SEC Form 10-Q filed by Mayville Engineering Company Inc.

5/7/25 4:00:38 PM ET

$MEC

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Mayville Engineering Company, Inc._March 31, 2025

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38894

Mayville Engineering Company, Inc.

(Exact Name of Registrant as Specified in its Charter)

Wisconsin	39-0944729
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

135 S. 84th Street, Suite 300 Milwaukee, Wisconsin	53214
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (414) 381-2860

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, no par value

MEC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 2, 2025, the registrant had 20,461,031 shares of common stock, no par value per share, outstanding.

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		Page

PART I.	FINANCIAL INFORMATION	5

Item 1.	Financial Statements (Unaudited)	5

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of Comprehensive Income	6

	Condensed Consolidated Statements of Cash Flows	7

	Condensed Consolidated Statements of Shareholders’ Equity	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

PART II.	OTHER INFORMATION	30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5.	Other Information	30

Item 6.	Exhibits	31

Signatures		32

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements related to future events, business strategy, future performance, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions or their negative. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on management’s belief, based on currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed in such forward-looking statements. Mayville Engineering Company, Inc. (MEC, the Company, we, our, us or similar terms) believes the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be unduly relied upon.

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, those described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the SEC) on March 6, 2025, as such may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10-Q (including this report) and the following:

●

Macroeconomic conditions, including inflation, elevated interest rates, labor availability, material cost pressures and inconsistent customer demand, 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;

●

volatility in the prices or availability of raw materials critical to our business;

●

geopolitical and economic developments, including foreign trade relations and associated tariffs;

●

risks related to entering new markets;

●

our ability to recruit and retain our key executive officers, managers and trade-skilled personnel;

●

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;

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●

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 of common stock (IPO);

●

risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan; and

●

our ability to remediate the material weakness in internal control over financial reporting identified in preparing our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, and to subsequently maintain effective internal control over financial reporting.

These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements. Other unknown or unpredictable factors could also cause actual results or events to differ materially from those expressed in the forward-looking statements. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. 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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(unaudited)


	March 31,		December 31,
	2025		2024
ASSETS
Cash and cash equivalents	$	183	$	206
Receivables, net of allowances for doubtful accounts of $270 at March 31, 2025 and $248 at December 31, 2024		57,927		49,782
Inventories, net		55,834		54,756
Tooling in progress		4,432		4,761
Prepaid expenses and other current assets		3,635		3,439
Total current assets		122,011		112,944
Property, plant and equipment, net		152,724		156,528
Assets held for sale		1,402		1,402
Goodwill		92,650		92,650
Intangible assets, net		50,001		51,734
Operating lease assets		27,297		28,615
Other long-term assets		1,617		1,697
Total assets	$	447,702	$	445,570
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	49,749	$	39,119
Current portion of operating lease obligation		4,806		4,914
Accrued liabilities:
Salaries, wages, and payroll taxes		6,163		5,094
Bonuses and deferred compensation		2,630		4,626
Other current liabilities		9,589		10,839
Total current liabilities		72,937		64,592
Bank revolving credit notes		77,479		79,725
Operating lease obligation, less current maturities		24,219		25,412
Deferred compensation, less current portion		3,877		4,719
Deferred income tax liability		16,293		16,831
Other long-term liabilities		2,940		2,538
Total liabilities	$	197,745	$	193,817
Commitments and contingencies (see Note 8)
Common shares, no par value, 75,000,000 authorized, 22,418,092 shares issued at March 31, 2025 and 22,300,106 at December 31, 2024		—		—
Additional paid-in-capital		207,007		207,076
Retained earnings		60,106		60,086
Treasury shares at cost, 2,003,997 shares at March 31, 2025 and 1,883,198 at December 31, 2024		(17,156)		(15,409)
Total shareholders’ equity		249,957		251,753
Total liabilities and shareholders' equity	$	447,702	$	445,570

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except share amounts and per share data)

(unaudited)


	Three Months Ended
	March 31,
	2025		2024
Net sales	$	135,579	$	161,269
Cost of sales		120,255		140,336
Amortization of intangible assets		1,733		1,733
Bonuses and deferred compensation		3,325		3,800
Other selling, general and administrative expenses		8,689		7,769
Income from operations		1,577		7,631
Interest expense		(1,567)		(3,356)
Income before taxes		10		4,275
Income tax expense (benefit)		(10)		1,034
Net income and comprehensive income	$	20	$	3,241

Earnings per share:
Basic	$	0.00	$	0.16
Diluted	$	0.00	$	0.16

Weighted average shares outstanding:
Basic		20,520,696		20,485,933
Diluted		20,750,938		20,700,046

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	20	$	3,241
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		7,750		7,521
Amortization		1,733		1,733
Allowance for doubtful accounts		22		(16)
Inventory excess and obsolescence reserve		(164)		(247)
Stock-based compensation expense		1,101		1,157
Loss (gain) on disposal of property, plant and equipment		(3)		2
Deferred compensation		275		316
Non-cash lease expense		1,318		1,215
Other non-cash adjustments		70		69
Changes in operating assets and liabilities:
Accounts receivable		(8,167)		(12,870)
Inventories		(914)		1,923
Tooling in progress		329		225
Prepaids and other current assets		(186)		(199)
Accounts payable		10,444		6,727
Deferred income taxes		(538)		1,159
Operating lease obligations		(1,303)		(1,128)
Accrued liabilities		(3,454)		(203)
Net cash provided by operating activities		8,333		10,625
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(2,962)		(2,775)
Proceeds from sale of property, plant and equipment		3		107
Net cash used in investing activities		(2,959)		(2,668)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank revolving credit notes		282,113		119,351
Payments on bank revolving credit notes		(284,359)		(127,026)
Repayments of other long-term debt		—		(195)
Shares withheld for employees' taxes		(1,170)		(683)
Purchase of treasury stock		(1,747)		—
Payments on finance leases		(234)		(107)
Proceeds from the exercise of stock options		—		345
Net cash used in financing activities		(5,397)		(8,315)
Net decrease in cash and cash equivalents		(23)		(358)
Cash and cash equivalents at beginning of period		206		672
Cash and cash equivalents at end of period	$	183	$	314

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,577	$	2,094
Cash paid for taxes	$	586	$	2
Non-cash property, plant and equipment	$	1,218	$	1,650

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands)

(unaudited)


	Shareholders' Equity
	Additional		Treasury		Retained
	Paid-in-Capital		Shares		Earnings		Total
Balance as of December 31, 2024	$	207,076	$	(15,409)	$	60,086	$	251,753
Net income		—		—		20		20
Share repurchases		—		(1,747)		—		(1,747)
Stock-based compensation		1,101		—		—		1,101
Restricted stock units net of employee tax withholding		(1,170)		—		—		(1,170)
Balance as of March 31, 2025	$	207,007	$	(17,156)	$	60,106	$	249,957

	Shareholders' Equity
	Additional		Treasury		Retained
	Paid-in-Capital		Shares		Earnings		Total
Balance as of December 31, 2023	$	205,373	$	(9,513)	$	34,118	$	229,978
Net income		—		—		3,241		3,241
Stock-based compensation		1,157		—		—		1,157
Stock options exercised net of employee tax withholding		185		—		—		185
Restricted stock units net of employee tax withholding		(524)		—		—		(524)
Balance as of March 31, 2024	$	206,191	$	(9,513)	$	37,359	$	234,037

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Mayville Engineering Company, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(in thousands except share amounts, per share data, years and ratios)

(unaudited)

Note 1. Basis of presentation

The interim unaudited Condensed Consolidated Financial Statements of Mayville Engineering Company, Inc. and subsidiaries (MEC, the Company, we, our, us or similar terms) presented here have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and financial position for the interim unaudited periods presented. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K. A summary of the Company’s significant accounting policies is included in the Company’s 2024 financial statements in the Annual Report on Form 10-K. The Company followed these policies in preparation of the interim unaudited Condensed Consolidated Financial Statements except for new accounting pronouncements adopted as described below.

Nature of Operations

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. Founded in 1945 and headquartered in Milwaukee, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets. The Company operates 23 facilities, of which 22 are in operation, located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Expense Disaggregation Disclosures, amending Accounting Standards Codification (ASC) 220, Income Statement – Reporting Comprehensive Income. The amendment requires an entity to provide a disclosure within the financial statement footnotes showing the disaggregation of certain expenses included in relevant expense captions on the consolidated income statement, with a qualitative description of the amounts that are not separately disaggregated quantitatively. The guidance also requires disclosure of the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. The guidance is applied on a prospective basis, with a retrospective option and allows for early adoption. The Company is evaluating the potential impact of this guidance on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, amending ASC 740, Income Taxes. The amendment is intended to enhance the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments require that on an annual basis, entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments require that entities disclose additional information about income taxes paid as well as additional disclosures of pretax income and income tax expense and remove the requirement to disclose certain items that are no longer considered cost beneficial or relevant. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the potential impact of this guidance on the consolidated financial statements.

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Note 2. Select balance sheet data

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out method, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Work-in-process and finished goods are valued at production costs consisting of material, labor, and overhead.

Inventories as of March 31, 2025 and December 31, 2024 consist of:


	March 31,		December 31,
	2025		2024
Finished goods and purchased parts	$	25,155	$	25,952
Raw materials		20,913		19,386
Work-in-process		9,765		9,418
Total	$	55,834	$	54,756

Property, plant and equipment

Property, plant and equipment as of March 31, 2025 and December 31, 2024 consist of:


	Useful Lives		March 31,		December 31,
	Years		2025		2024
Land		Indefinite	$	2,564	$	2,564
Land improvements		15-39		4,486		4,261
Building and building improvements		15-39		79,657		79,553
Machinery, equipment and tooling		3-10		311,798		310,300
Vehicles		5		4,405		4,377
Office furniture and fixtures		3-7		25,042		23,034
Construction in progress		N/A		2,750		3,263
Total property, plant and equipment, gross				430,702		427,352
Less accumulated depreciation				277,978		270,824
Total property, plant and equipment, net			$	152,724	$	156,528

Depreciation expense was $7,750 and $7,521 for the three months ended March 31, 2025 and 2024, respectively.

Additionally, the Company completed the closure of its Wautoma, WI manufacturing facility during the fourth quarter of the prior year period. The net amount of property, plant and equipment associated with the facility was $1,402, which is classified in assets held for sale on the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024.

Goodwill

There were no changes to the goodwill balance of $92,650 between December 31, 2024 and March 31, 2025.

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Intangible Assets

The following is a listing of definite-lived intangible assets, the useful lives in years (amortization period) and accumulated amortization as of March 31, 2025 and December 31, 2024:


			March 31, 2025
	Useful Lives		Gross Carrying		Accumulated
	Years		Amount		Amortization			Net
Amortizable intangible assets:
Customer relationships and contracts		9-17	$	96,040	$	59,020	$	37,020
Trade name		10		14,780		9,294		5,486
Non-compete agreements		5		8,800		8,800		—
Developed technology		7		4,900		1,225		3,675
Patents		19		24		15		9
Total intangible assets, net			$	124,544	$	78,354	$	46,190


			December 31, 2024
	Useful Lives		Gross Carrying		Accumulated
	Years		Amount		Amortization			Net
Amortizable intangible assets:
Customer relationships and contracts		9-17	$	96,040	$	57,832	$	38,208
Trade name		10		14,780		8,924		5,856
Non-compete agreements		5		8,800		8,800		—
Developed technology		7		4,900		1,050		3,850
Patents		19		24		15		9
Total intangible assets, net			$	124,544	$	76,621	$	47,923

Additionally, the Company reported an indefinite lived non-amortizable brand name asset with a balance of $3,811 as of March 31, 2025 and December 31, 2024.

Changes in intangible assets between December 31, 2024 and March 31, 2025 consist of:


Balance as of December 31, 2024	$	51,734
Amortization expense		(1,733)
Balance as of March 31, 2025	$	50,001

Amortization expense was $1,733 for each of the three months ended March 31, 2025 and 2024.

Future amortization expense is expected to be as followed:


Year ending December 31,
2025 (remainder)	$	5,200
2026	$	6,933
2027	$	6,933
2028	$	6,877
2029	$	5,455
Thereafter	$	14,792

Note 3. Debt

Bank Revolving Credit Notes

On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $250,000

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revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit Agreement also provides the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum consolidated interest coverage ratio of 3.00 to 1.00 as well as a consolidated total leverage ratio not to exceed 3.50 to 1.00.

The Company incurred deferred financing costs of $1,248 associated with executing the Credit Agreement, which was recorded as an other long-term asset in the Condensed Consolidated Balance Sheets and will be amortized over the duration of the agreement.

At March 31, 2025, our consolidated total leverage ratio was 1.39 to 1.00 as compared to a covenant maximum of 3.50 to 1.00 under the Credit Agreement.

At March 31, 2025, our consolidated interest coverage ratio was 4.93 to 1.00 as compared to a covenant minimum of 3.00 to 1.00 under the Credit Agreement.

Under the Credit Agreement, interest is payable quarterly at the adjusted secured overnight financing rate (SOFR) plus an applicable margin based on the current consolidated total leverage ratio. The interest rate was 5.67% and 6.55% as of March 31, 2025 and December 31, 2024, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was 0.20% and 0.25% as of March 31, 2025 and December 31, 2024, respectively.

The Company was in compliance with all financial covenants of its credit agreements as of March 31, 2025 and December 31, 2024. The amount borrowed on the revolving credit notes was $77,479 and $79,725 as of March 31, 2025 and December 31, 2024, respectively.

Other Debt

Additionally, the Company has a Fond du Lac County and Fond du Lac Economic Development Corporation term note (Fond du Lac Term Note). The Fond du Lac Term Note is secured by a security agreement, payable in annual installments of $500 plus interest at 2.00% and is due in full in December 2028. The balance outstanding as of March 31, 2025 and December 31, 2024 was $1,875. The short-term and long-term balance of $500 and $1,375, respectively, are recorded in other current liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets, respectively.

Note 4. Leases

The Company has real property operating leases for office and manufacturing space. Operating leases for the Company’s personal property consist of leases for office equipment, vehicles, forklifts and storage tanks for bulk gases. The Company recognizes a right-of-use (ROU) asset and a lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term, including renewal periods that are considered reasonably certain. The Company has not elected to recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less.

The Company has finance leases for equipment used throughout its office and manufacturing facilities. The Company recognizes an ROU asset and a lease liability for finance leases based on the net present value of future minimum lease payments.

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Lease expense for the Company’s finance leases is comprised of the amortization of the ROU asset and interest expense recognized based on the effective interest method.

Variable lease expense is related to certain of the Company’s real property leases and personal property leases, and it generally consists of property tax and insurance components that are for the benefit of the lessor (real property leases) and variable overage fees (personal property leases) that are remitted as part of the Company’s lease payments.

The components of lease expense were as follows:


	Three Months Ended
	March 31,
	2025		2024
Finance lease cost:
Amortization of finance lease assets	$	133	$	104
Interest on finance lease liabilities		9		8
Total finance lease expense		142		112
Operating lease expense		1,326		1,340
Short-term lease expense		151		152
Variable lease expense		115		52
Lease income ⁽¹⁾		(547)		(532)
Total lease expense	$	1,187	$	1,124

(1)	The Company subleased a portion of its Hazel Park, MI facility starting in June 2022. Lease income for the three months ended March 31, 2025 and 2024 was $547 and $532, respectively.

The lease related supplemental cash flow information is as follows:


	Three Months Ended
	March 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities for finance leases:
Operating cash flows	$	9	$	8
Financing cash flows	$	234	$	107

Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	1,535	$	1,481

Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases	$	—	$	134
Finance leases	$	798	$	1

Note 5. Employee stock ownership plan

Under the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (ESOP), the Company can make annual discretionary contributions to the trust for the benefit of eligible employees in the form of cash or shares of common stock of the Company subject to the Board of Directors’ approval. The Company recorded no ESOP expense for the three months ended March 31, 2025 and 2024.

Additionally, as of January 1, 2025, the Company amended the plan reducing the distribution period from three years to a full distribution on the annual distribution date of the year following separation from the Company.

As of January 1, 2025, the in-service diversification percentage allowed increased from 25% at age 50 with 10 years of service to 50% and at age 55 with 10 years of service, the percentage allowed increased from 50% to 75%.

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At various times following death, disability, retirement, termination of employment or the exercise of diversification rights, an ESOP participant is entitled to receive their ESOP account balance in accordance with various distribution methods as permitted under the policies adopted by the ESOP.

As of March 31, 2025 and December 31, 2024, the ESOP shares consisted of 1,904,459 and 3,474,467 in allocated shares, respectively.

Note 6. Retirement plans

The Mayville Engineering Company, Inc. 401(k) Plan (the 401(k) Plan) covers substantially all employees meeting certain eligibility requirements. The 401(k) Plan is a defined contribution plan and is intended for eligible employees to defer tax-free contributions to save for retirement. Employees may contribute up to 50% of their eligible compensation to the 401(k) Plan, subject to the limits of Section 401(k) of the Internal Revenue Code.

The Company provides a 50% match for employee contributions, up to 6%. For the three months ended March 31, 2025 and 2024, the Company’s employer match expense was $946 and $1,053, respectively.

Note 7. Income taxes

On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate and adjusted for discrete taxable events that may occur in the quarter. As the year progresses, the Company will refine its estimate based on facts and circumstances by each tax jurisdiction.

Income tax expense (benefit) was ($10) and $1,034, and the effective tax rate (ETR) was (100.00%) and 24.19% for the three months ended March 31, 2025 and 2024, respectively. Our ETR is different from the expected tax rate due to state taxes, non-deductible items, research and development credits and excess tax benefit associated with stock-based compensation items. The year-to-date rate includes the recognition of favorable discrete items. Due to lower pre-tax income, the favorable discrete items had a greater impact in 2025.

Uncertain Tax Positions

Based on the Company’s evaluation, there is one unrecognized tax benefit requiring recognition in its financial statements as of March 31, 2025. Any interest and penalties related to uncertain tax positions are recorded in income tax expense (benefit). The entire balance of unrecognized tax benefits as of March 31, 2025, if recognized, would affect the Company’s effective tax rate.

The Company files income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. Federal tax returns for tax years beginning January 1, 2021, and state tax returns beginning January 1, 2020, are open for examination.

Note 8. Commitments and contingencies

Litigation

From time to time, the Company may be involved in various claims and lawsuits, both for and against the Company, arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, in management’s opinion, either the likelihood of loss is remote, or any reasonably possible loss associated with the resolution of such proceedings is not expected to have a material adverse impact on the condensed consolidated financial statements.

Note 9. Deferred compensation

The Mayville Engineering Company Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors. Eligible employees may elect to defer a portion of their compensation for any plan year and the deferral cannot exceed 50% of the participant’s base salary and may include the participant’s annual short-term cash incentive up to 100%. The participant’s election must be made prior to the first day of the plan year.

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An employer contribution will be made for each participant to reflect the amount of any reduced allocations to the ESOP and/or 401(k) employer contributions due solely to the participant’s deferral amounts, as applicable. In addition, a discretionary amount may be awarded to a participant by the Company.

Deferrals are assumed to be invested in an investment vehicle based on the options made available to the participant (which does not include Company stock).

The deferred compensation plan provides benefits payable upon separation of service or death. Payments are to be made 180 days after date of separation from service, either in a lump-sum payment or up to five annual installments as elected by the participant when the participant first elects to defer compensation.

The deferred compensation plan is non-funded, and all future contributions are unsecured in that the employees have the status of a general unsecured creditor of the Company and the agreements constitute a promise by the Company to make benefit payments in the future. During the three months ended March 31, 2025 and 2024, eligible employees elected to defer compensation of $600 and $365, respectively. As of March 31, 2025 and December 31, 2024, the short-term portion accrued for all benefit years less than twelve months under this plan was $1,367 and $251, respectively, which is included within bonuses and deferred compensation on the Condensed Consolidated Balance Sheets. As of March 31, 2025 and December 31, 2024, the long-term portion accrued for all benefit years greater than twelve months under this plan was $3,877 and $4,719. These amounts include the initial deferral of compensation and were adjusted for changes in the value of investment options chosen by the participants. Total expense (credit) for the deferred compensation plan for the three months ended March 31, 2025 and 2024 was ($73) and $237, respectively. These expenses are included in bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income. Additionally, the Company made cash distributions of $252 and $286 for the three months ended March 31, 2025 and 2024, respectively.

Note 10. Self-Funded insurance

The Company is self-funded for the medical benefits provided to its employees and their dependents. Healthcare costs are expensed as incurred and are based upon actual claims paid, reinsurance premiums, administration fees, and estimated unpaid claims. The Company has an aggregate stop loss limit to mitigate risk. Expenses related to this contract were $4,130 and $6,169 for the three months ended March 31, 2025 and 2024, respectively. An estimated accrued liability of $922 and $1,184 was recorded as of March 31, 2025 and December 31, 2024, respectively, for estimated unpaid claims and is included within other current liabilities on the Condensed Consolidated Balance Sheets.

Note 11. Segments

The Company operates as a single reporting unit and single reporting segment, and is managed on a consolidated basis. The Company derives revenue from its customers by providing value-added manufacturing solutions ranging from concept to production, including prototyping and tooling, production fabrication, coating, assembly and aftermarket components. The accounting policies of the Company's one operating segment are the same as those described in the summary of significant accounting policies. The Company’s chief operating decision maker (CODM) is regularly provided with and assesses performance for its one operating segment with only the consolidated expenses and net income as presented in the Condensed Consolidated Statements of Comprehensive Income.

The CODM uses these performance measures to evaluate the Company's profitability, deciding whether to reinvest profits into the segment or into other parts of the entity, such as acquisitions or to buy back Company common stock and monitor budget versus actual results.

All sales are generated and all assets are located within the United States and the business activities are managed at a consolidated level.

The Company’s Chief Executive Officer is the CODM.

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Note 12. Fair value of financial instruments

Fair value provides information on what the Company may realize if certain assets were sold or might pay to transfer certain liabilities based upon an exit price. Financial assets and liabilities that are measured and reported at fair value are classified into a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs as follows:

●

Level 1 – Quoted prices in active markets for identical assets or liabilities.

●

Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data. Long-term debt is classified as a Level 2 fair value input.

●

Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgements about assumptions that market participants would use in pricing the asset or liability.

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:


	Balance at		Fair Value Measurements at
	March 31,		Report Date Using
	2025		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	5,244	$	5,244	$	—	$	—
Total	$	5,244	$	5,244	$	—	$	—


	Balance at		Fair Value Measurements at
	December 31,		Report Date Using
	2024		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	4,969	$	4,969	$	—	$	—
Total	$	4,969	$	4,969	$	—	$	—

Fair value measurements for the Company’s cash and cash equivalents are classified based upon Level 1 measurements because such measurements are based upon quoted market prices in active markets for identical assets.

Accounts receivable, accounts payable, long-term debt and accrued liabilities are recorded in the Condensed Consolidated Balance Sheets at cost and approximate fair value.

Deferred compensation liabilities are recorded at amounts due to participants at the time of deferral. Deferrals are invested in an investment vehicle based on the options made available to the participant, considered to be Level 1 or Level 2 on the fair value hierarchy, with the current balance all as Level 1. The change in fair value is recorded in the bonuses and deferred compensation line item on the Condensed Consolidated Statements of Comprehensive Income. The short-term and long-term balances due to participants are reflected on the bonuses and deferred compensation and deferred compensation, less current portion line items, respectively, on the Condensed Consolidated Balance Sheets.

The Company’s non-financial assets such as goodwill, intangible assets and property, plant, and equipment are re-measured at fair value when there is an indication of impairment and adjusted only when an impairment charge is recognized. As of March 31, 2025, there was no impairment recognized for the year.

Note 13. Earnings Per Share

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share. In accordance with ASC 260, outstanding options will be considered to have been exercised and outstanding as of the beginning of the period if the average

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market price of the common stock during the period exceeds the exercise price of the options (they are “in the money”), and the assumed exercise of the options do not have an anti-dilutive impact on earnings per share.

A reconciliation of basic and diluted net income per share attributable to the Company were as follows:


	Three Months Ended
	March 31,
	2025		2024
Net income attributable to MEC	$	20	$	3,241
Weighted average shares outstanding		20,520,696		20,485,933
Basic income per share	$	0.00	$	0.16

Weighted average shares outstanding		20,520,696		20,485,933
Effect of dilutive stock-based compensation		230,242		214,113
Total potential shares outstanding		20,750,938		20,700,046
Diluted income per share	$	0.00	$	0.16

There were no options in the money that were excluded in the computation of diluted earnings per share for the three months ended March 31, 2025 and 2024 that had an anti-dilutive impact on earnings per share.

Note 14. Revenue Recognition

Contract Assets and Contract Liabilities

The Company has contract assets and contract liabilities, which are included in tooling in progress and other current liabilities on the Condensed Consolidated Balance Sheets, respectively. Contract assets primarily consist of capitalized costs related to customer-owned tooling contracts, wherein the Company has not yet met performance obligations. Contract liabilities include deferred tooling revenue, where the performance obligation was not met. The performance obligation is satisfied when the tooling is completed and the customer signs off through the Product Part Approval Process or other documented customer acceptance. Cost of goods sold is recognized and released from the balance sheet when control of the tooling promised under contract is transferred to the customer.

The Company’s contracts with customers are short-term in nature; therefore, revenue is typically recognized, billed and collected within a 12-month period. The following table reflects the changes in our contract assets and liabilities during the three months ended March 31, 2025:


	Contract		Contract
	Assets		Liabilities
As of December 31, 2024	$	4,761	$	3,462
Net activity		(329)		(847)
As of March 31, 2025	$	4,432	$	2,615

During the three months ended March 31, 2025 and 2024, revenue recognized from deferred revenue that was recorded as a contract liability at the beginning of 2025 and 2024 was $2,100 and $2,346, respectively.

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Disaggregated Revenue

The following tables represent a disaggregation of revenue by product category and end market:


	Three Months Ended
	March 31,
Product Category	2025		2024
Outdoor sports	$	1,785	$	2,159
Fabrication		67,858		90,914
Performance structures		43,334		45,770
Tube		16,511		19,074
Tank		9,889		11,076
Total		139,377		168,993
Intercompany sales elimination		(3,798)		(7,724)
Total, net sales	$	135,579	$	161,269


	Three Months Ended
	March 31,
End Market	2025		2024
Commercial vehicle	$	50,877	$	58,954
Construction & access		19,524		28,446
Powersports		22,250		30,291
Agriculture		10,935		14,958
Military		8,487		7,952
Other		23,506		20,668
Total, net sales	$	135,579	$	161,269

Note 15. Concentration of major customers

The following customers accounted for 10% or greater of the Company’s recorded net sales or net trade receivables:


	Net Sales				Accounts Receivable
	Three Months Ended				As of		As of
	March 31,				March 31,		December 31,
	2025		2024		2025		2024
Customer
A	16.7	%	16.6	%	11.3	%	11.1	%
B	10.7	%	14.0	%	10.2	%	<10	%
C	<10	%	<10	%	10.6	%	15.2	%

Note 16. Stock-based compensation

The Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan provided the Company the ability to grant monetary payments based on the value of its common stock, up to 2,000,000 shares.

On April 20, 2021, shareholders of the Company approved an amendment to the 2019 Omnibus Incentive Plan increasing the number of shares of common stock authorized for issuance by 2,500,000 shares.

The total number of shares of the Company’s common stock still available for issuance under the 2019 Omnibus Incentive Plan as of March 31, 2025 is 1,442,424.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC 718, Compensation – Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the stock-based instrument at the time of grant and are recognized as expense over the vesting period of the stock-

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based instrument. Our stock-based compensation consists of stock options, restricted stock units (RSUs) and performance stock units (PSUs). For all types of units, fair value is equivalent to the adjusted closing stock price at the date of the grant. The Black-Scholes option pricing model is utilized to determine fair value for options.

Cancellations and forfeitures are accounted for as incurred.

Stock-based compensation expense was $1,101 and $1,157 for the three months ended March 31, 2025 and 2024, respectively. The Company reports stock-based compensation within bonuses and deferred compensation in the Condensed Consolidated Statements of Comprehensive Income.

There were no stock options granted by the Company to employees during the three months ended March 31, 2025 and 2024. Stock option grants expire 10 years subsequent to the grant date. Stock-based compensation expense related to stock options is calculated by estimating the fair value of non-qualified stock options at the time of grant and is amortized over the stock options’ vesting period. During the three months ended March 31, 2025, 113,700 options vested with a weighted average strike price of $15.99. There were no options exercised during the three months ended March 31, 2025. As of March 31, 2025, 547,619 options remained outstanding with a weighted average strike price of $14.18 and a weighted average contractual life of 6.88 years.

The Company granted 264,342 and 344,254 RSUs with no director awards during the three months ended March 31, 2025 and 2024, respectively. The RSUs granted to employees vest ratably over a three-year period beginning the subsequent year to the anniversary of the grant date and director awards vest the subsequent year to the grant date.

The Company granted 169,062 and 110,710 PSUs during the three months ended March 31, 2025 and 2024, respectively. The PSUs are earned based on the achievement of pre-determined financial performance goals at the end of a three-year performance measurement period.

The performance goals for the PSUs granted in 2025 are weighted 50% on the 3-year average of the Company’s Return on Invested Capital (“ROIC”) from 2025 to 2027 and 50% on the Company’s 2027 adjusted EBITDA target. The performance goals for the PSUs granted in 2024 are weighted 50% on the 3-year average of the Company’s ROIC from 2024 to 2026 and 50% on the Company’s 2026 adjusted EBITDA target. ROIC represents net operating profit after taxes divided by invested capital for the represented period. Adjusted EBITDA represents net income before interest expense, provision for income taxes, depreciation, amortization, stock-based compensation expense, legal costs due to the former fitness customer and adjusted for items to be determined unusual in nature or infrequent in occurrence for the performance period, as approved by the Compensation Committee. The number of earned PSUs can range from 50% (threshold) to 200% (maximum) of the target award, with no PSUs earned for performance below the threshold level.

Note 17. Common Equity

At March 31, 2025 the authorized stock of the Company consisted of 75,000,000 shares of common stock without par value.

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Changes in outstanding common shares are summarized as follows:


		Shares
		Outstanding
Shares as of December 31, 2023		20,310,584
Treasury stock purchases		—
Common stock issued (including stock-based compensation impact)		155,932
Balance as of March 31, 2024		20,466,516

		Shares
		Outstanding
Balance as of December 31, 2024		20,416,908
Treasury stock purchases		(120,799)
Common stock issued (including stock-based compensation impact)		117,986
Balance as of March 31, 2025		20,414,095

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in the understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 and “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 and our unaudited Condensed Consolidated Financial Statements and the notes thereto included in Part I, Item I of this Quarterly Report on Form 10-Q. In this discussion, we use certain non-GAAP financial measures. Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are included in this Management Discussion and Analysis of Financial Condition and Results of Operations. Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

All amounts are presented in thousands except share amounts, per share data, years and ratios.

Overview

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. We have developed long-standing relationships with our blue-chip customers based upon our commitment to “Unmatched Excellence”.

Macroeconomic Conditions

Over the past few years, the broader market dynamics, combined with recent geopolitical and economic developments, including foreign trade relations and associated tariffs, have resulted in impacts to the Company. These influences have contributed to elevated interest rates, inconsistent customer demand, material cost inflation and labor availability. The Company expects some of these dynamics to continue through 2025 and could continue to have an impact on demand, material costs and labor.

How We Assess Performance

Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to the current macroeconomic conditions, several factors affect our net sales in any given period, including weather, timing of acquisitions and the production schedules of our customers. Net sales are recognized at the time of shipment or at delivery to the customer.

Manufacturing Margins. Manufacturing margins represents net sales less cost of sales. Cost of sales consists of all direct and indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other directly related overhead costs. Our cost of sales is directly affected by the fluctuations in commodity prices, primarily sheet steel and aluminum, but these changes are largely mitigated by contractual agreements with our customers that allow us to pass through these price variations based upon certain market indexes.

Depreciation and Amortization. We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. The periodic expense related to leasehold improvements and intangible assets is depreciation and amortization expense, respectively. Leasehold improvements are depreciated over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets.

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Other Selling, General, and Administrative Expenses. Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and certain corporate level administrative expenses such as audit, accounting, legal and other consulting and professional services, travel, and insurance.

Other Key Performance Indicators

EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow

EBITDA represents net income before interest expense, provision (benefit) 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 expense and legal costs due to former fitness customer. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period.

Free cash flow represents net cash provided by operating activities less cash flow used in the purchase of property, plant and equipment.

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. We present EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow 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 measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow may not be comparable to the similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions.

The following table presents a reconciliation of net income and comprehensive income, the most directly comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA Margin and Adjusted EBITDA Margin for each of the periods presented.


	Three Months Ended
	March 31,
	2025			2024
Net income and comprehensive income	$	20		$	3,241
Interest expense		1,567			3,356
Provision (benefit) for income taxes		(10)			1,034
Depreciation and amortization		9,483			9,254
EBITDA		11,060			16,885
Stock-based compensation expense ⁽¹⁾		1,101			1,157
Legal costs due to former fitness customer ⁽²⁾		—			479
Adjusted EBITDA	$	12,161		$	18,521
Net sales	$	135,579		$	161,269
EBITDA Margin		8.2	%		10.5	%
Adjusted EBITDA Margin		9.0	%		11.5	%

(1)	Non-cash employee compensation based on the value of common stock issued pursuant to the 2019 Omnibus Incentive Plan.

(2)	Legal costs associated with the enforcement of the Company’s supply contract with the former fitness customer.

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The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable measure calculated in accordance with GAAP, to free cash flow for each of the periods presented.


	Three Months Ended
	March 31,
	2025		2024
Net cash provided by operating activities	$	8,333	$	10,625
Less: Capital expenditures		2,962		2,775
Free cash flow	$	5,371	$	7,850

Free Cash Flow Analysis Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Free cash flow for the three months ended March 31, 2025 was $5,371 as compared to $7,850 for the three months ended March 31, 2024, a decrease of $2,479 or 31.6%. The decrease in free cash flow was primarily due to a decrease in cash provided by operating activities. Please see the “Liquidity and Capital Resources” section below for further information.

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Consolidated Results of Operations

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024


	Three Months Ended March 31,
	2025				2024				Increase (Decrease)
			% of Net				% of Net		Amount
	Amount		Sales		Amount		Sales		Change		% Change
Net sales	$	135,579	100.0	%	$	161,269	100.0	%	$	(25,690)	(15.9)	%
Cost of sales		120,255	88.7	%		140,336	87.0	%		(20,081)	(14.3)	%
Manufacturing margins		15,324	11.3	%		20,933	13.0	%		(5,609)	(26.8)	%
Amortization of intangible assets		1,733	1.3	%		1,733	1.1	%		—	—	%
Bonuses and deferred compensation		3,325	2.5	%		3,800	2.4	%		(475)	(12.5)	%
Other selling, general and administrative expenses		8,689	6.4	%		7,769	4.8	%		920	11.8	%
Income from operations		1,577	1.2	%		7,631	4.7	%		(6,054)	(79.3)	%
Interest expense		(1,567)	1.2	%		(3,356)	2.1	%		(1,789)	(53.3)	%
Provision (benefit) for income taxes		(10)	(0.0)	%		1,034	0.6	%		(1,044)	(101.0)	%
Net income and comprehensive income	$	20	0.0	%	$	3,241	2.0	%	$	(3,221)	(99.4)	%
EBITDA	$	11,060	8.2	%	$	16,885	10.5	%	$	(5,825)	(34.5)	%
Adjusted EBITDA	$	12,161	9.0	%	$	18,521	11.5	%	$	(6,360)	(34.3)	%

Net Sales. Net sales were $135,579 for the three months ended March 31, 2025 as compared to $161,269 for the three months ended March 31, 2024, a decrease of $25,690, or 15.9%. This decrease was driven by lower customer demand across the majority of the Company’s key end markets and customer de-stocking channel inventory. This was partially offset by volume from new projects in our Other end market and increased after-market demand in our Military end market.

Manufacturing Margins. Manufacturing margins were $15,324 for the three months ended March 31, 2025 as compared to $20,933 for the three months ended March 31, 2024, a decrease of $5,609, or 26.8%. The decrease was primarily driven by the lower customer demand, partially offset by cost reduction actions.

Manufacturing margin percentages were 11.3% for the three months ended March 31, 2025, as compared to 13.0% for the three months ended March 31, 2024, a decrease of 1.7%. The decrease was attributable to less of an ability to absorb fixed costs as a result of lower sales and the items discussed in the preceding paragraph.

Amortization of Intangibles Assets. Amortization of intangible assets were $1,733 for the three months ended March 31, 2025 and 2024.

Bonuses and Deferred Compensation Expenses. Bonuses and deferred compensation expenses were $3,325 for the three months ended March 31, 2025 as compared to $3,800 for the three months ended March 31, 2024, a decrease of $475, or 12.5%. The decrease was primarily driven by deferred compensation income during the current year period versus deferred compensation expense during the prior year period due to fluctuations in the financial markets.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $8,689 for the three months ended March 31, 2025 as compared to $7,769 for the three months ended March 31, 2024, an increase of $920, or 11.8%. The increase was predominantly attributable to normal wage inflation, and higher costs related to compliance requirements, market analysis studies and other consulting fees.

Interest Expense. Interest expense was $1,567 for the three months ended March 31, 2025 as compared to $3,356 for the three months ended March 31, 2024, a decrease of $1,789, or 53.3%. The decrease is due to a decrease in borrowings and lower interest rates relative to the prior year period.

Provision (Benefit) for Income Taxes. Income tax expense (benefit) was ($10) for the three months ended March 31, 2025 as compared to $1,034 for the three months ended March 31, 2024. The decrease of $1,044 is primarily due to lower income before taxes in the current year period. Refer to Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for further details.

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Due to the factors described in the preceding paragraphs, net income and comprehensive income, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin decreased during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Liquidity and Capital Resources

Cash Flows Analysis


	Three Months Ended
	March 31,				Increase (Decrease)
	2025		2024		$ Change		% Change
Net cash provided by operating activities	$	8,333	$	10,625		(2,292)	(22)	%
Net cash used in investing activities		(2,959)		(2,668)		(291)	(11)	%
Net cash used in financing activities		(5,397)		(8,315)		2,918	35	%
Net change in cash	$	(23)	$	(358)	$	335

Operating Activities. Cash provided by operating activities was $8,333 for the three months ended March 31, 2025, as compared to $10,625 for the three months ended March 31, 2024. The decrease of $2,292 in cash provided by operating activities was primarily due to lower net income adjusted for reconciling items and a higher use of cash driven by a decrease in accrued liabilities. This was partially offset by a decrease in cash used for accounts receivable as a result of lower sales and a decrease in cash used for accounts payable due to the timing of supplier payments.

Investing Activities. Cash used in investing activities was $2,959 for the three months ended March 31, 2025, as compared to $2,668 for the three months ended March 31, 2024. The $291 increase in cash used in investing activities was driven by a slight increase in capital expenditures prioritizing investments in high-return, capital-light growth and automation.

Financing Activities. Cash used in financing activities was $5,397 for the three months ended March 31, 2025, as compared to $8,315 for the three months ended March 31, 2024. The $2,918 decrease was mainly due to lower debt repayments in excess of borrowings during the current year period in relation to the Company’s revolving credit facility. Additionally, under the share repurchase plan, the Company purchased $1,747 of common stock in the first three months of 2025 as compared to $0 in the prior year period. The Company’s decision to repurchase additional shares in 2025 will depend on business conditions, free cash flow generation, other cash requirements and stock price. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding share repurchases.

Amended and Restated Credit Agreement

On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a $250,000 revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit Agreement also provides for the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.

Borrowings under the Credit Agreement bear interest at a fluctuating secured overnight financing rate (SOFR) plus an applicable margin based on the current consolidated total leverage ratio (which may be adjusted for certain reserve requirements), plus 1.25% to 2.75% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement). Under certain circumstances, we may not be able to pay interest based on SOFR. If that happens, we will be required to pay interest at the Base Rate, which is the sum of (a) the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time), (ii) the Federal Funds Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%. The Credit Agreement also includes provisions for determining a replacement rate when SOFR is no longer available.

At March 31, 2025, the interest rate on outstanding borrowings under the Revolving Loan was 5.67%. We had availability of $172,521 under the revolving credit facility at March 31, 2025.

We must pay a commitment fee of 0.20% to 0.35% per annum on the average daily unused portion of the aggregate unused revolving commitments under the Credit Agreement. We must also pay fees as specified in the Fee Letter (as defined in the Credit Agreement) and with respect to any letters of credit issued under the Credit Agreement.

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The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At March 31, 2025, our interest coverage ratio was 4.93 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 3.50 to 1.00. As of March 31, 2025, our consolidated total leverage ratio was 1.39 to 1.00.

The Credit Agreement includes customary events of default, including, among other things, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material money judgments, and failure to maintain subsidiary guarantees. If an event of default occurs, the Agent will be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, termination of the credit facility, and all other actions permitted to be taken by a secured creditor.

Other Debt

Additionally, the Company has a Fond du Lac County and Fond du Lac Economic Development Corporation term note (Fond du Lac Term Note). The Fond du Lac Term Note is secured by a security agreement, payable in annual installments of $500 plus interest at 2.00% and is due in full in December 2028. The balance outstanding as of March 31, 2025 was $1,875, with the short-term and long-term balance of $500 and $1,375, respectively, recorded in other current liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets.

Capital Requirements and Sources of Liquidity

During the three months ended March 31, 2025 and 2024, our capital expenditures were $2,962 and $2,775 respectively. The marginal increase of $187 was driven by investments in high return, capital-light growth and automation. Capital expenditures for the full year 2025 are expected to be between $13,000 and $17,000.

We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. At March 31, 2025, we had immediate availability of $172,521 through our revolving credit facility and the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature under our Credit Agreement, subject to the covenants under the Credit Agreement. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2025 and the foreseeable future.

We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our operations for 2025 and beyond. However, future cash flows are subject to a number of variables, and additional capital expenditures will be required to conduct our operations. There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. In the event we make one or more acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot guarantee that this additional capital will be available on acceptable terms or at all. If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

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Contractual Obligations

The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at March 31, 2025:


			Payments Due by Period
	Total		2025 (Remainder)		2026 – 2027		2028 – 2029		Thereafter
Long-term debt principal payment obligations ⁽¹⁾	$	79,354	$	500	$	1,000	$	77,854	$	—
Forecasted interest on debt payment obligations ⁽²⁾		15,585		3,231		9,679		2,675		—
Finance lease obligations ⁽³⁾		1,332		540		792		—		—
Operating lease obligations ⁽³⁾		31,955		4,235		11,032		8,814		7,874
Total	$	128,226	$	8,506	$	22,503	$	89,343	$	7,874

(1)	Principal payments under the Company’s Credit Agreement, which expires in 2028 and the Fond du Lac Term Note, which is due in full in December 2028.

(2)	Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolving credit facility and debt balance and interest rate of the Company’s Fond due Lac Term Note.

(3)	See Note 4 – Leases in the Notes to Condensed Consolidated Financial Statements for additional information

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk from changes in customer forecasts, interest rates, and to a lesser extent, commodities. To reduce such risks, we selectively use financial instruments and other proactive management techniques.

Customer Forecasts

The use and consumption of our components, products and services fluctuates depending on order forecasts we receive from our customers. These order forecasts can change dramatically from quarter-to-quarter dependent upon the respective markets that our customers provide products in.

Interest Rate Risk

We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have SOFR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest payments due to changes in the referenced interest rates.

The amount borrowed under the revolving credit facility under the Credit Agreement was $77.5 million with an interest rate of 5.67% as of March 31, 2025. Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part I, Item 2 and Note 3 in the Notes to the Unaudited Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more specifics.

A hypothetical 100-basis-point increase in interest rates would have resulted in an additional $0.2 million of interest expense based on our variable rate debt at March 31, 2025. We do not use derivative financial instruments to manage interest risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.

Commodity Risk

We source a wide variety of materials and components from a network of suppliers. Commodity raw materials, such as steel, aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of March 31, 2025, we did not have any commodity hedging instruments in place.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

As of March 31, 2025, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the identification of the material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of March 31, 2025. Notwithstanding the material weakness in our internal control over financial reporting, management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (GAAP).

Remediation of Previously Identified Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim condensed consolidated financial statements will not be prevented or detected on a timely basis.

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, Management identified deficiencies in the design and operating effectiveness of internal control over financial reporting related to the review and approval of journal entries that constitutes a material weakness.

Subsequent to the identification of the material weakness, management under the oversight of the Audit Committee has been implementing measures and taking steps to address the underlying causes of the material weakness. Specifically, the following remediation efforts are planned or ongoing to ensure adequate review and approval of journal entries, including:

●

Enhancing the design and implementation of controls over the review and approval of journal entries to ensure that all journal entries are subject to appropriate review and approval; and

●

Provide additional training to personnel involved in the preparation and review of journal entries to ensure they understand and adhere to the revised control procedures.

While we believe these efforts have improved our internal controls and address the underlying cause of the material weakness, the material weakness will not be remediated until our remediation plan has been fully implemented and tested and we have concluded that following the improvements to our internal controls, our control environment is operating effectively for a sufficient period of time. In particular, the enhanced compensating controls and training will require time to test and assess. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.

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Changes in Internal Control Over Financial Reporting

Except for the identified material weakness, there were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2025, that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material litigation proceedings. From time to time, however, we may be a party to litigation and subject to claims incident to the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 6, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The table below sets forth information with respect to purchases we made of shares of our common stock during the quarter ended March 31, 2025:


				Total Number	Dollar Value of
				of Shares	Shares that
	Total			Purchased as	May Yet Be
	Number			Part of Publicly	Purchased
	of Shares	Average Price		Announced Plans	Under the Plans
Period	Purchased	Paid per Share		or Programs⁽¹⁾	or Programs⁽¹⁾
January 2025	—	$	—	—	$	19,104,268
February 2025	—	$	—	—	$	19,104,268
March 2025	120,799	$	14.47	120,799	$	17,356,796
Total	120,799			120,799

(1)	On October 26, 2023, the Board of Directors approved a new share repurchase program of up to $25 million of shares through 2026. The new share repurchase program replaced the prior program.

Item 5. Other Information

During the three months ended March 31, 2025, no director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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Item 6. Exhibits.

The exhibits listed in the Exhibit Index below are filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX


Exhibit Number		Description

31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MAYVILLE ENGINEERING COMPANY, INC.

Date: May 7, 2025	By:	/s/ Jagadeesh A. Reddy
		Jagadeesh A. Reddy
		President & Chief Executive Officer

	By:	/s/ Rachele M. Lehr
		Rachele M. Lehr
		Chief Financial Officer

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Date	Price Target	Rating	Analyst
11/7/2024	$30.00 → $20.00	Outperform → Market Perform	Northland Capital
6/9/2023	$14.00	Outperform → Neutral	Robert W. Baird
5/17/2023	$20.00	Outperform	Northland Capital
11/3/2022	$7.00 → $15.00	Neutral → Outperform	Robert W. Baird
1/21/2022	$21.00 → $13.00	Outperform → Neutral	Robert W. Baird
1/21/2022	$21.00 → $13.00	Outperform → Neutral	Baird

SEC Form 10-Q filed by Mayville Engineering Company Inc.

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