

“In July, we closed on our acquisition of Mid-States Aluminum, providing us with a strategic entry point into high-value, light-weight materials fabrication, positioning MEC to grow our share-of-wallet with existing accounts, most notably in our commercial vehicle, powersports, and agriculture end markets, while building leading market positions within emerging, high potential industries requiring the full lifecycle of solutions we offer,” noted Reddy. “The integration is moving forward seamlessly, with both MEC and MSA teams collaborating to provide our combined customer base with a full life cycle of on-demand solutions that include design, engineering and custom fabrication. We continue to expect that the MSA acquisition will contribute between $30 to $35 million of net sales and between $4 to $6 million in Adjusted EBITDA during the second half of 2023.”

“Today, we are increasing our full-year 2023 guidance, including partial-year contributions from the MSA acquisition,” concluded Reddy. “Looking to the second half of the year, we anticipate year-over-year growth in demand across our powersports and military end-markets, partially offset by softer demand within our commercial vehicle and construction markets, consistent with our expectations entering the year. On balance, we continue to focus on long-term value creation as we drive commercial growth in higher-value adjacent markets, further improve asset utilization and drive ratable margin expansion.”

PERFORMANCE SUMMARY

Net sales increased by 0.5% on a year-over-year basis in the second quarter 2023, driven by a combination of increased commercial vehicle, powersports and military sales volumes, partially offset by customer supply chain challenges affecting some of our customers, lower material price pass-throughs, and softening demand in our construction and small agriculture end markets.

Manufacturing margin was $16.1 million in the second quarter 2023, or 11.6% of net sales, versus $18.3 million, or 13.2% of net sales, in the prior year period. The year-over-year decrease in manufacturing margin was driven by unabsorbed fixed costs associated with new project launches, a one-time field replacement claim, higher employee health insurance claims and lower scrap income.

Profit sharing, bonus and deferred compensation expense increased $1.5 million to $2.7 million in the second quarter of 2023. Other selling, general and administrative expenses were $7.4 million in the second quarter of 2023 as compared to $6.4 million for the same prior year period. The increase in these expenses during the second quarter primarily reflect costs associated with acquisition of Mid-States Aluminum Corp. (“MSA”) and an increase in costs associated with our preparation to be Sarbanes-Oxley compliant in 2024.

Interest expense was $2.0 million in the second quarter 2023, compared to $0.8 million in the prior year period, due to higher interest rates and an increase in borrowings.

Net income for the second quarter of 2023 was $1.6 million, or $0.08 per diluted share, versus $5.9 million, or $0.29 per diluted share, in the prior-year period. The $4.3 million year-over-year decline in net income in the second quarter of 2023 reflects a $1.6 million, or $0.07 per diluted share impact, from MSA transaction costs, debt extinguishment and a one-time field replacement claim.

MEC reported Adjusted EBITDA of $15.3 million in the second quarter 2023, or 11.0% of net sales, versus $18.2 million, or 13.1% of net sales, in the prior-year period. Second quarter 2023 Adjusted EBITDA reflects $1.4 million of losses associated with the ramp-up of production at our Hazel Park facility. Excluding the impact of the ramp-up of the Hazel Park facility, Adjusted EBITDA margin would have been 12.0%.

Adjusted net income for the second quarter of 2023 was $4.1 million, or $0.20 per diluted share, versus $7.8 million, or $0.38 per diluted share, in the prior year period. The decrease in adjusted net income reflects a decrease in manufacturing margin associated with unabsorbed fixed costs from new project launches, higher employee health insurance claims and lower scrap income, along with higher interest expense.

Net cash provided by operations during the second quarter of 2023 was $0.2 million, compared to $16.1 million in the prior year period. Net cash provided by operations during the quarter reflects a $17.6 million use of cash associated with the payout of deferred compensation to a retired Company executive. Excluding the impact of the deferred compensation payment, net cash provided from operations would have been $17.8 million during the second quarter of 2023, an increase of 10.6% compared to the prior year period.

END-MARKET UPDATE

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

June 30,

 

 

2023

 

2022

Commercial Vehicle

 

$

56,075

 

$

55,130

Construction & Access

 

 

26,522

 

 

29,388

Powersports

 

 

23,995

 

 

22,379

Agriculture

 

 

13,444

 

 

15,367

Military

 

 

8,910

 

 

5,363

Other

 

 

10,033

 

 

10,710

Net Sales

 

$

138,980

 

$

138,337

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 $56.1 million in the second quarter of 2023, an increase of 1.7% versus the prior-year period. The increase in sales was primarily the result of volume increases and strengthened end market demand due to an 11% year-over-year increase in the class 8 commercial vehicle build schedule, partially offset by continued customer supply chain delays.

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 $26.5 million in the second quarter 2023, a decrease of 9.8% versus the prior-year period. The decrease in sales was primarily driven by decelerating residential construction demand and customer supply chain constraints.

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 $24.0 million in the second quarter of 2023, an increase of 7.2% versus the prior-year period. The increase in sales was the result of an increase in 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 $13.4 million during the second quarter of 2023, a decrease of 12.5% versus the prior-year period. The decrease in sales was driven mostly by a decline in small-ag and turf equipment demand.

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 second quarter of 2023, an increase of 66.2% 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 second quarter of 2023 were $10.0 million, a decrease of 6.3% year-over-year. Sales in this market primarily relate to MEC Outdoors, tooling, and additional miscellaneous markets.

STRATEGIC UPDATE

During the second 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 improved margin capture, free cash generation and profitability over a multi-year period.

• Drive a High-Performance Culture. The Company is focused on effectuating cultural change across its organization by implementing performance-based metrics, daily lean management and other process-oriented strategies. Through these efforts, the Company intends to create a high-performance culture capable of driving improved performance, asset utilization and cost optimization. During the second quarter, the Company continued to drive the implementation and alignment of processes and best-practices across the enterprise to drive strategic execution.
• 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. During the second quarter, the Company held a number of kaizen events to drive continuous improvement in plant operations.
• 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 second quarter, the Company executed on this strategy with the acquisition of MSA, a market-leading fabricator of aluminum extrusions for total consideration of $96 million. Through the MSA acquisition, MEC will be able 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.
• 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.

BALANCE SHEET UPDATE

At June 30, 2023, MEC had net debt outstanding of $89.7 million and total cash and availability on its senior secured revolving credit facility of $223.31 million. The Company’s total debt outstanding as of June 30, 2023 reflects borrowings during the quarter of $96.3 million primarily associated with $90.0 million of funds held in escrow as of the end of the current period to be used for the acquisition of MSA, which was completed on July 1, 2023. At the end of the second quarter, the ratio of net debt to trailing twelve-month Adjusted EBITDA was 1.61x.

_________________

1This amount is reduced to approximately $45.4 million after taking into account the $177.9 million of outstanding borrowings under the credit facility as of June 30, 2023.

FINANCIAL GUIDANCE

The Company increased financial guidance for the full year 2023. All guidance is current as of the time provided and is subject to change.

 

 

 

 

 

 

 

 

 

FY 2022

 

1H 2023

2H 2023

FY 2023

(in Millions)

 

Actual

 

Actual

Forecast

Forecast

Net Sales

 

$539.4

 

$281.6

$298 - $328

$580 - $610

Adjusted EBITDA

 

$60.8

 

$29.1

$37 - $42

$66 - $71

Capital Expenditures

 

$58.6

 

$6.3

$9 - $14

$15 - $20

The Company has increased its 2023 guidance to reflect its current view of the remainder of the year and to reflect the MSA acquisition. The increased guidance now reflects an expected $30 to $35 million of incremental net sales and $4 to $6 million of incremental Adjusted EBITDA associated with the MSA acquisition. The Company currently expects Net Sales and Adjusted EBITDA margin in the second half of the year will be favorably impacted by improved plant utilization, relative to the first half of the year. In addition, 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 $10 million and $12 million, compared to $13 million in the full year 2022. The guidance for full year 2023 Adjusted EBITDA also reflects $3 million to $5 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.

SECOND QUARTER 2023 RESULTS CONFERENCE CALL

The Company will host a conference call on Wednesday, August 2, 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: 925615.

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, Mayville Engineering Company (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.

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 and Adjusted Net Income and Diluted EPS.

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 stock-based compensation, MSA acquisition related costs, loss on debt extinguishment, field replacement claim, Hazel Park transition and legal costs due to the former fitness customer 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. We present Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income and Diluted EPS 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 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 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)

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2023

 

2022

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

90,125

 

 

$

127

 

Receivables, net of allowances for doubtful accounts of $551 at June 30, 2023 and $545 at December 31, 2022

 

 

69,066

 

 

 

58,001

 

Inventories, net

 

 

66,828

 

 

 

71,708

 

Tooling in progress

 

 

7,827

 

 

 

7,938

 

Prepaid expenses and other current assets

 

 

4,360

 

 

 

3,529

 

Total current assets

 

 

238,206

 

 

 

141,303

 

Property, plant and equipment, net

 

 

141,326

 

 

 

145,771

 

Assets held for sale

 

 

81

 

 

 

83

 

Goodwill

 

 

71,535

 

 

 

71,535

 

Intangible assets, net

 

 

40,333

 

 

 

43,809

 

Operating lease assets

 

 

33,929

 

 

 

36,073

 

Other long-term assets

 

 

3,192

 

 

 

2,007

 

Total assets

 

$

528,602

 

 

$

440,581

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

52,354

 

 

$

53,735

 

Current portion of operating lease obligation

 

 

5,017

 

 

 

4,857

 

Accrued liabilities:

 

 

 

 

 

 

Salaries, wages, and payroll taxes

 

 

8,229

 

 

 

7,288

 

Profit sharing and bonus

 

 

1,499

 

 

 

6,860

 

Current portion of deferred compensation

 

 

273

 

 

 

18,062

 

Other current liabilities

 

 

11,333

 

 

 

11,646

 

Total current liabilities

 

 

78,705

 

 

 

102,448

 

Bank revolving credit notes

 

 

177,943

 

 

 

72,236

 

Operating lease obligation, less current maturities

 

 

29,745

 

 

 

31,891

 

Deferred compensation, less current portion

 

 

3,446

 

 

 

3,132

 

Deferred income tax liability

 

 

12,710

 

 

 

11,818

 

Other long-term liabilities

 

 

684

 

 

 

1,189

 

Total liabilities

 

$

303,233

 

 

$

222,714

 

Commitments and contingencies

 

 

 

 

 

 

Common shares, no par value, 75,000,000 authorized, 21,829,453 shares issued at June 30, 2023 and 21,645,193 at December 31, 2022

 

 

—

 

 

 

—

 

Additional paid-in-capital

 

 

203,423

 

 

 

200,945

 

Retained earnings

 

 

30,459

 

 

 

26,274

 

Treasury shares at cost, 1,458,655 shares at June 30, 2023 and 1,472,447 at December 31, 2022

 

 

(8,513

)

 

 

(9,352

)

Total shareholders’ equity

 

 

225,369

 

 

 

217,867

 

Total

 

$

528,602

 

 

$

440,581

 

Mayville Engineering Company, Inc.

Consolidated Statement of Net Income

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

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2023

 

2022

 

2023

 

2022

Net sales

 

$

138,980

 

 

$

138,337

 

 

$

281,626

 

 

$

274,589

 

Cost of sales

 

 

122,885

 

 

 

120,079

 

 

 

249,154

 

 

 

241,449

 

Amortization of intangible assets

 

 

1,738

 

 

 

1,738

 

 

 

3,476

 

 

 

3,476

 

Profit sharing, bonuses, and deferred compensation

 

 

2,688

 

 

 

1,208

 

 

 

5,690

 

 

 

3,755

 

Employee stock ownership plan expense

 

 

—

 

 

 

1,330

 

 

 

—

 

 

 

1,820

 

Other selling, general and administrative expenses

 

 

7,396

 

 

 

6,396

 

 

 

14,363

 

 

 

12,121

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

(906

)

 

 

—

 

 

 

(2,089

)

Income from operations

 

 

4,273

 

 

 

8,492

 

 

 

8,943

 

 

 

14,057

 

Interest expense

 

 

(1,968

)

 

 

(765

)

 

 

(3,626

)

 

 

(1,332

)

Loss on extinguishment of debt

 

 

(216

)

 

 

—

 

 

 

(216

)

 

 

—

 

Income before taxes

 

 

2,089

 

 

 

7,727

 

 

 

5,101

 

 

 

12,725

 

Income tax expense

 

 

475

 

 

 

1,798

 

 

 

916

 

 

 

2,974

 

Net income and comprehensive income

 

$

1,614

 

 

$

5,929

 

 

$

4,185

 

 

$

9,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.29

 

 

$

0.21

 

 

$

0.48

 

Diluted

 

$

0.08

 

 

$

0.29

 

 

$

0.20

 

 

$

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

20,494,437

 

 

 

20,581,945

 

 

 

20,405,383

 

 

 

20,490,944

 

Diluted

 

 

20,827,728

 

 

 

20,650,551

 

 

 

20,789,175

 

 

 

20,807,677

 

Mayville Engineering Company, Inc.

Consolidated Statement of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

 

 

2023

 

2022

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

4,185

 

 

$

9,751

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation

 

 

12,415

 

 

 

10,975

 

Amortization

 

 

3,476

 

 

 

3,476

 

Allowance for doubtful accounts

 

 

6

 

 

 

168

 

Inventory excess and obsolescence reserve

 

 

41

 

 

 

87

 

Stock-based compensation expense

 

 

2,420

 

 

 

2,714

 

Gain on disposal of property, plant and equipment

 

 

(135

)

 

 

(625

)

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

(2,089

)

Deferred compensation

 

 

(17,475

)

 

 

(4,637

)

Loss on extinguishment of debt

 

 

216

 

 

 

—

 

Non-cash lease expense

 

 

2,144

 

 

 

2,482

 

Other non-cash adjustments

 

 

184

 

 

 

176

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(11,071

)

 

 

(15,973

)

Inventories

 

 

4,839

 

 

 

(4,033

)

Tooling in progress

 

 

111

 

 

 

(1,367

)

Prepaids and other current assets

 

 

(897

)

 

 

(1,561

)

Accounts payable

 

 

(3,061

)

 

 

9,275

 

Deferred income taxes

 

 

638

 

 

 

2,504

 

Operating lease obligations

 

 

(1,986

)

 

 

(2,270

)

Accrued liabilities

 

 

(1,915

)

 

 

6,631

 

Net cash provided by (used in) operating activities

 

 

(5,865

)

 

 

15,684

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(6,320

)

 

 

(26,351

)

Proceeds from sale of property, plant and equipment

 

 

153

 

 

 

5,228

 

Net cash used in investing activities

 

 

(6,167

)

 

 

(21,123

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from bank revolving credit notes

 

 

347,324

 

 

 

218,867

 

Payments on bank revolving credit notes

 

 

(241,618

)

 

 

(210,414

)

Repayments of other long-term debt

 

 

(575

)

 

 

(547

)

Payments of financing costs

 

 

(1,248

)

 

 

—

 

Purchase of treasury stock

 

 

(1,661

)

 

 

(2,323

)

Payments on finance leases

 

 

(192

)

 

 

(157

)

Net cash provided by financing activities

 

 

102,030

 

 

 

5,426

 

Net increase (decrease) in cash and cash equivalents

 

 

89,998

 

 

 

(13

)

Cash and cash equivalents at beginning of period

 

 

127

 

 

 

118

 

Cash and cash equivalents at end of period

 

$

90,125

 

 

$

105

 

Mayville Engineering Company, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2023

 

2022

 

2023

 

2022

Net income and comprehensive income

 

$

1,614

 

 

$

5,929

 

 

$

4,185

 

 

$

9,751

 

Interest expense

 

 

1,968

 

 

 

765

 

 

 

3,626

 

 

 

1,332

 

Provision for income taxes

 

 

475

 

 

 

1,798

 

 

 

916

 

 

 

2,974

 

Depreciation and amortization

 

 

8,011

 

 

 

7,245

 

 

 

15,891

 

 

 

14,451

 

EBITDA

 

 

12,068

 

 

 

15,737

 

 

 

24,618

 

 

 

28,508

 

Loss on extinguishment of debt

 

 

216

 

 

 

—

 

 

 

216

 

 

 

—

 

MSA acquisition related costs

 

 

899

 

 

 

—

 

 

 

899

 

 

 

—

 

Stock-based compensation expense

 

 

1,354

 

 

 

1,456

 

 

 

2,420

 

 

 

2,714

 

Field replacement claim

 

 

490

 

 

 

—

 

 

 

490

 

 

 

—

 

Hazel Park transition and legal costs due to former fitness customer

 

 

272

 

 

 

1,889

 

 

 

495

 

 

 

3,816

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

(906

)

 

 

—

 

 

 

(2,089

)

Adjusted EBITDA

 

$

15,299

 

 

$

18,176

 

 

$

29,138

 

 

$

32,949

 

Net sales

 

$

138,980

 

 

$

138,337

 

 

$

281,626

 

 

$

274,589

 

EBITDA Margin

 

 

8.7

%

 

 

11.4

%

 

 

8.7

%

 

 

10.4

%

Adjusted EBITDA Margin

 

 

11.0

%

 

 

13.1

%

 

 

10.3

%

 

 

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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2023

 

2022

 

2023

 

2022

 

 

Earnings

 

Diluted EPS

 

Earnings

 

Diluted EPS

 

Earnings

 

Diluted EPS

 

Earnings

 

Diluted EPS

Net income and comprehensive income

 

$

1,614

 

 

$

0.08

 

 

$

5,929

 

 

$

0.29

 

 

$

4,185

 

 

$

0.20

 

 

$

9,751

 

 

$

0.47

 

Loss on extinguishment of debt

 

 

216

 

 

 

0.01

 

 

 

—

 

 

 

—

 

 

 

216

 

 

 

0.01

 

 

 

—

 

 

 

—

 

MSA acquisition related costs

 

 

899

 

 

 

0.04

 

 

 

—

 

 

 

—

 

 

 

899

 

 

 

0.04

 

 

 

—

 

 

 

—

 

Stock-based compensation expense

 

 

1,354

 

 

 

0.07

 

 

 

1,456

 

 

 

0.07

 

 

 

2,420

 

 

 

0.12

 

 

 

2,714

 

 

 

0.13

 

Field replacement claim

 

 

490

 

 

 

0.02

 

 

 

—

 

 

 

—

 

 

 

490

 

 

 

0.02

 

 

 

—

 

 

 

—

 

Hazel Park transition and legal costs due to former fitness customer

 

 

272

 

 

 

0.01

 

 

 

1,889

 

 

 

0.09

 

 

 

495

 

 

 

0.02

 

 

 

3,816

 

 

 

0.18

 

Impairment of long-lived assets and gain on contracts

 

 

—

 

 

 

—

 

 

 

(906

)

 

 

(0.04

)

 

 

—

 

 

 

—

 

 

 

(2,089

)

 

 

(0.10

)

Tax effect of above adjustments

 

 

(783

)

 

 

(0.04

)

 

 

(579

)

 

 

(0.03

)

 

 

(1,095

)

 

 

(0.05

)

 

 

(1,054

)

 

 

(0.05

)

Adjusted net income and comprehensive income

 

$

4,062

 

 

$

0.20

 

 

$

7,789

 

 

$

0.38

 

 

$

7,610

 

 

$

0.37

 

 

$

13,138

 

 

$

0.63

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230801830113/en/

Stefan Neely or Noel Ryan (615) 844-6248 MEC@val-adv.com