Mayville Engineering Q2 Earnings Call Highlights

Mayville Engineering NYSE: MEC reported second-quarter sales growth that exceeded management’s expectations, driven by momentum in data center and critical power programs and an early recovery in commercial vehicles. The company raised its full-year sales outlook while maintaining its adjusted EBITDA forecast and lowering its free-cash-flow guidance to reflect planned growth investments. Total second-quarter sales increased 23.2% year over year to $163 million. Excluding the Accu-Fab acquisition, organic sales rose 9.2%, Chief Financial Officer Rachele Lehr said. Manufacturing margin improved to 10.9% from 10.3% a year earlier, aided by Accu-Fab’s higher-margin sales contribution and improved utilization in commercial vehicle and construction and access markets.

Adjusted EBITDA margin, however, declined to 8.1% from 10.3% in the prior-year quarter. Lehr attributed the decline primarily to $2.1 million in data center and critical power program launch costs, as well as higher gain-sharing accruals associated with company performance and workforce expansion.

President and CEO Jag Reddy said data center and critical power revenue grew organically by approximately 173% year over year, supported by existing OEM customers and cross-selling tied to the Accu-Fab acquisition. The company’s qualified opportunity pipeline in the market exceeds $125 million, while projects scheduled to launch during 2026 carry an estimated value of $50 million to $60 million, including growth from current OEM customers. MEC expects data center and critical power to represent about 20% of 2026 revenue. During the quarter, it secured approximately $40 million in new awards in the segment, with production launches and revenue contributions expected to begin in 2027. The awards include power distribution units, switchgear and static transfer switches. Reddy said the company is investing in workforce, equipment and capacity ahead of customer program launches. Current facility constraints have forced MEC to outsource portions of fabrication work, including laser cutting, brake-press capacity and certain painting services. The company has ordered equipment to bring work in-house, though the machines have lead times of four to six months. Lehr said MEC expects an additional $2 million to $3 million of outsourcing costs in the second half. For the full year, the company’s outlook includes $5 million to $6 million of launch-related expenses and $2 million to $3 million of outsourcing costs. Management expects those costs to normalize as equipment is deployed, employees reach productivity targets and programs move to full production. Legacy M...