Mayville Engineering Company, Inc. · NYSE:MEC
Mayville Engineering — Investor Day (September 2023)
71 slides from Mayville Engineering's investor day presentation, Sep 14, 2023
Slide 1: MEC 2023 Investor Day
MAYVILLE ENGINEERING COMPANY 2023 Investor Day
Slide 2: Safe Harbor/Non-GAAP Measures
Safe Harbor/Non-GAAP Measures Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995: This presentation contains statements that are forward-looking in nature which express the beliefs and expectations of management including statements regarding the Company’s expected
Slide 3: Welcome & Agenda
Welcome & Agenda Opening Remarks Jag Reddy (President & CEO) Three Year Strategy Overview Jag Reddy (President & CEO) Commercial Excellence & Expansion Ryan Raber (EVP: Strategy, Sales & Marketing) Operational Excellence Rand Stille (Chief Operating Officer) Financial Growth & Todd Butz (Chief Finan
Slide 4: Presenting Team
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Presenting Team Seasoned management team with deep industry experience Jag A. Reddy Todd M. Butz Rand P. Stille Ryan F. Raber President & CEO Chief Financial Officer Chief Operating Officer EVP, Strategy, Sales & Market
Slide 5: Key Messages for Today
Key Messages for Today MBX Framework Guiding value creation across the enterprise Expansion within higher-value adjacent end- Commercial Excellence markets Improve asset optimization, reduce costs and Operational Excellence create capacity for growth Standardized approach to strategic High Performan
Slide 6: About MEC
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth About MEC Vertically-integrated, value-added provider of design and fabrications solutions We are the largest vertically-integrated, value- End Market Revenue Mix added provider of custom prototyping, design Trailing-Tw
Slide 7: Strategic Domestic Manufacturing Footprint
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Strategic Domestic Manufacturing Footprint Geographically positioned to meet customers’ needs Founded in Mayville, WI in 1945 Beaver Dam, WI [2] Mayville, WI [2] Description of use: Manufacturing / Corporate Description
Slide 8: Nearly 80 Years of Profitable Growth
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Nearly 80 Years of Profitable Growth MEC named #1 on 470k sq. ft of facility Acquires APEX Clay NYSE: MEC the FAB 40 list of MEC founded by Ted expansions adding Traps introducing the MEC becomes the nation’s largest an
Slide 9: CEO Observations
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth CEO Observations MEC is Positioned to Execute on Compelling Growth Opportunities Secular trends in outsourcing confirmed by 1 reshoring and customers Hosted inaugural Launched investor day at Automation investments help
Slide 10: Our Value Creation Framework
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Our Value Creation Framework Transforming business performance through MBX and investing in growth High Performance Operational Commercial Disciplined Capital Human Resource Culture Excellence Excellence Deployment Opti
Slide 11: Strategic Objectives
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Strategic Objectives Strategic rationale driven by need to capture 11 MBX Value Creation Framework 2 2 Organic Revenue Acceleration 3 3 Adj. EBITDA Margin Expansion 4 4 Cash Flow & Capital Deployment Strategy 5 11
Slide 12: One MEC. One Mission.
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Mission Statement and Values Value oriented culture is the foundation of our relationships with all stakeholders One MEC. One Mission. We will empower Integrity Agile our team to create premium products Respect Customer
Slide 13: High Performance Culture
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth High Performance Culture Enabling our people to deliver their best work while living One MEC. One Mission. One MEC. One Mission. culture Talent attraction and employee value proposition Pay for performance and total rew
Slide 14: Organic Growth Acceleration
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Organic Growth Acceleration(1) Strategically positioned to benefit from growing customer demand and favorable macro trends Total Annual Sales ($s in Millions) #1 Fabricator in US with ~12% share Largest fabricator in a
Slide 15: End-Market Outlook
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth End-Market Outlook 3-year outlook reflects stable macro environment and strategic share-of-wallet revenue growth Commercial Construction Powersports Agriculture Military Other (1) Vehicle and Access MEC Sales Outlook 4%
Slide 16: Key Market Macro Outlook
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Key Market Macro Outlook Economic data supports stable demand in key end-markets Commercial Vehicle Construction & Access North American Class 8 Truck Production Y/Y Percent Change 380,005 336,735 318,559 315,128 10.7%
Slide 17: Attractive Multi-Year Mega Trends
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Attractive Multi-Year Mega Trends Multi-Year mega trends in on-shoring, outsourcing and vehicle electrification provide substantial growth opportunities U.S Imports of Steel & Aluminum Industrial Materials $s in Million
Slide 18: Adjusted EBITDA Margin Expansion
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Adjusted EBITDA Margin Expansion (1) Strategically focused on improving cost absorption and maximizing revenue Adjusted EBITDA Margin Operating excellence & automation driving productivity % of Revenue 300-400 14% - 16%
Slide 19: Strong Cash Generation Supports Targeted Capital Deployment
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Strong Cash Generation Supports Targeted Capital Deployment (1) Prioritizing shareholder value through strategic capital deployment Annual Free Cash Flow Free cash flow generation of ~$200M over next 3 years $s in Milli
Slide 20: Hazel Park Ramp Update
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Hazel Park Ramp Update 263,000 square foot hazel park facility which came online in 2022 $100M annualized revenue run rate by end of 2024 Revenue Ranges: 2023E $15-$20M; 2024E $50-$60M; 2025E $100M Categorization of rev
Slide 21: M&A Acquisition Guidelines
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth M&A Acquisition Guidelines Strategic opportunities expanding expertise within light-weight and next generation materials Acquisition Industry Focus Capabilities Criteria Revenue: Alternative / Light-Weighting: $50 – $15
Slide 22: Case Study: MSA Acquisition
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Case Study: MSA Acquisition Industry leading manufacturer of custom aluminum extrusions and fabrications with value added capabilities About Mid-States Aluminum Fond du Lac, 2 manufacturing 1964 ~325k sq ft ~250 Wiscons
Slide 23: Case Study: MSA Strategic Rationale
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Case Study: MSA Strategic Rationale Accelerates execution of MEC’s MBX Value Creation Initiative MEC-MSA Projected Revenue and Synergies Key Investment ($ in Millions) Highlights: $100-$110 25.0% $90-$100 $100.0 $75-$85
Slide 24: MSA Strategic Alignment
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth MSA Strategic Alignment MSA is expected to be immediately accretive, excluding transaction costs, to free cash flow, EPS and Adjusted EBITDA Operational Commercial High Performance Culture Disciplined Capital Deployment
Slide 25: Value Creation Roadmap
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Value Creation Roadmap(1) Strategic actions to yield ratable growth and expand shareholder value Sales Performance Adjusted EBITDA Performance Free Cash Flow Performance $s in Millions $s in Millions and as a % of Sales
Slide 26: Executing on Our Strategy
Executing on Our Strategy Vision & Strategy Execution MBX Value Organic Revenue Adj. EBITDA Capital Shareholder Creation Acceleration Margin Deployment Value Expansion Creation High-Performance Culture & Talent Critical That We Do Each Well 26
Slide 27: Commercial Excellence
Commercial Excellence Ryan Raber – Executive Vice President of Strategy, Sales and Marketing
Slide 28: Commercial Excellence - Key Messages
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Commercial Excellence - Key Messages 11 Organic Growth Acceleration 2 2 Margin Expansion 3 3 Full Product Lifecycle Support 4 Industry Diversification & Strategic 4 Growth in Emerging Technologies 5 28
Slide 29: Market Opportunity
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Market Opportunity Large addressable market and multiple paths of growth potential Total End Market Potential End Market Revenue Mix Trailing-Twelve Months Ended June 30, 2023 Other Military 7% 6% Commercial $580- $5B+
Slide 30: Tier-1 Supplier to Global OEMs
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Tier-1 Supplier to Global OEMs End-to-end solutions suite supports long-term, blue-chip relationships Commercial Vehicles 19+ yrs 32+ yrs 34+ yrs 39+ yrs 45+ yrs Powersports 2+ yrs 10+ yrs 14+ yrs 24+ yrs 33+ yrs 45+ yr
Slide 31: Executing on Our Plan
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Revenue Expansion Strategies New Product Customer Outsourcing Customer Supplier Cross-Selling Development and Reshoring Consolidation Path to 8% - 12% CAGR Revenue Growth Rate 2022 & 2023 YTD New B
Slide 32: Executing on Our Plan: Powersports
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Leveraging scale as a competitive advantage to grow share-of-wallet with customers Powersports – Organic Growth Case Study 5x Revenue Growth in 5 Years Industry Powersports Opportunity New Product
Slide 33: Executing on Our Plan: Pricing
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Maximizing revenue capture through pricing and commercial excellence Pricing Philosophy Value Based Pricing Model Commercial Excellence Targets Capture Cost to Serve 200 to 250 bps Technology Inves
Slide 34: Executing on Our Plan: Design, Prototype, Aftermarket
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Leveraging our unique product offering to deepen customer relationships and expand margins Design Prototype Aftermarket Integration into Customer Beta Samples & Prototype Support of higher Engineer
Slide 35: Executing on Our Plan: Light Duty Commercial Truck
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Leveraging design and prototype capabilities to grow volume and deepen customer relationships Light Duty Commercial Truck – Design & Prototype Industry Light Duty Commercial Truck Opportunity Desig
Slide 36: Executing on Our Plan: Aftermarket Fuel Tanks
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Broad and flexible product offerings creates high-margin opportunity in aftermarket parts Aftermarket Fuel Tanks Industry Commercial Vehicle Opportunity Product Mix & Inventory Optimization Competi
Slide 37: Executing on Our Plan: Emerging Technologies
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Energy transition mega-trend provides high-growth opportunities in current and adjacent markets Targeting $60-$80M in Revenues in 2026 from Emerging Technologies in markets served Targeted Industry
Slide 38: Executing on Our Plan: Electrification
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Executing on Our Plan Track record of leveraging competitive advantages to tap in to high-growth emerging technology demand Electrification – Significant Growth Forecasted Over Organic Growth Case Study Three-year Horiz
Slide 39: Commercial Excellence Summary & Key Messages
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Commercial Excellence Summary & Key Messages Commercial Excellence Targets Commercial Excellence Takeaways Current booked business provides multiple 1 Organic Growth Acceleration avenues to long-term growth. Significant
Slide 40: Operational Excellence
Operational Excellence Rand Stille – Chief Operating Officer
Slide 41: Operational Excellence Key Messages
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Operational Excellence Key Messages 11 Margin Expansion 2 2 Inventory Reduction – Improving Working Capital and Supporting FCF 3 Investing in Advanced Manufacturing & 3 Automation 4 Better Capital Utilization – 4 Employ
Slide 42: Margin Expansion through Operational Excellence – MBX
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Margin Expansion through Operational Excellence – MBX Established in September of 2022, MBX is MEC’s Lean initiative to drive excellence across the entire organization Strategy Execution Strategy Operational Excellence
Slide 43: Margin Expansion through Operational Excellence – MBX
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Margin Expansion through Operational Excellence – MBX MBX Framework creates systematic approach to drive improved cost absorption MBX Tools Improve Every Aspect of our Operations Driving Margin Enhancement through Opera
Slide 44: Margin Expansion through Operational Excellence – MBX
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Margin Expansion through Operational Excellence – MBX Established organizational structure dedicated to implementing, driving and sustaining MBX Created Vice President of MEC Business Excellence Dedicated MBX Engineers
Slide 45: Margin Expansion through Operational Excellence – MBX
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Margin Expansion through Operational Excellence – MBX Events in 1H23 generated $1.6M YTD in savings; on track for annual goal of 40-70 bps improvement MEC Kaizens by Type 75 MBX Lean Events in 1H23 12% ~350 unique parti
Slide 46: Case Study: Battery Box Assembly Value Stream Map
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Case Study: Battery Box Assembly Value Stream Map (VSM) Leveraged MBX toolkit to improve labor productivity The The Outcome Opportunity Action • Original process • Value Stream Map • Improved Final Weld required several
Slide 47: Case Study: Coil Press SMED Improvement
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Case Study: Coil Press SMED Improvement Utilized MBX toolkit to improve productivity and delivery The The Outcome Opportunity Action • Changeovers on a coil • SMED event held to • Coil press set-up time press in Byron C
Slide 48: Inventory Reduction Supporting Working Capital Efficiency
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Inventory Reduction Supporting Working Capital Efficiency Inventory reductions targeted to reach 10 turns in 2026 Inventory Turns Employing the SIOP Process 12 across MEC • Utilizing Best Practice from Fabrications 10 •
Slide 49: Inventory Reduction: Implementation of SIOP
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Inventory Reduction Supporting Working Capital Efficiency Case Study: Implementation of Sales, Inventory, and Operations Planning (SIOP) Sales, Inventory and Operations Plan (SIOP) Process The The Action Outcome Month D
Slide 50: Investing in Advanced Manufacturing & Automation
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Investing in Advanced Manufacturing & Automation Over the last 3 years, MEC has separated itself as the clear industry leader in technology New Robotic Weld Centers 25 New Fiber Lasers 11 Robotic Brake Press Cells 6 New
Slide 51: 35% Increase in Workforce Productivity Since 2019
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth 35% Increase in Workforce Productivity Since 2019 As measured by annual revenue per associate Advancements in Laser Technology Fiber Laser Technology advanced to 12K with automated loading and runoff Advancements in rob
Slide 52: Better Capital Utilization – Employing Open Capacity
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Better Capital Utilization – Employing Open Capacity On track to achieve target $100M revenue run rate at Hazel Park by the end of 2024 Hazel Park Launch SKUs Launched in 2023 at Full Run-Rate Volume to generate $74M an
Slide 53: Better Capital Utilization – Employing Open Capacity
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Better Capital Utilization – Employing Open Capacity Growth potential can be achieved through improved capacity utilization and workforce management Shift Utilization % of Total Capacity Substantial Open Capacity to Sup
Slide 54: Operational Excellence Summary and Key Messages
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Operational Excellence Summary and Key Messages Commercial Excellence Targets Operational Excellence Takeaways Margin Expansion through A great start to MBX; we are on target to annual 1 Operational Excellence and long-
Slide 55: Financial Growth & Shareholder Value Creation
Financial Growth & Shareholder Value Creation Todd Butz – Chief Financial Officer
Slide 56: Financial Key Messages
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Financial Key Messages 1 Organic Growth Acceleration Margin Expansion Through Commercial 2 and Operational Excellence Driving Improved Free Cash Flow 3 Generation Maintaining a Strong Balance Sheet While 4 Strategical
Slide 57: Financial Performance & Targets
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Financial Performance & Targets(1) Sales Performance Adjusted EBITDA Adjusted EBITDA Margin $s in Millions $s in Millions % of Sales 11% - 12% $66 - $71 $580 - $610 $55 $520 10.5% 2019 2023E 2019 2023E 2019 2023E 1 2 3
Slide 58: Organic Growth Acceleration
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Organic Growth Acceleration 3-Year Organic Revenue CAGR of 8% - 12%, before incremental M&A Three Year Sales Reconciliation (1) $s in Millions $750 - $850 $30 - $50 ($20) - ($30) Pricing Excellence End of Life M&A $60 -
Slide 59: Accelerated Margin Expansion
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Accelerated Margin Expansion Targeting 3-Year Adjusted EBITDA margin expansion of 300bps – 400bps 3-Year Adjusted EBITDA Margin Reconciliation Adjusted EBITDA as a % of Sales ~ 50bps ~ 50bps (200) - (250)bps 100 - 150bp
Slide 60: Leveraging SG&A
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Leveraging SG&A Attractive operating leverage contributes to margin expansion amid topline growth 3-Year Sales and SG&A Targets Key Highlights $s in Millions SG&A as a % of Sales $750 - $850 2023E SG&A $31 - $33M 2026E
Slide 61: Strong Free Cash Flow
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Strong Free Cash Flow Free cash flow generation to fuel growth investment and shareholder returns Free Cash Flow(1) Generated ~$200M >$3.00 annualized FCF / share ($2.3M) $25 - $35M ($0.04) annualized FCF / share ~$2.40
Slide 62: Working Capital Management
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Working Capital Management Improving free cash flow conversion by returning working capital utilization to pre-pandemic levels Days Sales Outstanding Days Sales of Inventory Days Payable Outstanding 63 45 44 55 43 43 42
Slide 63: Disciplined Capital Deployment
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Disciplined Capital Deployment Capital allocation priorities focused on maximizing cash flow and return on invested capital Balanced approach to capital allocation Capital Expenditures $’s in Millions Consistent Debt Pa
Slide 64: ESOP Plan & Float Improvement
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth ESOP Plan & Float Improvement Improving share availability while balancing employee strategic alignment Equity Ownership Composition 1 % of Shares Outstanding Total shares outstanding ~20.4M shares 30% 30% 2 ESOP was es
Slide 65: Shareholder Value Creation: 2026 Financial Milestones
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Shareholder Value Creation 2026 Financial Milestones (1) Revenue Adj. EBITDA FCF $750 - $850M $105 - $135M $65 - $75M 8% - 12% CAGR 14% - 16% Margin >$3.00 of FCF per share (1) Inclusive of Mid-States Aluminum 65
Slide 66: Financial Growth & Shareholder Value Creation Summary & Key Messages
Corporate Strategy Commercial Excellence Operational Excellence Financial Growth Financial Growth & Shareholder Value Creation Summary & Key Messages Financial Growth & Shareholder 1 Financial Growth Targets Value Takeaway’s Outsourcing, onshoring and MSA cross-selling 1 Organic Growth Acceleration
Slide 67: Key Investment Thesis
Key Investment Thesis Strategic evolution story supported by attractive re-shoring and outsourcing mega trends Strategic Business Transformation • Strong demand fundamentals across our end markets, supporting profitable growth • Value creation platform expected to drive Adjusted EBITDA margins to 14
Slide 68: Q&A
Q&A
Slide 69: Management Team
Management Team Seasoned management team with deep industry experience Jag A. Reddy Todd M. Butz Rand P. Stille Ryan F. Raber Sean P. Leuba Rachele M. Lehr President & CEO Chief Financial Officer Chief Operating Officer EVP, Strategy, Sales & SVP, Corporate Chief Human Resources Marketing Developmen
Slide 70: Value Creation Roadmap
Value Creation Roadmap(1) Sales Performance Adjusted EBITDA Performance Free Cash Flow Performance $s in Millions $s in Millions and as a % of Sales $s in Millions 8-12% $750 - $850 300-400 CAGR $105 - $135 $65 - $75 BPS $580 - $610 ~ 40% CAGR $66 - $71 14-16% $20 - $30 11-12% 2023E 2026E 2023E 2026
Slide 71: Non-GAAP Reconciliation of Adjusted EBITDA
Non-GAAP Reconciliation of Adjusted EBITDA Full Year ($MM) 2019 Net income (loss) and comprehensive income (loss) $ (4.8) Interest expense 6.7 Provision for income taxes (4.1) Depreciation and amortization 33.0 EBITDA $ 30.9 Loss on extinguishment of debt 0.2 Costs recognized on step-up of acquired
Mayville Engineering Company — Investor Day (September 2023) on 6ix