Business Context and Reporting Period
Company: Mayville Engineering Company, Inc. (MEC)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: MEC is a leading U.S.-based, vertically integrated, value-added manufacturing partner providing design, prototyping, fabrication, aluminum extrusion, coating, and assembly services. The company serves diverse end markets including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, data center & critical power, agriculture, and military. In 2025, the company acquired Accu-Fab, LLC to expand its presence in the data center and critical power infrastructure sector.
Key Financial Metrics
| Metric | 2025 (in thousands) | 2024 (in thousands) |
|---|---|---|
| Net Sales | $546,487 | $581,604 |
| Net Income (Loss) | $(8,110) | $25,968 |
| Manufacturing Margin | $54,009 (9.9%) | $71,097 (12.2%) |
| EBITDA | $37,443 (6.9%) | $82,141 (14.1%) |
| Adjusted EBITDA | $47,057 (8.6%) | $64,407 (11.1%) |
| Free Cash Flow | $26,914 | $77,709 |
| Total Debt (Revolving Credit) | $202,525 | $79,725 |
| Cash and Cash Equivalents | $1,502 | $206 |
| Consolidated Total Leverage Ratio | 3.68x | N/A (Covenant max 3.50x) |
Material Changes Versus Prior Period
- Revenue Decline: Net sales decreased by 6.0% to $546.5 million, driven by reduced customer demand across nearly all end markets and customer channel inventory destocking. This was partially offset by increased aftermarket demand in the Military sector and volumes from the Accu-Fab acquisition.
- Profitability Compression: Manufacturing margins declined 24.0% to $54.0 million (9.9% margin) due to softening demand, non-recurring restructuring costs, inventory step-up expenses from the Accu-Fab acquisition, and launch-phase dynamics in new markets.
- Net Loss: The company reported a net loss of $8.1 million in 2025, compared to net income of $26.0 million in 2024. This shift was influenced by the absence of a $25.5 million one-time gain on a lawsuit settlement recorded in 2024.
- Acquisition Impact: The July 1, 2025 acquisition of Accu-Fab resulted in significant cash outflows for investing activities ($151.5 million) and increased debt levels to fund the transaction.
- Debt Increase: Borrowings under the revolving credit facility increased from $79.7 million to $202.5 million to finance the Accu-Fab acquisition.
Guidance, Outlook, Risks, and Unusual Items
Management Commentary and Outlook
Management expects macroeconomic headwinds, including inflation, elevated interest rates, and labor availability challenges, to persist in 2026. Capital expenditures for 2026 are expected to range between $15.0 million and $20.0 million. The company is prioritizing capital investment in high-growth data center and critical power end markets.
Unusual Items
- Lawsuit Settlement (2024): A $25.5 million gain from a settlement with a former fitness customer (Peloton) was recorded in Q4 2024, significantly boosting prior-year earnings. No such gain occurred in 2025.
- Restructuring: In August 2025, the company initiated a restructuring plan to consolidate facilities, incurring $0.9 million in charges in 2025 with total expected costs between $5.0 million and $7.0 million.
- Inventory Step-Up: $0.6 million in costs were recognized related to the fair value step-up of inventory acquired in the Accu-Fab transaction.
Risks and Contingencies
- Covenant Compliance: Following the Accu-Fab acquisition, the consolidated total leverage ratio rose to 3.68x, approaching the 4.00x temporary covenant maximum. On February 25, 2026, the company amended its credit agreement to increase the maximum leverage ratio to 5.25x for Q1/Q2 2026 and reduce the facility size to $275 million.
- Customer Concentration: The top two customers (PACCAR Inc. and John Deere) accounted for 23.6% of net sales in 2025.
- Macroeconomic Factors: Risks include trade policy uncertainty, tariffs, raw material price volatility, and inconsistent customer demand.
Key Facts for Investor Verification
- Debt Covenants: Verify the company's ability to maintain compliance with the amended leverage ratios (up to 5.25x in early 2026) and interest coverage ratios given the increased debt load from the Accu-Fab acquisition.
- Accu-Fab Integration: Assess the realization of anticipated synergies and revenue growth from the Accu-Fab acquisition, particularly in the data center and critical power markets, to offset the decline in legacy end markets.
- Margin Recovery: Monitor manufacturing margin trends to determine if cost reduction actions and higher-margin Accu-Fab sales can reverse the 2.3% margin compression seen in 2025.
- Customer Demand: Track order volumes and inventory levels of key customers (PACCAR, John Deere) to gauge the severity of the destocking cycle and demand recovery.
- Restructuring Execution: Confirm the timeline and cost savings associated with the facility consolidation plan initiated in August 2025.