Mayville Engineering’s 2024 Earnings Call: Resilience Amid Challenges

Mayville Engineering Company ((MEC)) has held its Q4 earnings call. Read on for the main highlights of the call.

The latest earnings call from Mayville Engineering Company painted a picture of resilience amidst a challenging fiscal environment. Despite significant revenue and margin declines in 2024 due to weaker demand across core markets, the company demonstrated strong free cash flow generation and continued debt reduction. These achievements, along with new business wins and a committed share repurchase program, highlight Mayville’s strategic focus on long-term growth.

Strong Free Cash Flow Generation

In 2024, Mayville Engineering Company reported impressive free cash flow generation, totaling nearly $78 million. This figure includes a substantial $25.5 million from a legal settlement, and the organic free cash flow more than doubled compared to 2023 levels. This financial strength underscores the company’s ability to generate cash even in a tough market environment.

Debt Reduction Achievements

The company made significant strides in debt reduction during the fourth quarter, repaying over $31 million. This effort reduced the net leverage to 1.3 times by the year-end, which is below the targeted range of 1.5 to 2 times. This achievement reflects Mayville’s commitment to maintaining a strong balance sheet.

Share Repurchase Program

Mayville continued its commitment to enhancing shareholder value through its share repurchase program. In 2024, the company repurchased $5.9 million of common stock, with $19 million remaining under the existing $25 million authorization. This ongoing program signals confidence in the company’s future prospects.

New Business Wins

The company successfully secured over $100 million in new business wins in 2024, marking a 12% increase year-over-year. This growth demonstrates Mayville’s effective market expansion efforts and its ability to capture new opportunities even in a challenging market.

Revenue Decline

The fourth quarter of 2024 saw an 18% year-over-year decline in revenue, primarily due to lower customer program activity and softer demand across core markets. This decline highlights the challenges faced by the company in maintaining its revenue streams amidst market volatility.

Decreased Manufacturing Margin

Mayville experienced a decrease in its manufacturing margin, which fell to $10.8 million from $18.2 million in the previous year. The manufacturing margin rate also dropped from 12.3% to 8.9%, indicating pressures on profitability.

End Market Challenges

Significant declines were observed in key markets during the fourth quarter, with Powersports down 29.1%, Construction and Access down 34.5%, and Agriculture down 46.5% year-over-year. These declines reflect the broader challenges in the company’s core markets.

Adjusted EBITDA Decline

Adjusted EBITDA for the fourth quarter was $9.2 million, a decrease from $17.7 million in the prior year. The margin also fell by 430 basis points to 7.6%, highlighting the impact of reduced demand on the company’s earnings.

Forward-Looking Guidance

Looking ahead, Mayville Engineering Company provided guidance for 2025, anticipating net sales between $560 million and $590 million, with adjusted EBITDA ranging from $60 million to $66 million. The company expects a gradual recovery in the second half of the year, driven by demand improvements from new business ventures in less cyclical markets. Mayville remains committed to capital allocation strategies, including further debt reduction and share repurchases, and plans to explore M&A opportunities in high-growth adjacent markets.

In summary, Mayville Engineering Company’s earnings call highlighted a challenging year marked by revenue and margin declines. However, the company’s strong free cash flow, debt reduction efforts, and strategic initiatives in new business ventures and share repurchases demonstrate resilience and a focus on long-term growth. The forward-looking guidance suggests cautious optimism for 2025, with expectations of a gradual recovery and continued strategic investments.