Does the quick ramp-up in commercial vehicles change data center capacity plans, and any new business wins in trucks?

The company continues to see a significant ramp in commercial vehicle build-out rates, with most 2026 build slots filled and 2027 slots opening. They are supporting existing customers and seeing market share gains related to 2027 EPA emissions changes, with new programs on track for late Q4 revenue and 2027 ramp. This does not seem to directly impact data center capacity plans, but rather is managed in parallel. “Our understanding currently is that most of the 2026 build slots have been filled and the customers are just beginning to open up their 2027 build slots. That is certainly a faster uptick than we have anticipated in Q1 and we continue to support our customers, all three major customers we currently work with.”

What drives the low vs. high end of the outlook range (customer timing, uncertainty, or MEC's ramping ability)?

The primary variables are the pace of commercial vehicle recovery, the timing and execution of data center and critical power (DCP) volumes (customer pushes/pulls), and how quickly launch and outsourcing costs can be reduced as capital equipment arrives. “the primary variables as we look at the low end and the high end are the truly the pace of the CV recovery... The timing and execution of DCP volume... And then how quickly can we get through these launch and outsourcing.”

Are DCP wins mainly additional programs for existing customers or new customer wins? Certainty around incremental cross-selling revenue for 2026/2027.

DCP wins are a mix of existing customers increasing volumes, new programs from existing customers, and multiple new customer additions since the AccuFab acquisition. One new customer alone awarded over $55 million this year. The company feels good about the timing and line of sight for incremental cross-selling revenues in 2026 and 2027. “the wins in the DCP and market are both existing customers increasing volumes of existing ACCUFAB programs. It's new programs from existing DCP customers and and multiple new customers that we have been able to bring online since the transaction closed in July of last year.”

MEC

Mayville Engineering Company (MEC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 5, 2026

Source: earnings call transcript

Executive summary

Mayville Engineering Company Q2 FY26 — Strong Data Center Demand and Commercial Vehicle Recovery Drive Top-Line Beat

Mayville Engineering Company delivered stronger-than-expected Q2 FY26 results, driven by robust demand in data center and critical power, alongside an early recovery in commercial vehicles. The company is strategically investing in capacity expansion and managing temporary launch costs to capitalize on long-term profitable growth opportunities, particularly in high-value markets. A recent stock offering significantly bolstered liquidity, enabling proactive investment ahead of demand.

Highlights

Net sales increased 23.2% year-over-year to $163 million, exceeding expectations.
Data center and critical power organic growth was approximately 173% year-over-year.
Secured approximately $40 million in new awards with data center and critical power customers in Q2.
Successful common stock offering generated approximately $94 million in net proceeds, strengthening the balance sheet and increasing available liquidity to over $100 million.
Commercial vehicle net sales increased approximately 3% year-over-year, with Class 8 production projected to increase 9.1% in FY26.

Concerns

Project launch costs and outsourcing costs totaled $2.1 million in Q2, impacting near-term profitability.
Adjusted EBITDA margin decreased to 8.1% from 10.3% in the prior year period.
Free cash flow was a use of $6.6 million, down from $12.5 million provided in the prior year, driven by lower operating cash flow and working capital investments.
Interest expense increased to $3.5 million from $1.4 million due to increased average borrowings and interest rates.
Power sports net sales decreased approximately 6% year-over-year due to softness in legacy ATV, UTV, and motorcycle OEMs.

Guidance & targets

Category	Target	Timeline	Confidence
Net Sales	$160 million to $170 million high materiality	Q3 · FY26	High
Adjusted EBITDA	$15.5 million to $18.5 million high materiality	Q3 · FY26	High
Launch-related costs	$1 million to $1.5 million medium materiality	Q3 · FY26	High
Outsourcing costs	$1 million to $1.5 million medium materiality	Q3 · FY26	High
Net Sales	$620 million and $650 million high materiality	FY26	High
Adjusted EBITDA	$52 million and $60 million high materiality	FY26	High
Free Cash Flow	$7 million and $15 million high materiality	FY26	High
Launch-related costs	$5 million to $6 million medium materiality	FY26	High
Outsourcing costs	$2 million to $3 million medium materiality	FY26	High
Incremental Capital Expenditures	$40 million high materiality	next two years	High
Leased Equipment	$10 million medium materiality	next two years	High
Capital Expenditures (FY26 portion)	~$25 million medium materiality	FY26	High
New Manufacturing Facility Investment	$25 million to $30 million high materiality	future	Medium
New Manufacturing Facility Incremental Revenue Support	$50 million to $60 million high materiality	future	Medium
Long-term Net Leverage Target	2.5 times high materiality	long-term	High
Data Center and Critical Power Revenue as % of Total Revenue	approximately 20% high materiality	2026 · FY26	High
Total Bookings Across All End Markets	to exceed $150 million high materiality	2026 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Commercial Vehicle Net sales increased approximately 3% year over year in the second quarter as North American Class 8 production began to recover. Customer bill rates have continued to accelerate, and we expect this dynamic to continue into the second half of this year.	—	+3%	—	—
Construction and Access Revenue increased approximately 15% year over year in the quarter as performance was supported by strength in non-residential activity.	—	+15%	—	—
Power Sports Net sales decreased approximately 6% year over year, driven primarily by softness in legacy ATV, UTV, and motorcycle OEMs, resulting from ongoing offshoring initiatives.	—	-6%	—	—
Data Center and Critical Power Delivered organic growth of approximately 173% year over year, supported by growth from existing OEM customers and project launches tied to AccuFab-related cross-selling opportunities.	—	+173%	—	—

Capital programs

Capacity Expansion (existing manufacturing footprint) underway $40 million

Period spend: ~$25 million

Benefit:increase our revenue capacity beyond the approximately $850 million

Invest an incremental $50 million to expand capacity and support the growing needs of our data center and critical power customers. These investments include targeted upgrades across our existing manufacturing footprint. The FY26 guidance includes approximately $25 million of this planned investment.

New Production Facility (Southeastern United States) evaluating $25 million to $30 million

Benefit:support approximately $50 million to $60 million of incremental revenue

We are actively evaluating several in the southeastern United States and believe an investment of this type would likely fall in the $25 million to $30 million range and support approximately $50 million to $60 million of incremental revenue. We are generally targeting a decision in late 2026.

Risks & headwinds

Project launch costs and outsourcing costs Near-term (Q2, H2 FY26)

$2.1 million in Q2 FY26; additional $2 million to $3 million expected in H2 FY26

Mitigation:Expect these costs to normalize as equipment comes online (4-6 month lead time), production ramps, and utilization improves; expect to pull work back in-house by early next year.

Softness in Power Sports end market Q2 FY26

Net sales decreased approximately 6% year over year

Mitigation:Looking to take that capacity and convert it to Data Center and Critical Power (DCP) production.

Labor constraints and high unemployment rates in key factory areas Ongoing

Unemployment rate is 2.3% in Defiance, OH; 2.9% in Mabel, WI.

Mitigation:Pricing programs to account for increased costs, asking customers to pay for transitionary costs, prioritizing locations with good labor pools, leveraging third-party resources for hiring, focusing on retention.

Cyclicality of legacy end markets Long-term

Not quantified for future impact, but acknowledged as a general risk.

Mitigation:Increasing exposure to higher-margin, less cyclical Data Center and Critical Power (DCP) programs (target 25-30% of total revenue long-term).

What to watch in Q3 FY26

Outsourcing Costs Normalization

early next year

Current $2.1 million in Q2 FY26, $2 million to $3 million expected in H2 FY26

Target normalize

Why it matters

These costs are impacting near-term profitability; their reduction is key to margin expansion.

We expect launch costs to continue through the second half of the year... we expect them to subside as we bring our newly hired workforce up to full productivity and complete our targeted capacity investments.

Find out whether MEC delivers this. Inve re-checks your case every morning.

Q&A highlights

Details on capacity reservation model (data center only? deposits? take-or-pay contracts?).

MEC is exploring various options with data center customers, including upfront fee structures and volume commitments, due to increasing capacity needs and U.S. manufacturing constraints. No specific contracts signed yet, but there is interest.

“We put together a upfront fee structure. We have also discussed volume commitments and we continue to explore these options, even though we have not signed any particular customer to a contract like that, there is interest and we continue to explore those options with our data center customers.”

asked by Mike Schliske · answered by Unknown Speaker

2 min read 6 chapters

Detailed narrative

Data Center & Critical Power Momentum

MEC experienced significant organic growth of approximately 173% year-over-year in data center and critical power, driven by existing OEM customers and AccuFab cross-selling. The qualified opportunity pipeline exceeds $125 million, with $50 million to $60 million in projects scheduled to launch in 2026.

This segment is expected to comprise about 20% of total revenue in 2026, and the company secured $40 million in new awards in Q2, providing visibility into 2027 revenue generation.

Commercial Vehicle Market Recovery

The commercial vehicle segment saw a 3% year-over-year net sales increase in Q2, with North American Class 8 production beginning to recover. ACT's full-year 2026 outlook projects a 9.1% increase in Class 8 production, followed by a 9.7% increase in 2027, which is encouraging given MEC's demand activity typically precedes production by six weeks.

The company is expanding market share with key customers ahead of 2027 EPA regulation changes.

Strategic Capacity Investments

To meet accelerating demand, MEC plans to invest an incremental $50 million over the next two years in capacity expansion, including $40 million in capital expenditures and $10 million in leased equipment. This includes targeted upgrades to existing facilities and the development of a new production facility in the southeastern U.S., estimated to cost $25 million to $30 million and support $50 million to $60 million in incremental revenue.

These investments are expected to increase total revenue capacity beyond $850 million.

Temporary Launch & Outsourcing Costs

The company is incurring $2.1 million in project launch costs and outsourcing expenses due to equipment constraints and the need to ramp activity quickly. An additional $2 million to $3 million in outsourcing costs are expected in H2 FY26. These costs are considered temporary, with management anticipating normalization as new equipment comes online (4-6 month lead time), workforce productivity improves, and utilization increases, leading to strong incremental margins over time.

Strengthened Balance Sheet & Capital Allocation

A common stock offering generated approximately $94 million in net proceeds, used to reduce debt and increase available liquidity to over $100 million. This strengthens the balance sheet and enhances financial flexibility, supporting strategic growth initiatives. MEC's capital allocation priorities include investing in organic growth, continuing to reduce leverage towards a long-term target of 2.5 times net leverage, and pursuing selective accretive M&A.

Operational Efficiency & Margin Profile

Higher volumes drove improved operating leverage sequentially, though adjusted EBITDA margin was impacted by launch costs and higher gain-sharing accruals. The company is making disciplined portfolio decisions, evaluating pricing and margin profiles, and considering dedicated capacity reservations for customers to ensure predictable revenue and support margin expansion by directing capacity to higher-value programs.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.