Mayville Engineering’s 2026 Earnings Calls Reveal DCP Timeline Shifts and Contradictory Capacity Strategies

Date of Call: Aug 5, 2026

Financials Results

• Revenue: $163M, up 23.2% YOY (organic growth of 9.2% excluding ACUFAB acquisition)
• Gross Margin: 10.9%, compared to 10.3% in the prior year period

Guidance:

• Q3 2026 net sales expected between $160M and $170M.
• Q3 2026 adjusted EBITDA expected between $15.5M and $18.5M.
• Full-year 2026 net sales expected between $620M and $650M.
• Full-year 2026 adjusted EBITDA expected between $52M and $60M.
• Full-year 2026 free cash flow expected between $7M and $15M.
• Q3 and full-year outlook includes launch-related and outsourcing costs.

Business Commentary:

Strong Quarterly Performance and Revenue Growth:

• Mabel Engineering Company reported a 23.2% year-over-year increase in total sales, reaching $163 million for the second quarter of 2026. Organic net sales, excluding the impact of the AccuFab acquisition, increased by 9.2% compared to the prior year period.
• The growth was driven by stronger-than-expected demand across key end markets, particularly in data center and critical power, as well as the early recovery in the commercial vehicle market.

Data Center and Critical Power (DCP) Market Expansion:

• The company's data center and critical power segment showed organic growth of 173% year-over-year, with the qualified opportunity pipeline exceeding $125 million. Approximately $40 million in new awards were secured during the quarter.
• This expansion was fueled by growth from existing OEM customers and project launches tied to AccuFab-related cross-selling opportunities, indicating robust demand in the DCP market.

Commercial Vehicle Market Recovery:

• Commercial vehicle net sales increased approximately 3% year-over-year in the second quarter, supported by North American Class 8 production recovery. Customer build rates have accelerated, with a projected 9.1% increase in Class 8 production for 2026.
• The recovery is attributed to increased order activity and the typical lead time of about six weeks before production increases.

Investments in Capacity and Infrastructure:

• Mabel Engineering Company plans to invest an incremental $50 million over the next two years to expand capacity, including targeted upgrades across existing manufacturing footprint and the development of a new production facility.
• The investments are aimed at supporting the growing needs of data center and critical power customers and are expected to increase revenue capacity beyond $850 million.

Financial Strengthening and Capital Allocation:

• The company completed a common stock offering, generating approximately $94 million in net proceeds, which were used to reduce debt, leaving over $100 million in available liquidity.
• The strengthened balance sheet and increased liquidity are intended to fund strategic growth initiatives and capitalize on opportunities in the data center and critical power market.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'Our second quarter results reflect stronger than expected demand across several key end markets' and 'we are encouraged by the activity levels we are seeing today.' Management highlighted 'strong top line performance that came in well above our expectations' and expressed belief 'we are well positioned to capitalize on the demand environment ahead and continue to create long-term value for shareholders.'

Q&A:

• Question from Mike Schliske (DA Davidson): Regarding capacity reservations, was that a data center-only comment, and what would the contract structure look like?
  Response: Exploring options with data center customers, including upfront fees and volume commitments, but no contracts signed yet.

• Question from Mike Schliske (DA Davidson): Does the quick ramp in trucks change capacity plans, and were there any new business wins?
  Response: Commercial vehicle build slots are filling faster; supporting customers' increased build rates and gaining share, with some wins for 2027 EPA-related programs.

• Question from Vlad Bystrycki (Citigroup): What are the primary variables affecting the low vs. high end of the Q3 and full-year outlook?
  Response: Pace of commercial vehicle recovery, timing of DCP volume ramp, and speed of resolving launch and outsourcing costs.

• Question from Vlad Bystrycki (Citigroup): What is the nature of DCP program awards, and how certain are the incremental cross-selling revenues?
  Response: Awards include volume increases from existing customers, new programs from existing customers, and new customers; line of sight to 2026 and 2027 revenues.

• Question from Greg Palm (Craig Hallam): Are capacity reservation requests coming directly from customers, and are they with existing or new customers?
  Response: Conversations are with both existing and new data center customers; exploring the model more broadly.

• Question from Greg Palm (Craig Hallam): Are you becoming more selective in pursuing new business to hold capacity for larger programs?
  Response: Yes, saying no to some small programs and making choices to improve mix and profitability.

• Question from Ross Sparenbleck (William Blair): How is the revenue mix expected to change over time?
  Response: Prioritizing volume increases from existing DCP programs, converting tube capacity plants, and scaling larger programs; aiming for 20-25% DCP revenue mix long-term.

• Question from Ross Sparenbleck (William Blair): What is the scale and revenue potential of the new Southeast facility?
  Response: Targeting a plant that can generate $50-60M of revenue once fully capitalized, with a purchase and equipment cost of $25-30M.

• Question from Ted Jackson (Northland Securities): What is the cost range for the Southwest facility plan?
  Response: Cost estimated in the $25-30M range, including facility purchase and equipment.

• Question from Ted Jackson (Northland Securities): What functions are being outsourced, and when will the constraints be resolved?
  Response: Outsourcing laser cutting, brake press, and paint capacity; expecting to bring some back in-house by early 2027.

• Question from Ted Jackson (Northland Securities): How are labor costs and hiring plans being managed for the capacity expansion?
  Response: Pricing programs to account for higher labor costs, using third-party resources, and strategically locating programs near labor pools.

• Question from Greg Palm (Craig Hallam): Will outsourcing costs disappear entirely once equipment is in-house, and will revenue growth absorb temporary cost pressures?
  Response: Outsourcing costs for existing programs should go away; new business may have built-in margins. Revenue growth will help absorb costs.

• Question from Greg Palm (Craig Hallam): Could the new facility be dedicated to a single customer, with customer-funded CapEx or ramp costs?
  Response: Exploring all options, including customer funding for facilities or ramp costs, as part of commercial discussions.

Contradiction Point 1

Capacity Expansion Strategy and Facility Utilization

It presents a significant shift in strategy regarding facility usage for data center demand, impacting capacity planning and operational direction.

Greg Palm (Craig Hallam) - Greg Palm (Craig Hallam)

2026Q2: The **Southeast facility evaluation** also presents an opportunity to propose capacity reservations to DCP customers." "The company is **prioritizing higher-value, higher-margin programs** and has had to **say no to smaller opportunities**. - Jack Reddy(CEO)

Are capacity reservation requests coming directly from existing or new customers? - Michael Shlisky (D.A. Davidson)

2026Q1: **No new footprints are being closed**; instead, **6-7 plants are being converted/retooled** for data center manufacturing. **Legacy customer programs are not being exited.** - Jag Reddy(CEO)

Contradiction Point 2

Data Center Program (DCP) Revenue Mix Timeline

It involves a change in the financial outlook for achieving a key revenue mix target, affecting investor expectations for growth trajectory.

Ross Sparenbleck (William Blair) - Ross Sparenbleck (William Blair)

2026Q2: A **target of 20% DCP revenue mix by end of 2026 is expected**... - Jack Reddy(CEO)

How will the revenue mix evolve between recurring DCP revenue and cyclical bespoke programs over time? - Ted Jackson (Northland Securities)

2026Q1: The 20% target is **more likely in the second half** as programs move to full production. **Q2 will still be in the launch/early ramp phase.** - Rachele M. Lehr(CFO) & Jag Reddy(CEO)

Contradiction Point 3

Pace and Visibility of Commercial Vehicle (CV) Recovery

It reflects a shift in the expected timing for a CV demand recovery, altering the outlook for near-term capacity and revenue planning.

Mike Schliske (DA Davidson) - Mike Schliske (DA Davidson)

2026Q2: CV build rates are ramping faster than expected, with 2026 slots mostly filled and 2027 slots opening. - Jack Reddy(CEO)

How is the rapid ramp-up in commercial vehicle (CV) trucks impacting capacity plans for DCP and other groups, and have there been any recent new business wins in the truck market? - Linda Umwali (D.A. Davidson)

20260304-2025 Q4: The significant order increase in February is a positive signal, and MEC expects some of this demand to translate into accelerated build rate increases from commercial vehicle customers, likely showing up in mid- to late Q2. - Jagadeesh Reddy(CEO)

Contradiction Point 4

Certainty and Nature of DCP Program Wins

It highlights a change in the characterization of the DCP pipeline's certainty and win composition, affecting confidence in revenue visibility.

Vlad Bystrycki (Citigroup) - Vlad Bystrycki (Citigroup)

2026Q2: DCP wins are a mix of volume increases with existing customers, new programs from existing customers, and new customers (e.g., one new customer awarded >$55M in 2026 programs). The company sees a clear line of sight to the cross-selling revenue targets for 2026. - Jack Reddy(CEO)

Can you clarify the nature of recent DCP program awards (existing vs. new customers) and the certainty of the incremental cross-selling revenue highlighted on Slide 11? - Greg Palm (Craig-Hallum)

20260304-2025 Q4: The company has *very good confidence* in the $120 million of Data Center revenue. The $125 million qualified pipeline represents opportunities with >50% confidence, and excludes some very large (1-or-0) opportunities that could provide further upside. - Rachele Lehr(CFO)

Contradiction Point 5

Status of Outsourcing Cost Absorption and Equipment Arrival

It presents a contradiction on the timeline for resolving outsourcing costs, impacting cost structure and operational planning certainty.

Ted Jackson (Northland Securities) - Ted Jackson (Northland Securities)

2026Q2: Equipment (laser machines) is on order, being installed, or arriving by year-end. These outsourced costs are expected to be internalized by early 2027. - Jack Reddy(CEO)

Which functions are being outsourced, and when will equipment/constraints be resolved? - Linda Umwali (D.A. Davidson)

20260304-2025 Q4: The Critical Power project launch costs were primarily incurred in Q4 2025 and are expected to be largely complete by the end of Q2 2026, with full run rates achieved by the second half of the year. - Jagadeesh Reddy(CEO)