Mayville Engineering Company, Inc. Q1 FY2026 earnings call

• First quarter results exceeded expectations driven by strong top-line momentum in data center and critical power. - Ongoing business transition with teams focusing on resource positioning, tooling, and project launches. - Margins pressured in first quarter but improved late in the quarter as programs transitioned to full production. - Expect momentum to continue building through second quarter. - Strong execution in data center and critical power programs, reflecting upfront investment in onboarding. - Operating leverage and fixed cost absorption improving with better asset utilization. - Mixed conditions in legacy markets: Commercial vehicles demand softened, construction and access had 3% growth, power sports had 5% growth, data center and critical power had 71% organic growth. - Customer demand in data center and critical power remains robust with qualified opportunity pipeline over $125M and 2026 launch projects ~$50M - $60M. - Secured ~$50M in new project awards with data center and critical power customers in Q1, expecting total bookings over $150M in 2026. - Capital allocation focused on targeted investments for data center and critical power, balance sheet management, and deleveraging, with expectation of growth capital investment increase above historical average. - Focus on operational agility, efficient program execution, and improved cash flow conversion as volumes ramp.

Commercial vehicles: Net sales declined approximately 24% year-over-year in the first quarter as North American Class 8 production reached a low point. Construction and access: Revenue increased approximately 3% year over year, supported by continued strength in non-residential activity but more customer-specific. Power sports: Net sales increased approximately 5% year-over-year, driven by incremental volumes from discrete short-cycle customer programs but partially offset by legacy OEM softness and marine propulsion sales decline. Data center and critical power: Delivered organic growth of approximately 71% year-over-year, supported by legacy OEM customers and early project launches, with qualified opportunity pipeline exceeding $125 million and projects scheduled to launch in 2026 worth approximately $50 million to $60 million, and expected to represent more than 20% of revenue in 2026.

• Second quarter 2026: Expected net sales between $145 million and $155 million, adjusted EBITDA between $10 million to $13 million. - Full year 2026: Refined to net sales between $590 million and $620 million, adjusted EBITDA between $52 million and $60 million, free cash flow between $25 million and $35 million, reflecting full year AccuFab ownership, incremental cross-selling revenue, and gradual improvement in legacy end market demand mainly in the second half.

• Legacy customer demand not showing broad-based or material recovery. - Commercial vehicles market affected by OEM activity, fuel costs, and tariff policy changes. - Power sports market softness among legacy OEMs and marine propulsion sales decline. - Data center and critical power project launch related costs impacting margins in the short term. - Capacity constraints and need for organic investment to support growth and deleveraging challenges due to mixed product differences between data center and legacy products.

Q: Mike Schliske asked about non-data center end markets, including ag market change from down mid-teens to flat and construction and access outlook change.

A: On ag market, small ag turf care segment strength offsets large ag declines. On construction and access, heavy construction shows strength but access segment didn't accelerate as anticipated.

Q: Ross Sparenbleek asked about new customer wins in data centers and penetration rate.

A: Significant Q1 wins from two new customers to MEC and ACUFAB, sub 5% penetration with strong qualified pipeline.

Q: Greg Palm asked about early data center and critical power launches and existing customer order progression.

A: Invested in launch costs, saw improvement as programs hit full production, existing data center customers ramping significantly with new and existing customer growth.

Q: Ted Jackson asked about second quarter guidance and capacity.

A: Second quarter midpoint above consensus, current capacity without further investment would top out around $850 million revenue, with plans to add shifts and personnel.

Q: Andrew Kaplowitz asked about other end markets offsetting data center strength and confidence in free cash flow for de-levering.

A: Some growth reclassified to data center market, focus on second half for strong data center sales and CB market recovery to generate cash flow for de-levering.