Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 4 of last 6 quarters
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MEC's accelerating Datacenter & Critical Power growth (+173% YoY) and $125M+ pipeline underscore the ongoing buildout of AI infrastructure, particularly power distribution and switchgear. The company's capacity investments and new Southeast facility plans signal sustained demand for metal fabrication in data center construction, positioning MEC as a key supplier to the AI infrastructure supply chain.
MEC delivered strong top-line growth in Q2, with total sales up 23.2% YoY to $163M, driven by a 173% organic surge in Datacenter & Critical Power and early recovery in Commercial Vehicle. Adjusted EBITDA margin fell to 8.1% from 10.3% due to $2.1M in project launch costs and higher gain-sharing accruals. The company completed a $94M net equity offering, reducing net leverage to 2.9x and providing liquidity to fund growth. Management highlighted $40M in new DCP awards, a $125M+ pipeline, and plans to invest $50M in capacity over two years, while noting temporary outsourcing costs from equipment constraints.
Management raised full-year 2026 net sales guidance to $620M–$650M (from $590M–$620M) while maintaining adjusted EBITDA guidance of $52M–$60M and lowering free cash flow guidance to $7M–$15M. They expect Datacenter & Critical Power to represent ~20% of 2026 revenue, with a qualified pipeline exceeding $125M and $50M–$60M of project launches scheduled for 2026. They plan to invest ~$40M in incremental CapEx plus $10M in leased equipment over the next two years, and are evaluating a new Southeast facility ($25M–$30M investment) to support $50M–$60M of incremental revenue, with a decision targeted for late 2026. Management expects launch and outsourcing costs to normalize as equipment arrives (4–6 month lead times) and new hires ramp, driving margin expansion and strong incremental margins as programs scale.
“We are exploring various options, particularly with data center customers, where there is an increasing need for capacity and there is a constraint in the U.S. manufacturing space to accommodate all the demand that we're seeing and they're seeing in the data center build out.”
on Capacity reservations
“These investments are front-loaded by design and reflect both the natural cost of scaling at pace and the opportunity for profitable growth that we see ahead.”
on Investment strategy
“We are certainly prioritizing volume increases from existing programs. What I mean by that is if a DCP customer currently has a program that we're building in one of our plants, and we have seen occasions where they would come in and then say, I want to double my volumes, I want to triple my volumes, I want to quadruple my volumes.”
on Capacity prioritization
Was the capacity reservation comment data center only, and does it involve deposits or take-or-pay contracts?
Jagadeesh Reddy said they are exploring options primarily with data center customers, including upfront fee structures and volume commitments. No contracts signed yet, but there is interest.
What are the key variables between the low and high end of Q3 and back-half guidance?
Rachele Lehr cited the pace of commercial vehicle recovery, timing/execution of DCP volumes, and how quickly they can reduce launch and outsourcing costs as the main factors.
Are capacity reservation requests coming from existing or new customers, and are you becoming more selective?
Jagadeesh Reddy said conversations are with both existing and new DCP customers, and they are becoming more selective, saying no to some small programs to prioritize higher-value opportunities.