Mayville Engineering Company, Inc.

Good morning. Thank you for attending today's Mayville Engineering Company first quarter earnings call. My name is Forum and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. It is now my pleasure to pass the conference over to our host, Nathan Elwell with Investor Relations. Mr. Elwell, please proceed.

Thank you. Welcome, everyone, and thank you for joining us on today's call. A few quick items before we begin. First, please note that some of the information that you will hear during this call will consist of forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. Such statements express our expectations, anticipations, beliefs, estimates, intentions, plans, and forecasts. Because these forward-looking statements involve risks, assumptions, and uncertainties, our actual results could differ materially from those in the forward-looking statements. For more information regarding such risks and uncertainties, please see our filing through the Securities and Exchange Commission, including our filing on Form 10-K for the period ended December 31st, 2021. We assume no obligation and do not intend to update any such forward-looking statement except as required by federal securities law. Second, this call will involve a discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in the earnings press release, which is available at metinc.com. Joining me on the call today are Bob Campos, Chairman, President, and Chief Executive Officer, Todd Butts, Chief Financial Officer, and Ryan Raver, EVP of Strategy Sales and Marketing. Bob will provide an overview of our performance, then Todd will review our financial results and guidance. With that, I'll hand the call over to Bob.

Please go ahead. Thank you, Nathan. Good morning, everyone. Before we begin discussing our results, I want to touch on the retirement announcement we made at the end of March. After more than 16 years leading the company, I decided to retire from MEC on September 30th of this year. The timing of the announcement allows a full six months for the board to complete the search with the able assistance of Hydrocon Struggles and ensure a smooth transition. Having successfully navigated the pandemic, today MECC is in a strong financial position with a positive outlook and numerous growth opportunities in its future. I believe it is the right time for me to step aside and let a new leader take the reins. Over the past 16 years, we've produced tremendous growth and have been recognized as the largest fabricator in the United States by the Fabricator Magazine for the past 11 years in a row. More importantly, I've been fortunate to work with and put together an outstanding and dedicated team. I'm confident in the future of the company and I look forward to ensuring a successful transition in the coming quarters. And as a meaningful shareholder myself, I look forward to watching the company's continued success for many years to come. With that said, let's turn to the quarter. Year-to-year net sales increased approximately 21% to $136.3 million, and net income increased 50% to $3.8 million compared to last year. Basic earnings per share increased 6 cents to 19 cents per share. We delivered adjusted EBITDA 14.8 million as supply chain disruptions that impacted our customer schedules during the fourth quarter of 2021 merely deferred our volumes into the first quarter. We also continue to recover general inflationary pressures on raw materials, labor, and other product content through contractual material price adjustments and increased commercial pricing. In summary, we delivered a much better performance when compared to the same period last year. We continue to execute effectively and manage through the ongoing supply chain constraints that are impacting many of our customers. Our operations team has done a tremendous job in maintaining MEX supply chain, which is 98% focused in the U.S., while working to adapt and overcome the challenges. While the Omicron surge caused some manufacturing companies to falter, we were able to maintain our production capacity. First, since the pandemic began, we provided a clean and safe environment for our employees. Second, when we have seen increased absenteeism through illness, we've worked to minimize the impact by moving employees to other locations and finding ways to still deliver. Agility and adaptability are still part of our mantra. The end markets we serve continue to forecast strong demands over the mid and long term. While the commercial vehicle market has seen the largest impact from supply chain disruption to date and continues to expect disruption through 2022, we have seen sequential improvement due to the ongoing strength in freight demand and robust backlogs at the OEMs. This leads us to believe this will continue to be a strong market for MECC. over the medium to long term. Power sports continues to be a strong and growing market for us. Overall strength in retail demand coupled with low dealer inventories are leading to increased volumes as customers work to restock over the course of 2022. The construction and access end markets have continued to show strength with residential construction maintaining its stability and with non-residential also showing some signs of improvement. We believe that we'll continue to see increased volumes in the future based on low dealer inventories and the need to restock fleets. In the ag market, we continue to see strengthening demand here. Advancements in equipment productivity combined with low machine inventory low global crop inventories and strong crop prices will continue to drive volume growth over the mid to long term. Farmers are making a positive margin dollar. Concluding with our military segment, which remains a stable market for us, our customers have a solid backlog for U.S. government contracts and we continue to see opportunities based on upcoming vehicle updates and unique opportunities such as a new two-year aftermarket program we are working on for a top customer. While supply chain disruptions persist, pandemic-related issues have declined since February, and we anticipate volumes will gradually improve as 2022 progresses. Importantly, our new business pipeline remains strong. We continue to build relationships and convert on new opportunities to expand our customer base and the markets we serve with the capabilities and product offerings we already have. Our sales team continues to see business opportunities with new and existing customers coming from, number one, new model and program launches, number two, new product line offerings by customers, number three, outsourcing by OEMs, number four, reshoring by OEMs, and number five, takeover business with several top power sports customers. I'll walk through some of the more exciting and noteworthy opportunities we see today. We continue to launch new programs and products in the commercial vehicle market, leading to market share gains. In the most recent quarter, we focused on model changeovers, particularly with the future greenhouse gas emissions regulatory standards, and related vehicle updates. We've been working closely with another major OEM on a long-term outsourcing project, which leveraged our acquisition of DMP as a significant cross-selling synergy opportunity. The power sports market continues to be a very active space for us. We see reshoring activity where we are able to leverage our footprint with a leading power sports customer to gain market share, and we continue to work on outsourcing projects, plus takeover and new model launches with some of our newer customers. In the agricultural space, we see opportunities on numerous new programs as our customers update their equipment to the latest technology for farmer productivity improvement, while also seeing increased opportunities in the small ag and turf care space for takeover business. In the military end market, our market share on tactical wheeled vehicles continues to expand with our customers launching their next generation of products and new product development activities that have the potential to bolster revenues in the coming years. Overall, the new business pipeline remains robust with numerous projects being actively pursued. We are excited about the multiple avenues for growth with both current and potential new customers and will continue to provide updates in the coming quarters. We can also continue to see a pipeline of interesting M&A opportunities and focus on analyzing the potential targets that could open up new end markets, expand product offerings, develop new relationships with new blue chip customers, and possibly extend our geographic reach. Strategic fit and rational valuation will remain our top considerations, and we will continue to pursue logical deals as the year progresses. As we mentioned in our last call, we are in the process of repurposing our investments in Hazel Park, Michigan, and investing in redeployable automation and capacity to support the growth of our base business. We will be ramping up in the second half of this year to support meaningful volume from new projects and growth with current customers. We remain very bullish about the location, the technology skilled workforce in Southeast Michigan, and are pleased with the speed and amount of changes we've already made over the past two months, which bodes well for the future. Speaking of Hazel Park, I would just like to reiterate our position regarding the fitness customer. As we outlined during our last call in February, our fitness customer informed us that it does not forecast any demand for any products or parts that are the subject of our agreement with that customer for the remainder of the agreement's term which ends in March of 2026. As such, We have taken and will continue to take steps to reduce operating costs and capital investment for this project wherever appropriate. It is important to reiterate that we remain confident in the protections provided by our agreement with this customer and continue to vigorously pursue this matter to ensure the terms are honored. Our first quarter results reflect the stable to improving volume trends we are experiencing, which in conjunction with the commercial pricing increases we have implemented led to improved results. We continue to observe positive demand signals across all of our customers and end markets. We see the potential for significant new business opportunities and remain ready to increase our production volumes as needed. We are investing in the right technologies and facilities that will allow us to successfully address this demand. I'd now like to turn the call over to Todd to discuss our financial results in more detail. Todd? Thanks, Bob.