10-K: Mayville Engineering Reports 2025 Loss Amid Demand Decline

Mayville Engineering Company, Inc. (MEC) reported a net loss of $8.1 million for fiscal year 2025, a significant decline from the prior year, driven by reduced customer demand and acquisition-related costs, despite strategic expansion into the data center market.

Summary

• Net sales for the twelve months ended December 31, 2025, decreased by 6.0% to $546.5 million from $581.6 million in 2024, primarily due to reduced customer demand across most end markets and customer channel inventory destocking.
• The company reported a net loss of $8.1 million for 2025, a substantial decline from a net income of $26.0 million in 2024, representing a 131.2% decrease.
• EBITDA decreased by 54.4% to $37.4 million in 2025 from $82.1 million in 2024, while Adjusted EBITDA fell by 26.9% to $47.1 million from $64.4 million.
• Manufacturing margins decreased by 24.0% to $54.0 million, with the margin percentage dropping to 9.9% in 2025 from 12.2% in 2024, impacted by softening demand, restructuring costs, and inventory step-up expense from the Accu-Fab acquisition.
• Free cash flow significantly decreased by 65.4% to $26.9 million in 2025 from $77.7 million in 2024, largely due to lower cash provided by operating activities and the absence of the prior year's $25.5 million lawsuit settlement payment.
• The acquisition of Accu-Fab, LLC on July 1, 2025, for a net consideration of $141.2 million, contributed $40.7 million in net sales and $7.3 million in operating income since its acquisition date, expanding MEC's presence in the data center & critical power end market.
• Total debt increased significantly, with bank revolving credit notes outstanding at $202.5 million as of December 31, 2025, up from $79.7 million in 2024, primarily to finance the Accu-Fab acquisition.
• An amendment to the Credit Agreement on February 25, 2026, lowered the revolving credit facility to $275.0 million from $350.0 million and adjusted financial covenants, including increasing the maximum consolidated leverage ratio for 2026.
• The company initiated a restructuring plan (MBX) on August 5, 2025, to optimize its operational footprint and reduce fixed costs, expecting total charges of $5.0 million to $7.0 million, with $0.9 million incurred in 2025.
• MEC remediated a previously disclosed material weakness in internal control over financial reporting related to journal entry review and approval as of December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with a negative sentiment due to the significant decline in net sales, a shift to a net loss, and a substantial reduction in free cash flow. While the Accu-Fab acquisition is strategically positive, its immediate financial impact and the increased leverage, coupled with the subsequent downward amendment of the credit facility, indicate considerable financial headwinds and increased risk.

Positives

• The strategic acquisition of Accu-Fab, LLC on July 1, 2025, significantly enhances MEC's position in the rapidly growing data center & critical power infrastructure end markets, contributing $40.7 million in net sales and $7.3 million in operating income in 2025.
• MEC maintains a leading and defendable market position, ranked as the largest fabricator in the United States for 15 consecutive years (2011-2025) by The Fabricator magazine.
• The company's diversified end markets (heavyand medium-duty commercial vehicles, construction & access equipment, powersports, data center & critical power, agriculture, military) provide stability and allow for resource reallocation during market fluctuations.
• MEC's cost structure includes contractual agreements with customers to pass through commodity price changes, effectively limiting exposure to raw material price volatility and tariffs.
• The company successfully remediated a previously identified material weakness in internal control over financial reporting as of December 31, 2025, demonstrating improved financial oversight.
• Management approved one-time cash bonuses for executives on March 2, 2026, recognizing their extraordinary efforts in securing the strategically significant Accu-Fab acquisition.

Negatives

• Net sales decreased by 6.0% in 2025, primarily due to reduced customer demand across nearly all end markets and customer channel inventory destocking.
• The company reported a net loss of $8.1 million in 2025, a significant reversal from a net income of $26.0 million in 2024, indicating a substantial deterioration in profitability.
• EBITDA and Adjusted EBITDA saw considerable declines of 54.4% and 26.9% respectively, reflecting weaker operational performance.
• Manufacturing margins decreased by 2.3 percentage points to 9.9% in 2025, impacted by softening customer demand, non-recurring restructuring costs, and inventory step-up expense from the Accu-Fab acquisition.
• Free cash flow decreased by 65.4% to $26.9 million in 2025, largely due to lower cash from operating activities and the absence of a $25.5 million lawsuit settlement payment received in 2024.
• Total outstanding borrowings under the revolving credit facility increased significantly to $202.5 million in 2025 from $79.7 million in 2024, leading to higher leverage.
• The consolidated total leverage ratio was 3.68 to 1.00 as of December 31, 2025, approaching the covenant maximum of 4.00 to 1.00 (which was temporarily increased due to the Accu-Fab acquisition), indicating increased financial risk.
• The Credit Agreement was amended on February 25, 2026, to lower the total allowable borrowings under the revolving credit facility to $275.0 million from $350.0 million, suggesting a reduction in available liquidity or lender caution.

Risks

• Macroeconomic conditions, including inflation, elevated interest rates, labor availability, material cost pressures, trade policy uncertainty, and inconsistent customer demand, could continue to negatively impact business, financial condition, cash flows, and results of operations.
• Dependence on a limited number of large customers (PACCAR Inc. and John Deere accounted for 13.6% and 10.0% of 2025 net sales, respectively) means the loss of any of these customers or their market share could materially adversely affect the business.
• Most customers do not commit to long-term production schedules, making it difficult to schedule production accurately and achieve maximum efficiency, potentially leading to underutilized manufacturing capacity.
• Inability to realize net sales from awarded business due to a lack of long-term commitments and customer rights to unilaterally terminate contracts with limited notice, potentially resulting in unrecovered pre-production costs.
• Failure to compete successfully in highly competitive markets due to competitors responding more quickly to new technologies, having greater name recognition, or offering lower prices.
• Inability to maintain manufacturing, engineering, and technological expertise, including recruiting and retaining qualified personnel, or adapting to changing technologies, could adversely affect business.
• Macroeconomic conditions impacting data center & critical power end-market demand could materially adversely affect the business, especially given increased exposure from the Accu-Fab acquisition.
• Volatility in the prices and availability of raw materials (steel, aluminum) and energy, and the inability to fully pass along increased costs to customers, could adversely affect results of operations.
• Dependence on third-party suppliers makes the company vulnerable to supply shortages, financial viability issues of suppliers, and difficulties in re-sourcing components.
• Acquisition strategy involves risks such as difficulty identifying attractive targets, integrating acquired businesses, incurring substantial additional indebtedness, or dilution to shareholders.
• The impact of foreign trade relations and associated tariffs could significantly increase raw material prices or reduce customer demand.
• Geopolitical events, increased political instability, and social unrest could disrupt operations, supply chains, and consumer confidence.
• Increases in the cost of employee benefits, particularly healthcare, could impact financial results and cash flows.
• Failure to develop new and innovative processes or lack of customer acceptance for new processes could negatively affect sales and results.
• Dependence on information technology systems and infrastructure, including cybersecurity risks and data leakage, could negatively affect operations, lead to business interruption, or reputational damage.
• Manufacturing operations are subject to environmental, health, and safety laws and regulations, which could result in material costs, fines, or third-party claims.
• The capital-intensive nature of the industry and significant fixed costs make profitability sensitive to changes in volume.
• If the Employee Stock Ownership Plan (ESOP) fails to meet tax-qualified retirement plan requirements, the company could be subject to substantial penalties.
• Restrictions under the Amended and Restated Credit Agreement, including financial covenants (e.g., consolidated total leverage ratio), could limit business and financial transactions, and non-compliance could lead to an event of default.
• The ability to incur additional debt, despite restrictions, could reduce the capacity to satisfy current obligations under existing indebtedness.
• The ESOP and 401(k) plan's substantial stock ownership (approximately 22% as of December 31, 2025) may limit other shareholders' ability to influence corporate matters, including a change in control.
• The market price of common stock may be volatile due to various factors, some beyond the company's control, potentially leading to loss of investment.
• The company does not expect to declare any dividends in the foreseeable future, meaning investors may only realize gains through stock price appreciation.
• Provisions of Wisconsin law and the company's articles of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, potentially depressing the trading price of common stock.

Future Outlook

MEC expects material cost inflation and inflationary pressures on wages and benefits to continue in 2026, and may not be able to fully mitigate these impacts. Capital expenditures for the full year 2026 are expected to be between $15.0 million and $20.0 million. The company believes its operating cash flow and available borrowings under the Credit Agreement are sufficient to fund operations for 2026 and beyond, and expects to remain in compliance with financial covenants through 2026 and the foreseeable future.

Management Comments

• We believe the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are reasonable, but no assurance can be given that these expectations will prove to be correct.
• Our historical success is a function of our engineering expertise, extensive manufacturing capabilities, limited commodity exposure, investment in automation and relationships with the contractual ability to pass through variability in commodity prices.
• We believe we are poised to grow through economic cycles due to our market positioning and reputation; product breadth; flexible and re-deployable capital investment in automation and process capabilities; and our geographic, end market and product diversification.
• Our commitment to 'Unmatched Excellence' is the cornerstone that attracts our customers. We thrive on strategic collaboration, actively engaging with our customers to create alignment and become an integral part of their product development and manufacturing processes.
• We believe we will benefit from this continued shift in our customers focus and ongoing desire for OEMs to improve efficiencies, reduce costs and simplify supply chains.
• Our internal teams are actively creating and deploying software-driven automation solutions to support office business operations.
• The Company expects some of these dynamics [macroeconomic conditions] to continue in 2026 and could continue to have an impact on demand, material costs and labor.
• Management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (GAAP).
• Our management concluded that we maintained effective internal control over financial reporting as of December 31, 2025.

Industry Context

StockSavvy.ai notes that Mayville Engineering Company operates in a highly fragmented contract manufacturing market, where it distinguishes itself as a leading Tier I U.S. supplier with extensive capabilities and a 'one-source solution' approach. Its consistent ranking as the 'Largest Fabricator' for 15 years highlights its scale advantage over smaller, niche competitors. The company is strategically benefiting from OEM trends towards outsourcing and reshoring, which simplify supply chains and reduce in-house manufacturing investments for its blue-chip customers. The recent Accu-Fab acquisition further diversifies MEC into the high-growth data center & critical power end market, aligning with broader industry shifts towards specialized, technology-driven manufacturing partners.

Comparison to Industry Standards

• MEC has been ranked as the largest fabricator in the United States for the past 15 years in a row (2011-2025) by The Fabricator magazine, indicating a strong competitive position relative to other U.S. fabricators.
• The company's diversified end-market strategy, which muted its peak-to-trough sales declines to 10% between 2013 and 2017, compared to a median peak-to-trough sales decline of 23% for its heavyand medium-duty commercial vehicles, construction & access equipment, powersports, data center & critical power, and agriculture customers, demonstrates superior resilience during economic downturns compared to its customer base's individual market fluctuations.
• MEC's ability to pass through commodity price changes to customers via contractual agreements is a key competitive advantage, mitigating margin erosion that many competitors in the manufacturing sector face from raw material price volatility.

Management Changes

Corporate Governance

Legal Proceedings

• The lawsuit filed by the Company against Peloton Interactive, Inc. on August 4, 2022, for breach and anticipatory repudiation of contract, was resolved through a formal Settlement Agreement on October 28, 2024.
• Under the settlement terms, MEC received a gross payment of $25.5 million from Peloton in the fourth quarter of 2024, and both parties agreed to dismiss the lawsuit and exchange mutual releases, with no admission of liability.

Related Party Transactions

• The Employee Stock Ownership Plan (ESOP) and the Mayville Engineering Company, Inc. 401(k) Plan beneficially owned approximately 22% of the outstanding shares of common stock as of December 31, 2025, giving them significant influence over corporate matters.

Stakeholder Impact

• Shareholders: Experienced a significant net loss and reduced free cash flow in 2025, no anticipated dividends, and potential dilution from future capital raises. The concentration of ownership by ESOP and 401(k) plans may limit their influence on corporate decisions.
• Employees: Benefit from competitive compensation, comprehensive benefits, training and development programs, and health and safety initiatives. The ESOP and 401(k) plans provide retirement benefits. Workforce reallocation is expected due to automation and restructuring.
• Customers: Benefit from MEC's 'one-source solution' and deep engineering expertise, with long-standing relationships. However, reduced customer demand across end markets negatively impacted MEC's sales.
• Creditors: The company incurred substantial additional indebtedness for the Accu-Fab acquisition, leading to increased leverage and subsequent amendments to credit agreement covenants, which could impact future borrowing capacity and terms.
• Suppliers: MEC maintains a broad and diverse base of over 900 direct material suppliers, with over 90% sourced from the U.S., indicating stable relationships. However, macroeconomic conditions and supply chain disruptions remain a risk.

Next Steps

• Complete the restructuring plan (The Plan) by December 31, 2026, which involves consolidating three warehouses and one manufacturing facility.
• Incur additional charges under the restructuring plan in future periods as implementation progresses.
• Continue to invest in data security and system resiliency in response to the evolving cyber threat environment.
• Prioritize capital investment toward high-growth data center and critical power end markets as part of the disciplined capital deployment strategy.
• Evaluate potential strategic acquisitions of businesses, assets, and product lines as part of the growth strategy.
• The company's decision to repurchase additional shares in 2026 will depend on business conditions, free cash flow generation, other cash requirements, and stock price.
• File the proxy statement for its 2026 annual meeting of shareholders no later than 120 days after December 31, 2025.

Key Dates

Recommendation

The filing reveals a significant deterioration in Mayville Engineering Company's financial performance for 2025, marked by a 6.0% decline in net sales, a shift from a $26.0 million net income to an $8.1 million net loss, and a 65.4% drop in free cash flow. While the Accu-Fab acquisition is strategically sound, its immediate financial impact contributed to the negative results, and the company's leverage ratio is elevated, necessitating a downward amendment to its credit facility. These factors, combined with ongoing macroeconomic headwinds and no anticipated dividends, suggest a challenging outlook for profitability and shareholder returns in the near term. A seasoned investor would likely view these results as a strong indicator to sell or reduce exposure to the stock.

Keywords

Manufacturing, Fabrication, OEM, Data Center, Commercial Vehicles, Construction Equipment, Powersports, Agriculture, Military, Metal Components, SEC Filing, 10-K, Financial Results, Acquisition, Accu-Fab, Debt, Leverage, Restructuring, Supply Chain, Cybersecurity, Corporate Governance