Mayville Engineering Company, Inc.

Hello, everyone. Thank you for joining us and welcome to the Mayville Engineering Company first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. I will now hand the conference over to Stefan Neely with Balam Advisors. Please go ahead.

Thank you, operator. On behalf of our entire team, I'd like to welcome you to our first quarter 2026 results conference call. Leading the call today is MEC's President and CEO, Jag Reddy, and Rachelle Lair, Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties. including the risk described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which is available at MECinc.com. Following our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Chag.

Thank you, Stephan, and good morning, everyone. Our first quarter results exceeded our expectations, driven by strong top-line momentum in our data center and critical power and market. At the same time, the first quarter reflected an ongoing transition across the business. Our teams remained focused on positioning resources completing tooling requirements, and preparing for the launch of numerous data center and critical power programs throughout 2026. During this transition, we continue to incur and retain variable costs as we position the business for successful program execution. As a result, our margins remained pressured during the first quarter. That said, performance improved late in the quarter as several data center and critical power programs transitioned from the launch phase into full production. We expect that momentum to continue building through the second quarter, which reinforces our confidence in the sequential improvement reflected in our financial guidance. While many of our data center and critical power programs have yet to launch or are still in the early stages of RAMP, Execution to date has been strong. This reflects the upfront time, planning, and resources we have invested to ensure a smooth and repeatable onboarding process across our legacy manufacturing footprint. As additional programs enter production, we are seeing consistent improvement in operating leverage and fixed cost absorption driven by better asset utilization across our manufacturing network. Importantly, the strength we are seeing in data center and critical power continues to contrast with mixed conditions across our legacy and markets. While each market has its own dynamics, we have not yet seen clear indications of a broad-based or material recovery in legacy customer demand. Starting with commercial vehicles, demand continued to soften in the first quarter. Net sales declined approximately 24% year-over-year as North American Class 8 production reached a low point in the current cycle. In its most recent report, ACT again revised its full-year 2026 outlook upward, now projecting a 9.2% increase in Class 8 production. This improved outlook reflects greater clarity around the 2027 EPA emission standards, anticipated pre-buy activity, and strong Class 8 orders earlier in the year. That said, current OEM production levels remained largely consistent over the past six months and do not yet indicate a meaningful cyclical recovery. Combined with elevated fuel costs and recent tariff policy changes, our near term view of this market remains cautious pending a material improvement in OEM activity. In construction and access, revenue increased approximately 3% year over year in the quarter, which was ahead of our expectations. Performance was supported by continued strength in non-residential activity, although demand remains more customer-specific than broad-based. In power sports, net sales increased approximately 5% year-over-year, driven primarily by incremental volumes from discrete short-cycle customer programs. This was partially offset by continued softness among legacy ATV, UTV, and motorcycle OEMs, as well as lower sales within the marine propulsion market. Within data center and critical power, we delivered organic growth of approximately 71% year-over-year, supported by growth from legacy OEM customers and early project launches tied to AccuFab-related cross-selling opportunities. Overall, demand from OEM customers in the data center and critical power market remains strong. Our qualified opportunity pipeline exceeds $125 million, and the value of projects scheduled to launch in 2026 is approximately $50 million to $60 million. Combined with continued growth from our legacy OEM customers, we continue to expect data center and critical power to represent more than 20% of our revenue in 2026. Customer demand in this end market remains robust and we continue to evaluate the right approach to balancing the needs of our legacy customers while meeting accelerating demand in this rapidly evolving space. As data center infrastructure advances, customers are increasingly seeking adaptable solutions that are addressing their evolving needs and enabling faster speed to market. These shifts are redefining how customers approach large-scale deployments and their selection of partners. As we move into the second half of the year and with the potential for recovery across certain legacy end markets, we are actively managing capacity and prioritization to support long-term diversified and profitable growth. Before turning the call over to Rochelle, I want to highlight several areas of commercial momentum that reinforce our confidence in the growth trajectory for 2026 and beyond. Across all of our end markets, customer engagement and bidding activity remains strong. During the first quarter, we secured approximately $50 million in new project awards with data center and critical power customers. This amount surpasses the total awards we secured in this end market during the second half of last year. For the full year 2026, we currently expect total bookings across all of our end markets to exceed $150 million, supporting profitable growth as our legacy markets move toward a cyclical recovery exiting 2026. Within our legacy end markets, share gains continued with commercial vehicles customers as they launched new products ahead of the 2027 EPA regulation changes. These awards support future growth and are expected to enter production in late 2026 and 2027. In addition, new contract wins supporting legacy military vehicle platforms were secured during the quarter. This provides stability to our core base military revenues. Within the data center and the critical power market, the approximately $50 million of awards secured in the first quarter were primarily driven by demand from new customers in this end market. As these customers scale their programs, the intent is to serve as a long-term strategic metal fabrication partner. The awarded scopes of work span power distribution units, static transfer switches, and switchgear. Turning to capital allocation, our priorities are disciplined and well-balanced. In the near term, we are deploying capital in a targeted manner to support existing project commitments and the evolving needs of our data center and critical power OEM customers, including investments in equipment and capacity. At the same time, we remain focused on prudent balance sheet management and reducing debt. Longer term, the focus remains on strengthening the balance sheet and maintaining sustainable financial flexibility. Our long-term net leverage target remains 2.5 times, and we expect to make steady progress towards this objective through earnings growth, consistent cash generation, and disciplined capital deployment. Importantly, the demand environment in data center and critical power is creating a meaningful opportunity to invest organically in the business and expand our capacity. In certain areas, customer demand is already exceeding our current available capacity, and we believe targeted investments in equipment, automation, and operating capabilities can deliver attractive returns while enhancing our ability to serve this fast-growing end market. Although we're still assessing the full scope of this opportunity and the related capital requirements, we expect growth capital investment to increase above the $5 to $10 million level we have historically averaged. In 2026, that investment will remain focused on supporting current program launches and selectively adding capacity where visibility, customer demand, and return thresholds are strongest. Over time, we believe this market may support a broader and highly attractive organic investment opportunity. As always, we will pursue that opportunity within a disciplined capital allocation framework, balancing growth investment with deleveraging, cash flow generation, and balance sheet optionality. In closing, I am encouraged by the discipline and execution our team has demonstrated so far this year. As we navigate this next phase of growth, our focus is on prioritizing operational agility, efficient program execution, and improved cash flow conversion as volumes ramp. We believe that consistent, disciplined execution over the coming quarters will position MEC to deliver stronger operating performance and create a solid foundation for sustainable growth. With that, I would like to turn the call over to Rachelle.