Mayville Engineering Company, Inc. (MEC) Bundle
Understanding Mayville Engineering Company, Inc. (MEC) Revenue Streams
Understanding Mayville Engineering Company’s Revenue Streams
Net Sales: Net sales for the nine months ended September 30, 2024, were $460,298 compared to $439,843 for the same period in 2023, reflecting an increase of $20,455 or 4.7%. For the three months ended September 30, 2024, net sales were $135,392, down from $158,217 in 2023, a decrease of $22,825 or 14.4%.
Revenue Breakdown by Product Category:
| Product Category | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|---|---|
| Outdoor sports | $1,824 | $2,155 | $6,188 | $6,839 |
| Fabrication | $67,284 | $89,372 | $245,400 | $260,545 |
| Performance structures | $42,645 | $41,541 | $136,209 | $95,063 |
| Tube | $16,140 | $19,096 | $55,061 | $58,916 |
| Tank | $10,684 | $11,660 | $34,385 | $33,849 |
| Total | $138,577 | $163,824 | $477,243 | $455,212 |
Manufacturing Margins: Manufacturing margins for the nine months ended September 30, 2024, were $60,305, an increase of $8,813 or 17.1% from $51,492 in the comparable period of 2023. The manufacturing margin percentage improved to 13.1% from 11.7%.
Year-over-Year Revenue Growth Rate: The year-over-year revenue growth rate for the nine months ended September 30, 2024, was 4.7%, while for the three months ended September 30, 2024, there was a year-over-year decrease of 14.4%.
Contribution of Different Business Segments: The fabrication segment remains the largest contributor to revenue, accounting for $245,400 in the nine-month period ending September 30, 2024, despite a decrease from $260,545 in the previous year.
Significant Changes in Revenue Streams: The overall decrease in net sales for the third quarter of 2024 was primarily driven by decreased demand across all key end markets and customer de-stocking. This was somewhat offset by incremental volumes associated with new project wins and the acquisition of MSA.
Overall, the revenue analysis indicates a mixed performance, with a solid increase in the nine-month period contrasted by a notable decline in the most recent quarter.
A Deep Dive into Mayville Engineering Company, Inc. (MEC) Profitability
A Deep Dive into Mayville Engineering Company's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $17,095, resulting in a gross profit margin of 12.6%. This is compared to $19,020 and a margin of 12.0% for the same period in 2023, representing a decrease in gross profit of $1,925 or 10.1%.
Operating Profit Margin: The income from operations for the three months ended September 30, 2024, was $5,727, yielding an operating profit margin of 4.2%, down from 3.7% in 2023 with an operating income of $5,893.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $2,974, leading to a net profit margin of 2.2%. This is a significant increase from the 0.9% margin of $1,432 in the same quarter of 2023, reflecting an increase of $1,542 or 107.7%.
Trends in Profitability Over Time
For the nine months ended September 30, 2024, net sales reached $460,298, an increase of 4.7% from $439,843 in 2023. The net income for the same period was $9,997, up from $5,617 in 2023, marking an increase of 78.0%.
Comparison of Profitability Ratios with Industry Averages
The manufacturing margin for the nine months ended September 30, 2024, was 13.1%, compared to 11.7% in 2023. This indicates improved operational efficiency, particularly against industry averages which typically range from 10% to 12%.
Analysis of Operational Efficiency
Cost management remains a focus, with other selling, general and administrative expenses at $23,589 for the nine months ended September 30, 2024, a slight increase of 2.7% from $22,969 in 2023. Interest expenses decreased to $8,977 from $7,533, reflecting a 19.2% increase.
| Metric | 2024 (Q3) | 2023 (Q3) | Change |
|---|---|---|---|
| Net Sales | $135,392 | $158,217 | ($22,825) (-14.4%) |
| Gross Profit | $17,095 | $19,020 | ($1,925) (-10.1%) |
| Operating Income | $5,727 | $5,893 | ($166) (-2.8%) |
| Net Income | $2,974 | $1,432 | $1,542 (107.7%) |
| EBITDA | $15,209 | $15,501 | ($292) (-1.9%) |
Overall, the profitability metrics indicate a stabilizing performance, with net income showing significant growth despite fluctuations in gross and operating profits. The operational efficiencies achieved through cost management initiatives are contributing positively to the overall profitability.
Debt vs. Equity: How Mayville Engineering Company, Inc. (MEC) Finances Its Growth
Debt vs. Equity: How Mayville Engineering Company Finances Its Growth
As of September 30, 2024, Mayville Engineering Company, Inc. reported total liabilities of $227,646 thousand, down from $266,683 thousand at the end of 2023. The company's total shareholders’ equity was $238,356 thousand, reflecting an increase from $229,978 thousand.
Overview of Debt Levels
Mayville Engineering Company has a structured debt profile, consisting of both short-term and long-term debt. The short-term debt includes a portion of the Fond du Lac Term Note, which has an outstanding balance of $500 thousand, and the long-term portion is $1,875 thousand. The company also has a revolving credit facility with borrowings of $111,045 thousand as of September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the debt-to-equity ratio for Mayville Engineering Company is calculated at approximately 0.95, derived from total liabilities of $227,646 thousand divided by total equity of $238,356 thousand. This ratio is below the industry average, indicating a healthier balance between debt and equity financing.
Recent Debt Issuances and Credit Ratings
On June 28, 2023, Mayville Engineering entered into an amended and restated credit agreement providing for a $250,000 thousand revolving credit facility. As of September 30, 2024, the interest rate on outstanding borrowings under this credit agreement stood at 7.22%. The company has maintained compliance with all financial covenants, including a consolidated total leverage ratio of 1.59 compared to a maximum allowable ratio of 3.50.
Balancing Debt Financing and Equity Funding
Mayville Engineering Company effectively balances its debt financing with equity funding. In the nine months ended September 30, 2024, the company reported net cash provided by operating activities of $51,847 thousand. This operational cash flow supports both debt obligations and capital expenditures, which are projected between $13,000 thousand and $15,000 thousand for the full year.
| Debt Type | Amount (in $ thousands) | Maturity | Interest Rate |
|---|---|---|---|
| Revolving Credit Facility | 111,045 | 2028 | 7.22% |
| Fond du Lac Term Note | 2,375 | 2028 | 2.00% |
| Total Liabilities | 227,646 | N/A | N/A |
| Total Shareholders' Equity | 238,356 | N/A | N/A |
Assessing Mayville Engineering Company, Inc. (MEC) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio as of September 30, 2024, is 1.30, indicating a solid liquidity position, as the company has sufficient current assets to cover its current liabilities. The quick ratio, which excludes inventory from current assets, stands at 0.90, suggesting potential concerns regarding immediate liquidity without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was reported at $22,000 as of September 30, 2024. This reflects an increase from $18,000 at the same time in 2023, indicating a positive trend in managing short-term financial health.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, highlight the following:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change |
|---|---|---|---|---|
| Net cash provided by operating activities | $51,847 | $13,696 | $38,151 | 279% |
| Net cash used in investing activities | ($9,645) | ($97,654) | $88,009 | 90% |
| Net cash provided by (used in) financing activities | ($42,696) | $86,136 | ($128,832) | NM |
| Net change in cash | ($494) | $2,178 | ($2,672) | NM |
Potential Liquidity Concerns or Strengths
Despite a strong operating cash flow, the company's quick ratio indicates potential liquidity challenges in meeting short-term obligations without selling inventory. The significant decrease in cash used in investing activities suggests a cautious approach to capital expenditures, likely in response to the acquisition of MSA which has already impacted financing activities negatively.
Additionally, the total liabilities decreased to $227,646 as of September 30, 2024, from $266,683 the previous year, while total shareholders’ equity increased to $238,356 from $229,978, indicating a strengthening balance sheet overall.
Consolidated Results of Operations
For the nine months ended September 30, 2024, net income and comprehensive income stood at $9,997, a significant increase from $5,617 in 2023. This robust performance is underpinned by an increase in net sales to $460,298 from $439,843.
Is Mayville Engineering Company, Inc. (MEC) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial metrics, including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical measure of valuation, reflecting the market's expectations of a company's future earnings growth. As of the latest financial data:
- P/E Ratio: 28.8
- EPS (Earnings Per Share): $0.49
Price-to-Book (P/B) Ratio
The P/B ratio indicates how much investors are willing to pay for each dollar of net assets. The current P/B ratio is:
- P/B Ratio: 2.0
- Book Value Per Share: $7.50
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio provides insight into how the market values the company's earnings before interest, taxes, depreciation, and amortization. The current EV/EBITDA ratio is:
- EV/EBITDA Ratio: 12.5
Stock Price Trends
Over the past 12 months, the company's stock price has exhibited the following trends:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 12.50 |
| December 2023 | 15.00 |
| March 2024 | 14.00 |
| June 2024 | 15.50 |
| September 2024 | 14.75 |
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, hence the dividend yield and payout ratio are:
- Dividend Yield: 0%
- Payout Ratio: 0%
Analyst Consensus on Stock Valuation
The consensus among analysts regarding the company's stock valuation is as follows:
- Buy: 4
- Hold: 2
- Sell: 1
In summary, the P/E and P/B ratios suggest the company may be overvalued compared to sector averages, while the EV/EBITDA ratio presents a more favorable view of its earnings potential. The stock price has fluctuated over the past year with an overall modest increase. Analysts generally lean towards a buy recommendation, indicating confidence in the company's future performance.
Key Risks Facing Mayville Engineering Company, Inc. (MEC)
Key Risks Facing the Company
In the current business landscape, the company faces numerous internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The competitive landscape remains intense, with several players vying for market share in the manufacturing sector. For the three months ended September 30, 2024, net sales decreased by $22,825 or 14.4% compared to the same period in 2023, primarily driven by decreased demand across all key end markets.
Regulatory Changes
Regulatory compliance costs have been increasing. Other selling, general, and administrative expenses rose to $7,559 for the three months ended September 30, 2024, reflecting a 12.2% decrease from $8,608 in the same period last year, partly due to compliance requirements.
Market Conditions
Macroeconomic factors have led to material cost inflation and inflationary pressures on wages and benefits. The company reported net sales of $135,392 for the three months ended September 30, 2024, down from $158,217 in 2023.
Operational Risks
Operationally, the company faces challenges from supply chain disruptions and reliance on key customers. The MSA acquisition has created additional operational complexities, with associated costs of $1,398 recognized in the previous fiscal year.
Financial Risks
Financially, the company reported an interest expense of $8,977 for the nine months ended September 30, 2024, an increase of 19.2% from $7,533 in the prior year. The consolidated total leverage ratio stood at 1.59 to 1.00, significantly below the covenant maximum of 3.50 to 1.00.
Strategic Risks
Strategically, the company has faced litigation risks, including a lawsuit against Peloton Interactive, which could impact its reputation and financial standing. The outcome of this litigation remains uncertain and poses a potential risk to future earnings.
Mitigation Strategies
To mitigate these risks, the company has implemented several strategies, including a 12% reduction in the labor force to manage costs and improve operational efficiency. The company continues to focus on enhancing its supply chain resilience and exploring new market opportunities to offset declining demand in existing markets.
| Risk Factor | Current Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Net sales decrease of $22,825 (14.4%) | Cost reduction measures |
| Regulatory Changes | Increase in compliance costs | Streamlining compliance processes |
| Market Conditions | Net sales of $135,392 down from $158,217 | Diversification of customer base |
| Operational Risks | Operational costs due to MSA acquisition | Efficiency improvement initiatives |
| Financial Risks | Interest expense of $8,977 | Debt restructuring and refinancing |
| Strategic Risks | Ongoing litigation with Peloton | Legal risk management strategies |
Future Growth Prospects for Mayville Engineering Company, Inc. (MEC)
Future Growth Prospects for Mayville Engineering Company, Inc.
Analysis of Key Growth Drivers
The primary growth drivers for the company include:
- Acquisition of MSA: Completed in July 2023, this acquisition has significantly boosted revenues. For the nine months ended September 30, 2024, net sales were $460,298 compared to $439,843 for the same period in 2023, reflecting an increase of 4.7%.
- Incremental Volumes from New Program Wins: These new contracts have contributed positively to sales growth despite a backdrop of declining demand in key markets.
- Cost Reduction Initiatives: The company has implemented cost reduction measures, including a 12% reduction in the labor force, which has improved manufacturing margin percentages.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to be influenced by the following:
- Continued integration of MSA and expected synergies from the acquisition.
- Expected growth in net income, which was $9,997 for the nine months ended September 30, 2024, compared to $5,617 in 2023, marking an increase of 78.0%.
- EBITDA for the nine months ended September 30, 2024, was $49,633, up from $40,119 in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- MEC Business Excellence (MBX) Initiatives: These have enhanced operational efficiency and are expected to continue driving profitability.
- Partnership with Key Clients: Long-standing relationships with blue-chip customers provide a stable revenue base and opportunities for joint ventures or expanded contracts.
- Focus on Diversified End Markets: The company serves various sectors, including agriculture, military, and commercial vehicles, which helps mitigate risks associated with reliance on any single market.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages:
- Vertically Integrated Operations: This allows for greater control over production and costs, enhancing profitability.
- Strong Customer Relationships: Established trust with clients leads to repeat business and referrals.
- Diverse Product Offerings: A wide range of products across multiple sectors reduces vulnerability to market fluctuations.
| Key Financial Metrics | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Net Sales | $460,298 | $439,843 | +4.7% |
| Net Income | $9,997 | $5,617 | +78.0% |
| EBITDA | $49,633 | $40,119 | +23.7% |
| Manufacturing Margin | $60,305 | $51,492 | +17.1% |
Mayville Engineering Company, Inc. (MEC) DCF Excel Template
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Updated on 16 Nov 2024
Resources:
- Mayville Engineering Company, Inc. (MEC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Mayville Engineering Company, Inc. (MEC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Mayville Engineering Company, Inc. (MEC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.