08-05-2025
Mayville Engineering Co Inc (MEC) Q1 2025 Earnings Call Highlights: Navigating Challenges with ...
Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Mayville Engineering Co Inc (NYSE:MEC) achieved a 12% sequential sales growth and margin expansion despite softer customer demand.
The company maintained its full-year guidance, driven by strong execution and demand in less cyclical markets like military.
MEC's domestic footprint positions it well to benefit from OEM reshoring activities and changes in US trade policy.
The company secured significant new business wins, progressing towards its annual goal of $100 million in new business.
MEC generated $5.4 million in free cash flow during the first quarter, with a free cash flow conversion of 44% of adjusted EBITDA.
Negative Points
Total sales for the first quarter decreased by 15.9% year over year due to softer customer demand and inventory destocking.
The manufacturing margin decreased from $20.9 million to $15.3 million, primarily due to lower net sales.
The construction and access market revenue decreased by 31.4% year over year, reflecting soft demand.
Agricultural market revenues decreased by 26.9% year over year, with an uncertain outlook due to interest rates and trade policy impacts.
Adjusted EBITDA margin decreased by 250 basis points to 9% in the current quarter, attributed to lower sales despite cost rationalization efforts.
Q & A Highlights
Q: Can you discuss the expected market trends for the second half of 2025, particularly in commercial vehicles and power sports? A: (CEO) We anticipate a slight uptick in the commercial vehicle market in the second half due to potential 2027 regulation changes and pre-buys in 2025 and 2026. The power sports market remains highly dependent on interest rates, and we do not expect significant changes in demand for 2025. The agriculture market is not expected to recover until 2026.
Q: How are tariffs and reshoring impacting your business, and are there any standout markets? A: (CEO) We are well-positioned to benefit from any increased tariff regime due to our domestic manufacturing footprint, with 95-96% of our inputs sourced domestically. We are in discussions with customers about potential opportunities, but they remain cautious due to the dynamic nature of tariffs.
Q: What is the onboarding timeline for new customers if tariffs become structural? A: (CEO) If a structural tariff regime is in place by mid-year, we could start a program within 3 to 4 months, potentially seeing benefits by late Q3 or early Q4.
