Mayville Engineering Company, Inc.

Total sales increased 23.2% year over year to $163 million; organic net sales increased 9.2%. Manufacturing margin was 10.9% versus 10.3% a year ago, while adjusted EBITDA margin was 8.1% versus 10.3% in the prior-year period. Other SG&A was $9.3 million, or 5.7% of sales, versus $10.3 million, or 7.8% of sales last year. Free cash flow was a use of $6.6 million versus a source of $12.5 million in the prior-year period, net debt was $134.7 million, and bank covenant net leverage was 2.9x. For Q3, the company expects net sales of $160 million-$170 million and adjusted EBITDA of $15.5 million-$18.5 million, including $1 million-$1.5 million of launch-related costs and $1 million-$1.5 million of outsourcing costs. For full-year 2026, MEC raised net sales guidance to $620 million-$650 million, kept adjusted EBITDA at $52 million-$60 million, and lowered free cash flow guidance to $7 million-$15 million; full-year guidance includes $5 million-$6 million of launch-related costs and $2 million-$3 million of outsourcing costs.

Jag Reddy framed the quarter as evidence that demand is accelerating across key end markets, especially data center and critical power, while commercial vehicle is starting to recover. He emphasized that MEC is making deliberate, timing-related investments in equipment, hiring, and outsourcing to support faster customer launches and expand capacity, saying these costs are temporary and should fade as projects ramp. He also highlighted the stock offering and debt reduction as strengthening the balance sheet and giving MEC flexibility to invest ahead of demand rather than react to it.

Rachele Lehr quantified the quarter: sales of $163 million, manufacturing margin of 10.9%, adjusted EBITDA margin of 8.1%, and free cash flow use of $6.6 million. She said the EBITDA margin decline versus last year reflected $2.1 million of DCP launch costs and higher gain-sharing accruals, partly offset by Accu-Fab and higher legacy volumes. She also noted $3.5 million of interest expense, $134.7 million of net debt, 2.9x leverage, and that the company expects $1 million-$1.5 million of launch costs and $1 million-$1.5 million of outsourcing costs in Q3, plus full-year 2026 capex of about $25 million tied to the broader $40 million incremental investment plan.

Analysts focused on capacity reservations, the pace of the Commercial Vehicle recovery, the mix and certainty of data center awards, and how long launch/outsourcing costs will persist. Management said it is exploring reserved-capacity models mainly with data center customers, potentially using upfront fees or volume commitments, but has not signed any such contracts yet. On DCP awards, Jag said the wins include volume increases from existing programs, new programs from existing customers, and multiple new customers, including one new customer that has awarded a little over $55 million this year alone; he also said the company is selective on new business and is willing to walk away from smaller opportunities to protect mix and margins.