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    MEC
    Earnings call· Jun 2026(Q2 FY26)

    Mayville Engineering Company Q2 FY26 earnings call MEC

    Aug 5, 2026 Source

    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

    5

    • 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

    5

    • 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

    17
    CategoryTargetConfidence
    Net Sales
    $160 million to $170 million
    high materiality
    High
    Adjusted EBITDA
    $15.5 million to $18.5 million
    high materiality
    High
    Launch-related costs
    $1 million to $1.5 million
    medium materiality
    High
    Outsourcing costs
    $1 million to $1.5 million
    medium materiality
    High
    Net Sales
    $620 million and $650 million
    high materiality
    High
    Adjusted EBITDA
    $52 million and $60 million
    high materiality
    High
    Free Cash Flow
    $7 million and $15 million
    high materiality
    High
    Launch-related costs
    $5 million to $6 million
    medium materiality
    High
    Outsourcing costs
    $2 million to $3 million
    medium materiality
    High
    Incremental Capital Expenditures
    $40 million
    high materiality
    High
    Leased Equipment
    $10 million
    medium materiality
    High
    Capital Expenditures (FY26 portion)
    ~$25 million
    medium materiality
    High
    New Manufacturing Facility Investment
    $25 million to $30 million
    high materiality
    Medium
    New Manufacturing Facility Incremental Revenue Support
    $50 million to $60 million
    high materiality
    Medium
    Long-term Net Leverage Target
    2.5 times
    high materiality
    High
    Data Center and Critical Power Revenue as % of Total Revenue
    approximately 20%
    high materiality
    High
    Total Bookings Across All End Markets
    to exceed $150 million
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    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%——

    Operational metrics

    18
    Total Sales
    $163 million+23.2% YoY
    Q2 FY26

    Increased on a year-over-year basis.

    Organic Net Sales Growth
    +9.2%YoY
    Q2 FY26

    Compared to the prior year period.

    Manufacturing Margin
    10.9%vs 10.3% prior year
    Q2 FY26

    Increase due to higher margin sales contribution and improved capacity utilization.

    SG&A Expenses
    $9.3 millionvs $10.3 million prior year
    Q2 FY26

    Decrease primarily relates to non-recurring executive transition expenses and AccuFab related acquisition costs in the prior year period.

    Adjusted EBITDA Margin
    8.1%vs 10.3% prior year
    Q2 FY26

    Decrease reflects project launch costs and higher gain sharing accruals.

    Project Launch Costs
    $2.1 million
    Q2 FY26

    Came in slightly above expectations to meet customer program timelines.

    Outsourcing Costs
    $2 million to $3 million
    H2 FY26

    Expected to be recognized in the second half of the year due to equipment constraints.

    Interest Expense
    $3.5 millionvs $1.4 million prior year
    Q2 FY26

    Increase driven by increased average borrowings and interest rate under the company's revolving credit facility.

    Capital Expenditures Increase
    $5.6 million
    Q2 FY26

    Driven primarily by equipment investments supporting the launch of new programs.

    Net Debt
    $134.7 millionup from $71.8 million Q2 FY25
    as of June 30

    At the end of the second quarter.

    Bank Covenant Net Leverage Ratio
    2.9 times
    as of June 30

    As of June 30th.

    Available Liquidity
    >$100 million
    end of Q2 FY26

    Exiting the quarter with more than $100 million of available liquidity.

    Net Proceeds from Common Stock Offering
    approximately $94 million
    Q2 FY26

    Generated approximately $94 million in net proceeds, used to reduce debt.

    Capital Investment Payback Period Target
    2-3 years
    target

    Targeting a payback period of two to three years for new capital investments.

    Capital Investment Internal Rate of Return Target
    at least 15%
    target

    Targeting an internal rate of return of at least 15% for new capital investments.

    Unemployment Rate
    2.3%
    current

    Unemployment rate in Defiance, Ohio area.

    Unemployment Rate
    2.9%
    current

    Unemployment rate in Mabel, Wisconsin area.

    DCP Revenue Mix
    25 to 30%
    long-term

    Long-term target for data center and critical power revenue as a percentage of total revenues.

    Industry KPIs

    5
    MetricValueDetails
    Capacity expansion$850 millionUSD
    Data center prime power demand>$125 millionUSD
    Incremental margin operating leveragestrong incremental margins
    Order backlog order intake by segment$40 millionUSD
    Industry production market size forecasts9.1% increase%

    Capital programs

    2
    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

    4
    Project launch costs and outsourcing costsNear-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 marketQ2 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 areasOngoing

    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 marketsLong-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

    5

    Outsourcing Costs Normalization

    early next year
    Current$2.1 million in Q2 FY26, $2 million to $3 million expected in H2 FY26
    Targetnormalize

    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.

    Q&A highlights

    8

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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⏳.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.