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Mayville Engineering (MEC) 7 Aug 24 2024 Q2 Earnings call transcript

AInvestThursday, Aug 8, 2024 1:53 pm ET
1min read

Mayville Engineering Company (MEC) held a successful Second Quarter 2024 Earnings Conference Call, highlighting the company's robust net sales growth, margin expansion, and free cash flow conversion. The call provided valuable insights into MEC's strategic execution, market conditions, and future outlook.

Strategic Execution and Market Conditions

During the second quarter, MEC executed on new project start-ups in its commercial vehicle and powersports markets, demonstrating strong strategic execution and organic sales growth. The company's MBX lean initiatives drove year-over-year self-help adjusted EBITDA improvement, highlighting its operational excellence and lean manufacturing capabilities.

In the commercial vehicle market, MEC's new project launches and strategic pricing initiatives have offset a decrease in North American Class 8 production. The company expects to maintain comparable sales to this end market relative to 2023, despite a softening customer outlook for the second half of the year.

The construction and access market, representing approximately 17% of MEC's trailing 12-month revenues, saw a 2.7% year-over-year increase in the second quarter. This growth was driven by steady demand in nonresidential and public infrastructure markets.

Financial Performance and Guidance

MEC's financial performance in the first half of the year has outpaced expectations, leading to an increase in full year 2024 total free cash flow guidance to between $45 million and $55 million. The company's strategic execution and operational excellence initiatives have been instrumental in driving this growth.

For the second quarter, MEC reported a 17.7% year-over-year increase in total sales, primarily driven by the MSA acquisition and strong strategic execution. The company also achieved a 13.6% manufacturing margin rate, marking a 200 basis point increase compared to the prior year period.

In the construction and access market, MEC expects flat net sales growth for the full year due to infrastructure-related equipment demand and ongoing new customer wins. The powersports market, which represents approximately 18% of MEC's trailing 12-month revenues, is expected to continue benefiting from market share gains and new customer programs.

Looking Ahead

MEC remains optimistic about its long-term growth prospects, reiterating its financial guidance for net sales and adjusted EBITDA, while increasing free cash flow guidance for 2024. The company's focus on operational excellence, strategic growth initiatives, and market share gains positions it well for the future, despite challenges in some end markets.

In conclusion, Mayville Engineering Company's Second Quarter 2024 Earnings Call provided a comprehensive overview of the company's financial health, strategic initiatives, and market conditions. The call highlighted the company's strong execution, operational excellence, and strategic initiatives, setting a positive tone for MEC's future growth prospects.

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