Mayville Engineering Company, Inc. (MEC) | The Buildout — AI Infrastructure
The Verdict
Mayville Engineering Company fabricates metal components, enclosures, frames and weldments for original equipment manufacturers. Its role in the AI buildout is indirect: it does not sell to hyperscalers or chip companies, but supplies the power-distribution hardware that data center electrical OEMs build, including power distribution units, static transfer switches and switchgear enclosures.
| Market Cap | — |
| Revenue (TTM) | $556M |
| Revenue Growth | +0.0% |
| EBITDA Margin (TTM) | 6.0% |
| Net Debt | $22M |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- DCP organic growth accelerated from roughly 71% year over year in Q1 to roughly 173% in Q2.
- DCP awards were about $50 million in Q1 and $40 million in Q2, with full-year 2026 bookings expected to exceed $150 million.
- Management expects DCP to be about 20% of 2026 revenue and sees a 25–30% long-term range.
- Existing capacity tops out near $850 million without further investment; a $50 million two-year capacity program targets 2–3 year payback and at least 15% IRR.
- May 2026 equity offering delivered about $94 million in net proceeds; leverage improved to 2.9x with more than $100 million of liquidity.
What We’re Watching
- Q2 2026 adjusted EBITDA margin was 8.1% versus 10.3% a year earlier; FY2026 EBITDA guidance stayed at $52–60 million even as revenue rose.
- FY2026 free cash flow guidance was cut to $7–15 million from $25–35 million, after negative Q1 and Q2 free cash flow.
- One new DCP customer accounted for roughly $55 million of $90 million in first-half DCP bookings.
- Plant conversions and hiring are execution risks: equipment lead times are 4–6 months and local unemployment is 2.3–2.9%.
The thesis is strengthening on demand and awards but remains unproven on cash generation and margins. The open question is whether Q3 2026 guided EBITDA of $15.5–18.5 million and a late-2026 Southeast facility decision confirm the operating leverage and customer backing.
Earnings Beat
MEC reported Q2 2026 net sales of $163.0 million, up 23.2% year over year, with organic growth of 9.2%. Manufacturing margin was 10.9% versus 10.3% a year earlier, while adjusted EBITDA margin fell to 8.1% from 10.3%. Data center and critical power organic growth reached roughly 173% year over year. The company posted a $2.1 million GAAP net loss.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $145M | $134M | $136M | +6.8% |
| Gross margin | 5.4% | 6.6% | 11.3% | -590bps |
| EBITDA | $7M | $6M | $11M | −35.1% |
| EPS | $-0.40 | $-0.22 | $0.00 | — |
| DCP organic growth | +173% y/y (approx.) | +71% y/y (approx.) | n/a | — |
We believe we are entering a transformative chapter defined by expanding capacity, accelerating growth, improving profitability, and rising returns on invested capital.— Jag Reddy, CEO, 2026-08-05
Management tone: Management shifted from saying in Q1 it had "not yet seen clear indications of a broad-based or material recovery" to Q2's "stronger-than-expected demand" and "early recovery underway in our commercial vehicle market." Management also directly acknowledged launch costs, outsourcing costs, tight labor and powersports offshoring rather than deflecting.
Management Guidance
Full-year 2026 net sales were raised to $620–650 million, adjusted EBITDA was held at $52–60 million, and free cash flow was cut to $7–15 million. Management added full-year launch costs of $5–6 million and outsourcing costs of $2–3 million. Q3 2026 guidance was initiated at $160–170 million of net sales and $15.5–18.5 million of adjusted EBITDA, with $1.0–1.5 million each of launch and outsourcing costs.
Trajectory
The audited data spine shows revenue accelerating through the most recent quarters and margins compressing, with gross margin down about 490 basis points and EBITDA margin down about 230 basis points in the computed trend. The Q2 2026 result, $163.0 million of revenue with 10.9% manufacturing margin and 8.1% adjusted EBITDA margin, captures the pattern: DCP and commercial vehicle volume are growing, while launch and outsourcing costs keep profitability below prior-year levels.
The Model
The model's locked projections show FY+1 revenue of $615 million and EBITDA of $55 million, an 8.9% margin, rising to FY+2 revenue of $705 million and EBITDA of $88 million, a 12.5% margin. The near-term anchor is DCP approaching 20% of revenue and a commercial vehicle recovery, while FY+2 assumes launch and outsourcing costs normalize as new capacity ramps.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $546M | $615M | $705M |
| YoY Growth | — | +12.5% | +14.6% |
| EBITDA | $38M | $55M | $88M |
| EBITDA Margin | 6.9% | 8.9% | 12.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.4% above analyst consensus.
Full-year 2026 net sales were raised to $620–650 million, adjusted EBITDA was held at $52–60 million, and free cash flow was cut to $7–15 million. Management added full-year launch costs of $5–6 million and outsourcing costs of $2–3 million. Q3 2026 guidance was initiated at $160–170 million of net sales and $15.5–18.5 million of adjusted EBITDA, with $1.0–1.5 million each of launch and outsourcing costs.
What Could Go Right — and Wrong
- DCP awards keep running at or above the $40–50 million quarterly pace and full-year bookings exceed $150 million.
- Launch and outsourcing costs normalize by early 2027 as equipment arrives and work comes back in-house.
- A late-2026 Southeast facility decision lands with customer backing, adding $50–60 million of revenue capacity.
- Commercial vehicle EPA 2027 programs ramp through 2027 and lift legacy plant utilization.
- Capacity reservation agreements with upfront fees or volume commitments reduce MEC's capital burden.
- Launch, outsourcing or hiring delays keep adjusted EBITDA margin below prior-year levels into 2027.
- The single large new DCP customer pauses awards after representing about $55 million of $90 million in first-half bookings.
- Commercial vehicle recovery stalls or powersports offshoring worsens legacy volume.
- Equipment lead times of 4–6 months and tight labor markets slow plant conversions.
- Free cash flow undershoots the lowered $7–15 million guidance as working capital and capex stay elevated.
Looking Ahead
Over the next 12 months, MEC's story hinges on converting DCP awards into revenue, normalizing launch and outsourcing costs, and deciding on a Southeast facility. Management expects Q2 2026 DCP awards of approximately $40 million to contribute revenue beginning in 2027, while commercial vehicle EPA 2027 programs may show revenue in late Q4 2026 and ramp through 2027.
- August 2026Credit agreement rate step-down — Borrowing-rate step-down from equity offering takes effect.
- Q3 2026Q3 results print — Tests guided $160–170M revenue and $15.5–18.5M adjusted EBITDA.
- Late 2026Southeast facility decision — Tests customer backing and expansion beyond ~$850M capacity ceiling.
- Late Q4 2026EPA 2027 program revenue — Commercial vehicle revenue may begin showing in late Q4 2026.
- Early 2027Outsourced fabrication returns in-house — Tests normalization of laser, brake press and paint outsourcing costs.
- 2027Q2 2026 DCP awards convert — Approximately $40M in awards expected to contribute revenue.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $582M | $546M | $556M | -6.0% |
| Gross Margin | 12.0% | 9.8% | 8.3% | 222bps |
| EBITDA | $82M | $38M | $361M | -54.3% |
| EBITDA Margin | 14.1% | 6.9% | 6.0% | 725bps |
| Net Income | $26M | −$8M | −$16M | -131.5% |
| Free Cash Flow | $78M | $27M | $146M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)8.3%
- EBITDA Margin (TTM)6.0%
- Net Margin (TTM)-3.0%
- ROIC-2.8%
- FCF Conversion43.7%
- SBC / Revenue0.5%
The Company
Mayville Engineering Company is a U.S.-based, vertically integrated value-added manufacturing partner founded in 1945 and headquartered in Milwaukee, Wisconsin. It describes itself as a leading Tier I U.S. supplier of highly engineered components to OEM customers. It operates one segment producing metal components and services for commercial vehicles, construction and access, powersports, data center and critical power, agriculture and military end markets.
The FY2025 10-K listed 27 facility line items, mostly manufacturing sites plus a corporate headquarters and one held-for-sale property, with an estimated listed footprint of roughly 3.5 million square feet excluding one Fond du Lac site. MEC runs highly utilized plants, has converted six to seven plants to DCP manufacturing, and is planning a $50 million two-year capacity program plus a potential $25–30 million Southeast facility.
Business Segments
Competitive Landscape
Mayville describes itself as a leading Tier I U.S. supplier of highly engineered components to OEM customers. The record includes a June 2026 press release naming it number one fabricator for the 16th consecutive year, though the intel file classifies that recognition as not financially material. No MEC filing in the supplied material names a direct competitor; the supply-chain map lists inferred fabrication competitors only.
- BTD ManufacturingInferred fabrication competitor; not confirmed in MEC filings.
- CadrexInferred fabrication competitor; not confirmed in MEC filings.
- IronformInferred fabrication competitor; not confirmed in MEC filings.
- MaysteelInferred fabrication competitor; not confirmed in MEC filings.
- O'Neal Manufacturing ServicesInferred fabrication competitor; not confirmed in MEC filings.
Supply Chain
MEC operates between steel and aluminum inputs and OEMs; management says 100% of steel is domestic and 30–40% of aluminum is imported from Canada. No neighbor transcript directly names MEC.
More on MEC: Earnings recap