Mayville Engineering Company, Inc. · NYSE:MEC
Mayville Engineering — Investor Presentation (March 2024)
37 slides from Mayville Engineering's investor presentation, March 2024
Slide 1: Mayville Engineering Company Investor Presentation
MAYVILLE ENGINEERING COMPANY Investor Presentation March 2024
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT March 2024 Investor Presentation 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 regardi
Slide 3: Key Messages
KEY MESSAGES Leading U.S. based provider of design, engineering, and fabrications solutions for established base of OEM customers across diverse end-markets Demonstrating strategic execution; high-value commercial expansion, increased operational efficiency, and balanced capital allocation Poised fo
Slide 4: About MEC
ABOUT MEC Vertically-integrated, value-added provider of design and fabrications solutions End Market Revenue Mix Full Year 2023 We are the largest vertically-integrated, value-added provider of custom prototyping, design and Military fabrications services in the United States Agriculture 6% 10% 23
Slide 5: Strategic Domestic Manufacturing Footprint
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 of use: Manufacturing Headquarters Ownership: Owned Ownership: Owned Vanderbilt,
Slide 6: Management Team
MANAGEMENT TEAM Seasoned management team with deep industry experience Jag A. Reddy Ryan F. Raber Sean P. Leuba Rachele M. Lehr Todd M. Butz SVP, Corporate Development & Chief Human EVP, Strategy, Sales President & CEO Chief Financial Officer & Marketing General Counsel Resources Officer • W.R Grace
Slide 7: Tier-1 Supplier to Global OEMs
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+ yrs Construction & Access 25+ yrs 31+ yrs 45+ yrs Agriculture 14+ yrs 25+ yrs 45+ y
Slide 8: Customer-Centric Development Model
1 Identify customer-defined concept for production evaluation 2 Collaborate with customer to design and develop product 3 Prototyping, tooling and pre-production development 4 Manufacturing process planning CUSTOMER-CENTRIC DEVELOPMENT MODEL 5 Manufacturing process refinement Customer collaboration
Slide 9: Our Unique Customer Value Proposition
OUR UNIQUE CUSTOMER VALUE PROPOSITION MEC’s value added service offerings has resulted in a long track record of strong customer acquisition and retention We provide end-to-end prototyping, 100% of our operational footprint is based design and manufacturing expertise in the continental US, mitigatin
Slide 10: Our Value Creation Framework
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 Optimization Enable teams to drive Strategy deployment Implement strategic and Genera
Slide 11: Improving New Capacity Utilization to Drive Growth
Improving New Capacity Utilization to Drive Growth 263,000 square foot Hazel Park facility which came online in 2022 Over $100M annualized revenue run rate by end of 2024 Revenue ranges: 2024E $50- $60M; 2025E $100M+ Categorization of revenues – new business landed $45M; transfers $30M; yet to get $
Slide 12: Attractive Multi-Year Mega Trends
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 Millions On-Shoring/Outsourcing On-Shoring of Manufacturing Capacity from China creates
Slide 13: M&A Acquisition Guidelines
M&A Acquisition Guidelines Strategic opportunities expanding expertise within light-weight and next generation materials Acquisition Industry Focus Capabilities Criteria Revenue: Alternative/Renewable Energy Light-Weighting: $50 - $150M • Aluminum Electrification Infrastructure • Plastics EBITDA Mar
Slide 14: Case Study: MSA Strategic Rationale
CASE STUDY: MSA STRATEGIC RATIONALE Industry leading manufacturer of custom aluminum extrusions and fabrications with value added capabilities About Mid-States Aluminum Fond du Lac, 1964 2 manufacturing ~325k sq ft ~250 Wisconsin Family Owned facilities Manufacturing Non-union HQ and Founded in Both
Slide 15: Commercial Excellence
COMMERCIAL EXCELLENCE Leveraging scale and our unique product offerings to capture market share amid multi-year secular demand trends Revenue Expansion Strategies Customer New Product Outsourcing and Cross-Selling Development Customer Supplier Reshoring Consolidation Total End Market Potential 2023
Slide 16: Case Study: Commercial Pricing & Revenue Capture
CASE STUDY: COMMERCIAL PRICING & REVENUE CAPTURE Maximizing revenue capture through pricing and commercial excellence Pricing Philosophy Commercial Value Based Pricing Model Excellence Targets 150 to 200 bps Capture Cost to Serve Adj. EBITDA Expansion ’24E vs. ’26E Value Pricing and Elimination of T
Slide 17: Margin Expansion Through Operational Excellence
MARGIN EXPANSION THROUGH OPERATIONAL EXCELLENCE Established in September of 2022, MBX is MEC’s Lean initiative to drive excellence across the entire organization Strategy Execution Strategy Operational Excellence • Strategy Deployment Process Execution • Lean Value Stream Mapping & Kaizen Culture •
Slide 18: 4Q23 Financial Performance
4Q23 FINANCIAL PERFORMANCE Successful strategic execution delivers continued organic revenue growth and record quarterly free cash flow Successful commercial growth execution and • Net sales +15.6% y/y including organic growth of 6.1% y/y, due to the acquisition of continued MBX MSA and supported by
Slide 19: Fourth Quarter Financial Performance
FOURTH QUARTER FINANCIAL PERFORMANCE Net Sales Adj. EBITDA & Margin Adjusted Diluted EPS Free Cash Flow ($MM) ($MM & % of Net Sales) ($/share) ($MM) +15.6% +53.2% +40.5% $148.6 $0.21 $19.9 $17.7 $0.15 $11.6 11.9% $128.5 9.0% $(0.7) 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 19 See the appendix for reco
Slide 20: Full Year Financial Performance
FULL YEAR FINANCIAL PERFORMANCE Net Sales Adj. EBITDA & Margin Adjusted Diluted EPS Free Cash Flow ($MM) ($MM & % of Net Sales) ($/share) ($MM) +9.1% +8.7% (29.4%) $588.4 $66.1 $23.8 $1.12 $60.8 $0.79 11.3% 11.2% $539.4 $(6.2) FY2022 FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 FY2023 20 See the append
Slide 21: 4Q Net Sales & Adjusted EBITDA Performance Highlights
4Q NET SALES & ADJUSTED EBITDA PERFORMANCE HIGHLIGHTS Organic growth tailwinds remain prevalent, while self-help initiatives build momentum Organic growth remains stable 4Q Net Sales Reconciliation Revenues grew 6.1% organically y/y as Powersports, Construction ($s in Millions) & Access & Military n
Slide 22: 2023 Net Sales & Adjusted EBITDA Performance Highlights
2023 NET SALES & ADJUSTED EBITDA PERFORMANCE HIGHLIGHTS Annual net sales and Adjusted EBITDA growth driven by commercial growth and operational excellence Organic growth accelerated through the year 2023 Net Sales Reconciliation Revenues grew 4.3% organically y/y driven by strong demand in ($s in Mi
Slide 23: 2024 End-Market Outlook
2024 END-MARKET OUTLOOK End-market demand is softening but market-share gains will offset in 2024 Commercial Construction Powersports Agriculture Military Other Vehicle & Access MEC Macro Assumptions: Assumptions: Assumptions: Assumptions: Assumptions: Assumptions: • Demand slowing in 4Q23 • Soft re
Slide 24: Track-Record of Cyclical Durability
TRACK-RECORD OF CYCLICAL DURABILITY Diverse business mix and flexible business model limit MEC’s cyclical volatility Performance Through End Market Volatility Agility (% Y-o-Y Change in Sales) Our technology enabled manufacturing processes give us Class 4-7 Trucks Class 8 Trucks US Light Vehicle SAA
Slide 25: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Capital allocation priorities focused on maximizing cash flow and return on invested capital Balanced approach to capital allocation Capital Expenditures ($MM) $59 Consistent Debt Paydown • Net leverage of 2.1x as of December 31, 2023 • Targeting leverage of 1.5x – 2.0x
Slide 26: Disciplined Capital Management
DISCIPLINED CAPITAL MANAGEMENT Flexible balance sheet with ample liquidity to support long term growth Total Cash & $250 Available Liquidity1 $198 $150 ($MM) $150 Total Net Debt2 ($MM) $71 $75 Net Leverage Ratio3 2.4x 2.1x 1.3x $75 $76 $79 Net Working Capital4 2021 2022 2023 1) Assumes continued com
Slide 27: 2024 Financial Guidance
2024 FINANCIAL GUIDANCE As of March 5, 2024 Business Outlook Financial Assumptions • End-market demand is expected to • Leveraging newly acquired aluminum • Organic net sales growth of 1.5% to 2.5% • Capital expenditures of $15 to $20 million soften through the year in many key extrusion capabilitie
Slide 28: Value Creation Roadmap
Value Creation Roadmap (1) MBX Framework expected to drive substantial financial value and shareholder returns Sales Performance Adjusted EBITDA Performance Free Cash Flow Performance $s in Millions $s in Millions and as a % of Sales $s in Millions 10-15% $750 - $850 240-410 ~ 30% $65 - $75 CAGR BPS
Slide 29: Organic Growth Acceleration
Organic Growth Acceleration (1) 2-Year Organic Revenue CAGR of 10% - 15%, before incremental M&A Two Year Sales Reconciliation (1) $s in Millions $25 - $45 ($15) - ($20) Pricing Excellence End of Life $40 - $50 $750 - $850 $80 - $135 MSA Growth $620 - $640 2024E 2026E (1) Inclusive of Mid-States Alu
Slide 30: Accelerated Margin Expansion
Accelerated Margin Expansion Targeting 2-Year Adjusted EBITDA margin expansion of 250bps – 400bps 2-Year Adjusted EBITDA Margin Reconciliation Adjusted EBITDA as a % of Sales ~ 50bps ~ 50bps (150) - (160)bps 80 - 120bps MBX / Labor Productivity Wage Inflation 100 - 150bps Leveraging SG&A Plant Utili
Slide 31: Investment Thesis
INVESTMENT THESIS Strategic evolution story supported by attractive re-shoring and outsourcing mega trends • Strong demand fundamentals across our end markets, supporting profitable growth • Value creation platform expected to drive Adjusted EBITDA margins to 14% - Strategic 16% and organic revenue
Slide 32: Appendix
ne ° APPENDIX
Slide 33: Sales by Customer
SALES BY CUSTOMER 2023 2022 2021 2020 John John Deere John Deere John Deere Deere 17% 17% 15% Other Other Other Other 15% 28% 28% 30% 35% Paccar Honda Paccar 14% 13% Paccar 16% 15% Navistar Navistar 4% Paccar Volvo 5% Harley 12% 11% Volvo Navistar 5% Harley Volvo Harley 11% 6% 6% 12% 7% Navistar Har
Slide 34: Sales to Individual Customer
Sales to Individual Customer Paccar John Deere Volvo JLG Honda Navistar Harley $100 $90 $80 $70 $60 Millions $50 $40 $30 $20 $10 $0 2020 2021 2022 2023 34
Slide 35: Non-GAAP Reconciliation of Adjusted EBITDA
Non-GAAP Reconciliation of Adjusted EBITDA Full Year Q4 ($MM) 2023 2022 2023 2022 Net income and comprehensive income $ 7.8 $ 18.7 $ 2.2 $ 2.4 Interest expense 11.1 3.4 3.6 1.2 Provision for income taxes 1.0 3.7 (0.4) (0.8) Depreciation and amortization 35.1 29.3 9.6 7.8 EBITDA $ 55.1 $ 55.1 $ 14.9
Slide 36: Non-GAAP Reconciliation of Adjusted Net Income & Diluted EPS
Non-GAAP Reconciliation of Adjusted Net Income & Diluted EPS Full Year Q4 ($MM, except share amounts and per share values) 2023 2022 2023 2022 Net income and comprehensive income $ 7.8 $ 18.7 $ 2.2 $ 2.4 CEO transition costs — 1.5 — — Loss on extinguishment of debt 0.2 — — — MSA acquisition related
Slide 37: Non-GAAP Reconciliation of Free Cash Flow
Non-GAAP Reconciliation of Free Cash Flow Full Year Q4 ($MM) 2023 2022 2023 2022 Net cash provided by operating activities $ 40.4 $ 52.4 $ 26.7 $ 19.1 Purchase of property, plant and equipment (16.6) (58.6) (6.8) (19.8) Free cash flow $ 23.8 $ (6.2) $ 19.9 $ (0.7) 37
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