MAYVILLE, Wis.--(BUSINESS WIRE)--Mayville Engineering Company (NYSE: MEC) (the “Company” or “MEC”), a leading value-added provider of design, prototyping and manufacturing solutions serving diverse end-markets, today announced results for the three months ended June 30, 2023.
SECOND QUARTER 2023 RESULTS
(All comparisons versus the prior-year period)
- Net sales of $139.0 million, or +0.5% y/y
- Net income of $1.6 million, or $0.08 per diluted share
- Non-GAAP Adjusted Diluted EPS of $0.20
- Adjusted EBITDA of $15.3 million, including a $1.4 million impact from Hazel Park facility ramp-up
- Adjusted EBITDA margin of 11.0%, including a 100 bps impact from Hazel Park facility ramp-up
MANAGEMENT COMMENTARY
“Our second quarter results demonstrate favorable demand conditions across our key end markets, together with the early benefits of targeted price actions and improved asset optimization, consistent with our MBX value creation strategy,” stated Jag Reddy, President and Chief Executive Officer. “Organic sales momentum across key customer accounts supported improved utilization across our network during the second quarter, resulting in 130 basis points of sequential EBITDA margin improvement. Given current order rates and anticipated activity levels, we expect stable volume growth in the second half of 2023.”
“Our MBX strategy has positioned MEC to become an increasingly cash generative business,” continued Reddy. “During the first half of the year, we’ve delivered more than $15 million in free cash flow excluding a one-time deferred compensation payout, positioning us to fund a combination of organic and inorganic growth investments, together with opportunistic, open market repurchases of our common equity. As we look to the second half of the year, we are projecting improved plant utilization resulting in Adjusted EBITDA margin expansion relative to the first half of the year. In addition, we expect to generate $25 to $35 million in free cash flow for the remainder of the year and will prioritize deploying incremental free cash flow to repay debt, consistent with our long-term net leverage target of at or below 2.5x.”
“In July, we closed on our acquisition of Mid-States Aluminum, providing us with a strategic entry point into high-value, light-weight materials fabrication, positioning MEC to grow our share-of-wallet with existing accounts, most notably in our commercial vehicle, powersports, and agriculture end markets, while building leading market positions within emerging, high potential industries requiring the full lifecycle of solutions we offer,” noted Reddy. “The integration is moving forward seamlessly, with both MEC and MSA teams collaborating to provide our combined customer base with a full life cycle of on-demand solutions that include design, engineering and custom fabrication. We continue to expect that the MSA acquisition will contribute between $30 to $35 million of net sales and between $4 to $6 million in Adjusted EBITDA during the second half of 2023.”
“Today, we are increasing our full-year 2023 guidance, including partial-year contributions from the MSA acquisition,” concluded Reddy. “Looking to the second half of the year, we anticipate year-over-year growth in demand across our powersports and military end-markets, partially offset by softer demand within our commercial vehicle and construction markets, consistent with our expectations entering the year. On balance, we continue to focus on long-term value creation as we drive commercial growth in higher-value adjacent markets, further improve asset utilization and drive ratable margin expansion.”
PERFORMANCE SUMMARY
Net sales increased by 0.5% on a year-over-year basis in the second quarter 2023, driven by a combination of increased commercial vehicle, powersports and military sales volumes, partially offset by customer supply chain challenges affecting some of our customers, lower material price pass-throughs, and softening demand in our construction and small agriculture end markets.
Manufacturing margin was $16.1 million in the second quarter 2023, or 11.6% of net sales, versus $18.3 million, or 13.2% of net sales, in the prior year period. The year-over-year decrease in manufacturing margin was driven by unabsorbed fixed costs associated with new project launches, a one-time field replacement claim, higher employee health insurance claims and lower scrap income.
Profit sharing, bonus and deferred compensation expense increased $1.5 million to $2.7 million in the second quarter of 2023. Other selling, general and administrative expenses were $7.4 million in the second quarter of 2023 as compared to $6.4 million for the same prior year period. The increase in these expenses during the second quarter primarily reflect costs associated with acquisition of Mid-States Aluminum Corp. (“MSA”) and an increase in costs associated with our preparation to be Sarbanes-Oxley compliant in 2024.
Interest expense was $2.0 million in the second quarter 2023, compared to $0.8 million in the prior year period, due to higher interest rates and an increase in borrowings.
Net income for the second quarter of 2023 was $1.6 million, or $0.08 per diluted share, versus $5.9 million, or $0.29 per diluted share, in the prior-year period. The $4.3 million year-over-year decline in net income in the second quarter of 2023 reflects a $1.6 million, or $0.07 per diluted share impact, from MSA transaction costs, debt extinguishment and a one-time field replacement claim.
MEC reported Adjusted EBITDA of $15.3 million in the second quarter 2023, or 11.0% of net sales, versus $18.2 million, or 13.1% of net sales, in the prior-year period. Second quarter 2023 Adjusted EBITDA reflects $1.4 million of losses associated with the ramp-up of production at our Hazel Park facility. Excluding the impact of the ramp-up of the Hazel Park facility, Adjusted EBITDA margin would have been 12.0%.
Adjusted net income for the second quarter of 2023 was $4.1 million, or $0.20 per diluted share, versus $7.8 million, or $0.38 per diluted share, in the prior year period. The decrease in adjusted net income reflects a decrease in manufacturing margin associated with unabsorbed fixed costs from new project launches, higher employee health insurance claims and lower scrap income, along with higher interest expense.
Net cash provided by operations during the second quarter of 2023 was $0.2 million, compared to $16.1 million in the prior year period. Net cash provided by operations during the quarter reflects a $17.6 million use of cash associated with the payout of deferred compensation to a retired Company executive. Excluding the impact of the deferred compensation payment, net cash provided from operations would have been $17.8 million during the second quarter of 2023, an increase of 10.6% compared to the prior year period.
END-MARKET UPDATE |
||||||
|
|
|
|
|
|
|
|
|
Three Months Ended |
||||
|
|
June 30, |
||||
|
|
2023 |
|
2022 |
||
Commercial Vehicle |
|
$ |
56,075 |
|
$ |
55,130 |
Construction & Access |
|
|
26,522 |
|
|
29,388 |
Powersports |
|
|
23,995 |
|
|
22,379 |
Agriculture |
|
|
13,444 |
|
|
15,367 |
Military |
|
|
8,910 |
|
|
5,363 |
Other |
|
|
10,033 |
|
|
10,710 |
Net Sales |
|
$ |
138,980 |
|
$ |
138,337 |
Commercial Vehicles
MEC is a Tier 1 supplier to many of the country’s top original equipment manufacturers (OEM) of commercial vehicles providing exhaust & aftertreatment, engine components, cooling, fuel and structural systems for both heavy- and medium-duty commercial vehicles.
Net sales to the commercial vehicle market were $56.1 million in the second quarter of 2023, an increase of 1.7% versus the prior-year period. The increase in sales was primarily the result of volume increases and strengthened end market demand due to an 11% year-over-year increase in the class 8 commercial vehicle build schedule, partially offset by continued customer supply chain delays.
Construction & Access
MEC manufactures thousands of parts for the construction & access market including fenders, hoods, supports, frames, platforms, frame structures, doors and tubular products such as exhaust & aftertreatment, engine components, cooling system components, handrails and full electro-mechanical assemblies.
Net sales to the construction & access market were $26.5 million in the second quarter 2023, a decrease of 9.8% versus the prior-year period. The decrease in sales was primarily driven by decelerating residential construction demand and customer supply chain constraints.
Powersports
MEC manufactures stampings and complex metal assemblies and coatings for the marine propulsion, all-terrain vehicles (ATV), multi-utility vehicles (MUV) and motorcycle markets. MEC’s powersports expertise includes axle housings, steering columns, swing arms, fenders, suspension components, ATV/MUV racks, cowl assemblies and vehicle frames.
Net sales to the powersports market were $24.0 million in the second quarter of 2023, an increase of 7.2% versus the prior-year period. The increase in sales was the result of an increase in volumes from new project wins and share gains from both new and existing customers.
Agriculture
MEC is an integral partner in the supply chain of the world’s leading agriculture OEMs manufacturing thousands of parts including fenders, hoods, supports, frames, platforms, frame structures, doors, and tubular products such as exhaust, engine components, cooling system components, handrails and full electro-mechanical assemblies.
Net sales to the agriculture market were $13.4 million during the second quarter of 2023, a decrease of 12.5% versus the prior-year period. The decrease in sales was driven mostly by a decline in small-ag and turf equipment demand.
Military
MEC holds the International Traffic in Arms Regulations (ITAR) certification and produces components for the United States military. Products include exhaust, engine components, cooling, fuel, suspension, structural systems, and chemical agent resistant coating (CARC) painting capabilities.
Net sales to the military market were $8.9 million in the second quarter of 2023, an increase of 66.2% versus the prior-year period. Contributions from new programs, new vehicle introductions and demand associated with the conflict in Ukraine, contributed to the year-over-year sales growth.
Other
MEC also produces a wide variety of components and assemblies for customers in the power generation, industrial equipment, mining, forestry, communications, and medical markets.
Net sales to other end markets for the second quarter of 2023 were $10.0 million, a decrease of 6.3% year-over-year. Sales in this market primarily relate to MEC Outdoors, tooling, and additional miscellaneous markets.
STRATEGIC UPDATE
During the second quarter, MEC continued the rigorous implementation of its MEC Business Excellence (MBX) initiative, a value-creation framework designed to drive sustained operational and commercial excellence execution across all aspects of the organization. Upon full implementation, MEC expects MBX to drive improved margin capture, free cash generation and profitability over a multi-year period.
- Drive a High-Performance Culture. The Company is focused on effectuating cultural change across its organization by implementing performance-based metrics, daily lean management and other process-oriented strategies. Through these efforts, the Company intends to create a high-performance culture capable of driving improved performance, asset utilization and cost optimization. During the second quarter, the Company continued to drive the implementation and alignment of processes and best-practices across the enterprise to drive strategic execution.
- Drive Operational Excellence. The Company is focused on leveraging technologies and capabilities to increase productivity and reduce costs across the value chain. The Company intends to achieve this objective through the implementation of lean initiatives such as value stream mapping, sales, inventory, and operations planning (SIOP), and further optimization of its supply chain and procurement strategies. During the second quarter, the Company held a number of kaizen events to drive continuous improvement in plant operations.
- Drive Commercial Expansion. The Company is focused on driving commercial growth through an integrated, solutions-oriented approach that leverages its full suite of design, prototyping, and aftermarket services; an expansion of its fabrication capabilities beyond steel, with an emphasis on lightweight aluminum, plastics and composites; diversification within high-growth energy transition markets; further market penetration within existing end-markets; and the implementation of value-based pricing. During the second quarter, the Company executed on this strategy with the acquisition of MSA, a market-leading fabricator of aluminum extrusions for total consideration of $96 million. Through the MSA acquisition, MEC will be able capitalize on revenue synergies within its existing legacy customer base and is now positioned to grow organically by pursuing demand for light-weight aluminum products in high-growth EV and energy transition markets.
- Drive Human Resource Optimization. The Company remains focused on the recruitment and retention of skilled, experienced employees to support the growth of its business. This component of the MBX value creation framework is designed to provide competitive, performance-based incentives; develop high-potential candidates for internal development and advancement; ensure business continuity through multi-tiered succession planning; and to ensure a stable recruiting pipeline.
BALANCE SHEET UPDATE
At June 30, 2023, MEC had net debt outstanding of $89.7 million and total cash and availability on its senior secured revolving credit facility of $223.31 million. The Company’s total debt outstanding as of June 30, 2023 reflects borrowings during the quarter of $96.3 million primarily associated with $90.0 million of funds held in escrow as of the end of the current period to be used for the acquisition of MSA, which was completed on July 1, 2023. At the end of the second quarter, the ratio of net debt to trailing twelve-month Adjusted EBITDA was 1.61x.
_________________ |
1This amount is reduced to approximately $45.4 million after taking into account the $177.9 million of outstanding borrowings under the credit facility as of June 30, 2023. |
FINANCIAL GUIDANCE
The Company increased financial guidance for the full year 2023. All guidance is current as of the time provided and is subject to change.
|
|
|
|
|
|
|
||
|
|
FY 2022 |
|
1H 2023 |
2H 2023 |
FY 2023 |
||
(in Millions) |
|
Actual |
|
Actual |
Forecast |
Forecast |
||
Net Sales |
|
$539.4 |
|
$281.6 |
$298 - $328 |
$580 - $610 |
||
Adjusted EBITDA |
|
$60.8 |
|
$29.1 |
$37 - $42 |
$66 - $71 |
||
Capital Expenditures |
|
$58.6 |
|
$6.3 |
$9 - $14 |
$15 - $20 |
The Company has increased its 2023 guidance to reflect its current view of the remainder of the year and to reflect the MSA acquisition. The increased guidance now reflects an expected $30 to $35 million of incremental net sales and $4 to $6 million of incremental Adjusted EBITDA associated with the MSA acquisition. The Company currently expects Net Sales and Adjusted EBITDA margin in the second half of the year will be favorably impacted by improved plant utilization, relative to the first half of the year. In addition, the Company continues to expect net sales for 2023 to reflect raw material pass-through costs of between negative 4% to negative 5% of total net sales for the year, as compared to positive 5% of net sales for the full year 2022. The Company’s Adjusted EBITDA guidance reflects scrap income of between $10 million and $12 million, compared to $13 million in the full year 2022. The guidance for full year 2023 Adjusted EBITDA also reflects $3 million to $5 million of under-absorbed overhead costs associated with the ramp-up of production at the Company’s Hazel Park, Michigan manufacturing facility. The Company expects the unfavorable impact from the ramp-up of production at Hazel Park to be partially offset by a 40 to 70 basis point improvement in manufacturing margins resulting from the MBX initiatives, which will directly benefit Adjusted EBITDA.
SECOND QUARTER 2023 RESULTS CONFERENCE CALL
The Company will host a conference call on Wednesday, August 2, 2023 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).
For a live webcast of the conference call and to access the accompanying investor presentation, please visit www.mecinc.com and click on the link to the live webcast on the Investors page.
For telephone access to the conference, call (833) 470-1428 within the United States, or call (833) 950-0062 within Canada and please use the Access Code: 925615.
FORWARD-LOOKING STATEMENTS
This press-release includes forward-looking statements that reflect plans, estimates and beliefs. Such statements involve risk and uncertainties. Actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors. Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to: macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing supply chain challenges, labor availability and cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including future uncertain impacts); risks relating to developments in the industries in which our customers operate; risks related to scheduling production accurately and maximizing efficiency; our ability to realize net sales represented by our awarded business; failure to compete successfully in our markets; our ability to maintain our manufacturing, engineering and technological expertise; the loss of any of our large customers or the loss of their respective market shares; risks related to entering new markets; our ability to recruit and retain our key executive officers, managers and trade-skilled personnel; volatility in the prices or availability of raw materials critical to our business; manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements; our ability to successfully identify or integrate acquisitions; our ability to develop new and innovative processes and gain customer acceptance of such processes; risks related to our information technology systems and infrastructure; geopolitical and economic developments, including foreign trade relations and associated tariffs; results of legal disputes, including product liability, intellectual property infringement and other claims; risks associated with our capital-intensive industry; risks related to our treatment as an S Corporation prior to the consummation of our initial public offering; risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan; and other factors described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q. This discussion should be read in conjunction with our audited consolidated financial statements included in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.
ABOUT MAYVILLE ENGINEERING COMPANY
Founded in 1945, Mayville Engineering Company (MEC) is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Along with process engineering and development services, MEC maintains an extensive manufacturing infrastructure with 22 facilities across seven states. These facilities make it possible to offer conventional and CNC (computer numerical control) stamping, shearing, fiber laser cutting, forming, drilling, tapping, grinding, tube bending, machining, welding, assembly, and logistic services. MEC also possesses a broad range of finishing capabilities including shot blasting, e-coating, powder coating, wet spray and military grade chemical agent resistant coating (CARC) painting.
NON-GAAP FINANCIAL MEASURES
This press release contains financial information calculated in a manner other than in accordance with U.S generally accepted accounting principles (“GAAP”).
The non-GAAP measures used in this press release are EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income and Diluted EPS.
EBITDA represents net income before interest expense, provision for income taxes, depreciation, and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period. Adjusted EBITDA represents EBITDA before stock-based compensation, MSA acquisition related costs, loss on debt extinguishment, field replacement claim, Hazel Park transition and legal costs due to the former fitness customer and impairment charges on long-lived assets and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. Adjusted Net Income and Diluted EPS represent net income before the aforementioned Adjusted EBITDA addback items which do not reflect our core operating performance. We present Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income and Diluted EPS as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income, or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. These measures may not be comparable to the similarly named measures reported by other companies and have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.
Please reference our reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to EBITDA, Adjusted EBITDA, Adjusted Net Income and Diluted EPS and the calculation of EBITDA Margin and Adjusted EBITDA Margin included in this press release.
Mayville Engineering Company, Inc. Consolidated Balance Sheet (in thousands, except share amounts) (unaudited) |
||||||||
|
|
|
|
|
|
|
||
|
|
June 30, |
|
December 31, |
||||
|
|
2023 |
|
2022 |
||||
ASSETS |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
90,125 |
|
|
$ |
127 |
|
Receivables, net of allowances for doubtful accounts of $551 at June 30, 2023 and $545 at December 31, 2022 |
|
|
69,066 |
|
|
|
58,001 |
|
Inventories, net |
|
|
66,828 |
|
|
|
71,708 |
|
Tooling in progress |
|
|
7,827 |
|
|
|
7,938 |
|
Prepaid expenses and other current assets |
|
|
4,360 |
|
|
|
3,529 |
|
Total current assets |
|
|
238,206 |
|
|
|
141,303 |
|
Property, plant and equipment, net |
|
|
141,326 |
|
|
|
145,771 |
|
Assets held for sale |
|
|
81 |
|
|
|
83 |
|
Goodwill |
|
|
71,535 |
|
|
|
71,535 |
|
Intangible assets, net |
|
|
40,333 |
|
|
|
43,809 |
|
Operating lease assets |
|
|
33,929 |
|
|
|
36,073 |
|
Other long-term assets |
|
|
3,192 |
|
|
|
2,007 |
|
Total assets |
|
$ |
528,602 |
|
|
$ |
440,581 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
52,354 |
|
|
$ |
53,735 |
|
Current portion of operating lease obligation |
|
|
5,017 |
|
|
|
4,857 |
|
Accrued liabilities: |
|
|
|
|
|
|
||
Salaries, wages, and payroll taxes |
|
|
8,229 |
|
|
|
7,288 |
|
Profit sharing and bonus |
|
|
1,499 |
|
|
|
6,860 |
|
Current portion of deferred compensation |
|
|
273 |
|
|
|
18,062 |
|
Other current liabilities |
|
|
11,333 |
|
|
|
11,646 |
|
Total current liabilities |
|
|
78,705 |
|
|
|
102,448 |
|
Bank revolving credit notes |
|
|
177,943 |
|
|
|
72,236 |
|
Operating lease obligation, less current maturities |
|
|
29,745 |
|
|
|
31,891 |
|
Deferred compensation, less current portion |
|
|
3,446 |
|
|
|
3,132 |
|
Deferred income tax liability |
|
|
12,710 |
|
|
|
11,818 |
|
Other long-term liabilities |
|
|
684 |
|
|
|
1,189 |
|
Total liabilities |
|
$ |
303,233 |
|
|
$ |
222,714 |
|
Commitments and contingencies |
|
|
|
|
|
|
||
Common shares, no par value, 75,000,000 authorized, 21,829,453 shares issued at June 30, 2023 and 21,645,193 at December 31, 2022 |
|
|
— |
|
|
|
— |
|
Additional paid-in-capital |
|
|
203,423 |
|
|
|
200,945 |
|
Retained earnings |
|
|
30,459 |
|
|
|
26,274 |
|
Treasury shares at cost, 1,458,655 shares at June 30, 2023 and 1,472,447 at December 31, 2022 |
|
|
(8,513 |
) |
|
|
(9,352 |
) |
Total shareholders’ equity |
|
|
225,369 |
|
|
|
217,867 |
|
Total |
|
$ |
528,602 |
|
|
$ |
440,581 |
|
Mayville Engineering Company, Inc. Consolidated Statement of Net Income (in thousands, except share amounts and per share data) (unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net sales |
|
$ |
138,980 |
|
|
$ |
138,337 |
|
|
$ |
281,626 |
|
|
$ |
274,589 |
|
Cost of sales |
|
|
122,885 |
|
|
|
120,079 |
|
|
|
249,154 |
|
|
|
241,449 |
|
Amortization of intangible assets |
|
|
1,738 |
|
|
|
1,738 |
|
|
|
3,476 |
|
|
|
3,476 |
|
Profit sharing, bonuses, and deferred compensation |
|
|
2,688 |
|
|
|
1,208 |
|
|
|
5,690 |
|
|
|
3,755 |
|
Employee stock ownership plan expense |
|
|
— |
|
|
|
1,330 |
|
|
|
— |
|
|
|
1,820 |
|
Other selling, general and administrative expenses |
|
|
7,396 |
|
|
|
6,396 |
|
|
|
14,363 |
|
|
|
12,121 |
|
Impairment of long-lived assets and gain on contracts |
|
|
— |
|
|
|
(906 |
) |
|
|
— |
|
|
|
(2,089 |
) |
Income from operations |
|
|
4,273 |
|
|
|
8,492 |
|
|
|
8,943 |
|
|
|
14,057 |
|
Interest expense |
|
|
(1,968 |
) |
|
|
(765 |
) |
|
|
(3,626 |
) |
|
|
(1,332 |
) |
Loss on extinguishment of debt |
|
|
(216 |
) |
|
|
— |
|
|
|
(216 |
) |
|
|
— |
|
Income before taxes |
|
|
2,089 |
|
|
|
7,727 |
|
|
|
5,101 |
|
|
|
12,725 |
|
Income tax expense |
|
|
475 |
|
|
|
1,798 |
|
|
|
916 |
|
|
|
2,974 |
|
Net income and comprehensive income |
|
$ |
1,614 |
|
|
$ |
5,929 |
|
|
$ |
4,185 |
|
|
$ |
9,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.08 |
|
|
$ |
0.29 |
|
|
$ |
0.21 |
|
|
$ |
0.48 |
|
Diluted |
|
$ |
0.08 |
|
|
$ |
0.29 |
|
|
$ |
0.20 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
20,494,437 |
|
|
|
20,581,945 |
|
|
|
20,405,383 |
|
|
|
20,490,944 |
|
Diluted |
|
|
20,827,728 |
|
|
|
20,650,551 |
|
|
|
20,789,175 |
|
|
|
20,807,677 |
|
Mayville Engineering Company, Inc. Consolidated Statement of Cash Flows (in thousands) (unaudited) |
||||||||
|
|
|
|
|
|
|
||
|
|
Six Months Ended |
||||||
|
|
June 30, |
||||||
|
|
2023 |
|
2022 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income |
|
$ |
4,185 |
|
|
$ |
9,751 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
12,415 |
|
|
|
10,975 |
|
Amortization |
|
|
3,476 |
|
|
|
3,476 |
|
Allowance for doubtful accounts |
|
|
6 |
|
|
|
168 |
|
Inventory excess and obsolescence reserve |
|
|
41 |
|
|
|
87 |
|
Stock-based compensation expense |
|
|
2,420 |
|
|
|
2,714 |
|
Gain on disposal of property, plant and equipment |
|
|
(135 |
) |
|
|
(625 |
) |
Impairment of long-lived assets and gain on contracts |
|
|
— |
|
|
|
(2,089 |
) |
Deferred compensation |
|
|
(17,475 |
) |
|
|
(4,637 |
) |
Loss on extinguishment of debt |
|
|
216 |
|
|
|
— |
|
Non-cash lease expense |
|
|
2,144 |
|
|
|
2,482 |
|
Other non-cash adjustments |
|
|
184 |
|
|
|
176 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(11,071 |
) |
|
|
(15,973 |
) |
Inventories |
|
|
4,839 |
|
|
|
(4,033 |
) |
Tooling in progress |
|
|
111 |
|
|
|
(1,367 |
) |
Prepaids and other current assets |
|
|
(897 |
) |
|
|
(1,561 |
) |
Accounts payable |
|
|
(3,061 |
) |
|
|
9,275 |
|
Deferred income taxes |
|
|
638 |
|
|
|
2,504 |
|
Operating lease obligations |
|
|
(1,986 |
) |
|
|
(2,270 |
) |
Accrued liabilities |
|
|
(1,915 |
) |
|
|
6,631 |
|
Net cash provided by (used in) operating activities |
|
|
(5,865 |
) |
|
|
15,684 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Purchase of property, plant and equipment |
|
|
(6,320 |
) |
|
|
(26,351 |
) |
Proceeds from sale of property, plant and equipment |
|
|
153 |
|
|
|
5,228 |
|
Net cash used in investing activities |
|
|
(6,167 |
) |
|
|
(21,123 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from bank revolving credit notes |
|
|
347,324 |
|
|
|
218,867 |
|
Payments on bank revolving credit notes |
|
|
(241,618 |
) |
|
|
(210,414 |
) |
Repayments of other long-term debt |
|
|
(575 |
) |
|
|
(547 |
) |
Payments of financing costs |
|
|
(1,248 |
) |
|
|
— |
|
Purchase of treasury stock |
|
|
(1,661 |
) |
|
|
(2,323 |
) |
Payments on finance leases |
|
|
(192 |
) |
|
|
(157 |
) |
Net cash provided by financing activities |
|
|
102,030 |
|
|
|
5,426 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
89,998 |
|
|
|
(13 |
) |
Cash and cash equivalents at beginning of period |
|
|
127 |
|
|
|
118 |
|
Cash and cash equivalents at end of period |
|
$ |
90,125 |
|
|
$ |
105 |
|
Mayville Engineering Company, Inc. Reconciliation of Net Income to EBITDA and Adjusted EBITDA (in thousands) (unaudited) |
||||||||||||||||
|
|
|
|
|
||||||||||||
|
Three Months Ended |
|
Six Months Ended |
|||||||||||||
|
June 30, |
|
June 30, |
|||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
Net income and comprehensive income |
$ |
1,614 |
|
$ |
5,929 |
|
$ |
4,185 |
|
$ |
9,751 |
|
||||
Interest expense |
|
1,968 |
|
|
765 |
|
|
3,626 |
|
|
1,332 |
|
||||
Provision for income taxes |
|
475 |
|
|
1,798 |
|
|
916 |
|
|
2,974 |
|
||||
Depreciation and amortization |
|
8,011 |
|
|
7,245 |
|
|
15,891 |
|
|
14,451 |
|
||||
EBITDA |
|
12,068 |
|
|
15,737 |
|
|
24,618 |
|
|
28,508 |
|
||||
Loss on extinguishment of debt |
|
216 |
|
|
— |
|
|
216 |
|
|
— |
|
||||
MSA acquisition related costs |
|
899 |
|
|
— |
|
|
899 |
|
|
— |
|
||||
Stock-based compensation expense |
|
1,354 |
|
|
1,456 |
|
|
2,420 |
|
|
2,714 |
|
||||
Field replacement claim |
|
490 |
|
|
— |
|
|
490 |
|
|
— |
|
||||
Hazel Park transition and legal costs due to former fitness customer |
|
272 |
|
|
1,889 |
|
|
495 |
|
|
3,816 |
|
||||
Impairment of long-lived assets and gain on contracts |
|
— |
|
|
(906 |
) |
|
— |
|
|
(2,089 |
) |
||||
Adjusted EBITDA |
$ |
15,299 |
|
$ |
18,176 |
|
$ |
29,138 |
|
$ |
32,949 |
|
||||
Net sales |
$ |
138,980 |
|
$ |
138,337 |
|
$ |
281,626 |
|
$ |
274,589 |
|
||||
EBITDA Margin |
|
8.7 |
% |
|
11.4 |
% |
|
8.7 |
% |
|
10.4 |
% |
||||
Adjusted EBITDA Margin |
|
11.0 |
% |
|
13.1 |
% |
|
10.3 |
% |
|
12.0 |
% |
||||
Mayville Engineering Company, Inc. Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Diluted EPS (in thousands, except share amounts and per share data) (unaudited) |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||||||||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||||||||||||||||||
|
|
Earnings |
|
Diluted EPS |
|
Earnings |
|
Diluted EPS |
|
Earnings |
|
Diluted EPS |
|
Earnings |
|
Diluted EPS |
||||||||||||||||
Net income and comprehensive income |
|
$ |
1,614 |
|
|
$ |
0.08 |
|
|
$ |
5,929 |
|
|
$ |
0.29 |
|
|
$ |
4,185 |
|
|
$ |
0.20 |
|
|
$ |
9,751 |
|
|
$ |
0.47 |
|
Loss on extinguishment of debt |
|
|
216 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
|
|
|
216 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
|
MSA acquisition related costs |
|
|
899 |
|
|
|
0.04 |
|
|
|
— |
|
|
|
— |
|
|
|
899 |
|
|
|
0.04 |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation expense |
|
|
1,354 |
|
|
|
0.07 |
|
|
|
1,456 |
|
|
|
0.07 |
|
|
|
2,420 |
|
|
|
0.12 |
|
|
|
2,714 |
|
|
|
0.13 |
|
Field replacement claim |
|
|
490 |
|
|
|
0.02 |
|
|
|
— |
|
|
|
— |
|
|
|
490 |
|
|
|
0.02 |
|
|
|
— |
|
|
|
— |
|
Hazel Park transition and legal costs due to former fitness customer |
|
|
272 |
|
|
|
0.01 |
|
|
|
1,889 |
|
|
|
0.09 |
|
|
|
495 |
|
|
|
0.02 |
|
|
|
3,816 |
|
|
|
0.18 |
|
Impairment of long-lived assets and gain on contracts |
|
|
— |
|
|
|
— |
|
|
|
(906 |
) |
|
|
(0.04 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,089 |
) |
|
|
(0.10 |
) |
Tax effect of above adjustments |
|
|
(783 |
) |
|
|
(0.04 |
) |
|
|
(579 |
) |
|
|
(0.03 |
) |
|
|
(1,095 |
) |
|
|
(0.05 |
) |
|
|
(1,054 |
) |
|
|
(0.05 |
) |
Adjusted net income and comprehensive income |
|
$ |
4,062 |
|
|
$ |
0.20 |
|
|
$ |
7,789 |
|
|
$ |
0.38 |
|
|
$ |
7,610 |
|
|
$ |
0.37 |
|
|
$ |
13,138 |
|
|
$ |
0.63 |
|