Mayville Engineering Company, Inc.

Hello everyone, thank you for joining us and welcome to the 2026 second quarter Mayville Engineering Company earnings 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 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Stephan Neely with Valum Advisors. Please go ahead.

Thank you, Operator. On behalf of our entire team, I'd like to welcome you to our second quarter 2026 results conference call. Leading the call today is MEC's President and CEO, Jag Reddy, and Rachele Lehr, 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 risks described in our periodic reports filed with the Securities and Exchange Commission. Thank you, Stephan, and good morning, everyone.

Our second quarter results reflect stronger than expected demand across several key end markets. This was highlighted by continued momentum in data center and critical power on the early recovery underway in our commercial vehicle market. As a result, top line performance exceeded our expectations and positions as well as we entered the second half of the year. Throughout the quarter, Our execution remains strong as we ramped activity across numerous data center and critical power programs while continuing to invest in the people and equipment needed to support future demand. These investments are to expand the capacity required to support long-term profitable growth as anticipated higher volumes drove improved operating leverage sequentially during the quarter. As we move quickly to capture a rapidly expanding data center and critical power opportunity pipeline, we are incurring incremental operating costs ahead of the associated revenue. This reflects two deliberate timing-related investments. First, the capacity and equipment we're putting in place to ensure effective program launches. Second, the incremental cost of outsourcing certain elements of the fabrication process to third parties as equipment constraints in our existing facilities currently limit our ability to perform this work in-house. We have ordered the equipment needed to bring this work in-house, though it carries a four to six month lead time. We expect launch costs to continue through the second half of the year as we support customers' aggressive program timelines. 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. Importantly, we continue to view these costs as temporary and we expect them to subside as we bring our newly hired workforce up to full productivity and complete our targeted capacity investments. These programs are building toward a meaningful step up in margins over time. As these investments come online, production volumes ramp and utilization improves, we expect strong incremental margins to materialize. Simply put, the programs we are launching today are accretive to the long-term margin profile of the business, and the investments we're making now unlock that expansion in the future. A significant milestone during the quarter was the successful completion of our common stock offering, which generated approximately $94 million in net proceeds. The offering advances our capital allocation priorities by strengthening the balance sheet and enhancing financial flexibility. We use the proceeds to reduce debt exiting the quarter with more than $100 million of available liquidity. With a stronger balance sheet and increased liquidity, we are well positioned to fund strategic growth initiatives and capitalized on the significant opportunities developing within the data center and the critical power market. Equally important was the timing of the offering. With the demand accelerating beyond what operating cash flow alone could prudently fund, securing capital now gives us the flexibility to invest ahead of demand rather than react to it. This provides us with the Financial Foundation to pursue profitable growth opportunities with confidence. As we deploy this capital, we will remain disciplined, prioritizing higher value, higher margin opportunities that we believe will generate the strongest returns and create lasting value for our shareholders. Moving to some of our key end markets. Commercial vehicle net sales increased approximately 3% year-over-year in the second quarter as North American Class 8 production began to recover. Customer build rates have continued to accelerate, and we expect this dynamic to continue into the second half of this year. In its most recent report, ACT's full-year 2026 outlook projects a 9.1% increase in Class 8 production, supported by a projected 45% increase in production throughout the remainder of the year. This outlook reflects a continued upcycle in order activity and leads to a projected 9.7% increase in 2027. Given that our demand activity typically precedes Class 8 production by approximately six weeks, we are encouraged by the activity levels we are seeing today. In construction and access, revenue increased approximately 15% year-over-year in the quarter as performance was supported by strength in non-residential activity. In power sports, Net sales decreased approximately 6% year-over-year driven primarily by softness in legacy ATV, UTV, and motorcycle OEMs resulting from ongoing offshoring initiatives. With the data center and critical power, we delivered organic growth of approximately 173% year-over-year supported by growth from existing OEM customers and project launches tied to AccuFab-related cross-selling opportunities. Demand in this end market remains robust, with our qualified opportunity pipeline continuing to exceed $125 million. The value of projects scheduled to launch in 2026 is approximately $50 million, to $60 million. Including the growth from our existing OEM customers, data center and critical power is expected to represent approximately 20% of total revenue in 2026. As demand for these higher value programs accelerates, we are making disciplined portfolio decisions across the business. This includes actively evaluating pricing, and Margin Profiles across our portfolio on a case-by-case basis. This may result in changes to mix our capacity allocation over time. These dynamics are unfolding against a backdrop of limited manufacturing capacity across the U.S., increasing the value of reliable domestic supply in response We are evaluating opportunities for customers to reserve dedicated capacity with us. For customers, this provides greater certainty of supply. For MEC, it creates more predictable revenue and supports margin expansion by directing capacity towards our highest value programs. We will continue to manage capacity and production priorities carefully to support sustainable, diversified, and profitable growth over the long term. Before turning to capital allocation, I would like to highlight a few examples of the commercial momentum we are seeing across the business. During the second quarter, we secured approximately $40 million in new awards with data center and critical power customers. While these awards are not expected to contribute materially in the near term, they provide strong visibility into the future with production launches and revenue generation anticipated to begin during 2027. Based on current visibility, we expect total 2026 bookings across all of our end markets to exceed $150 million, supported by and others. Within our legacy end markets, we continue to expand our share with key commercial vehicle customers as they prepare for upcoming product launches tied to the 2027 EPA regulation changes. These programs are expected to begin entering production in late 2026. Beyond commercial vehicle We secured business through new model introductions for an access customer while also capturing additional service business supporting a military customer. In data center and the critical power, the approximately $40 million in awards secured during the quarter reflect both new business and continued expansion with major customers. These programs include power distribution units Switchgear, and Static Transfer Switches. Turning to capital allocation in more detail. With our balance sheet significantly strengthened, our focus is centered on three priorities. Investing in organic growth, continuing to reduce leverage, and pursuing selective accretive acquisitions. First, organic growth. Customer demand is increasingly outpacing our current available capacity, and our organic investments are aimed squarely at unlocking more of it. Over the next two years, we expect to invest an incremental $50 million to expand capacity and support the growing needs of our data center and critical power customers. These investments include targeted upgrades across our existing manufacturing footprint, customer supported program investments, and the development and equipping of a new production facility. Together, these initiatives are expected to increase our revenue capacity beyond the approximately $850 million we have discussed previously with room to build from there over time. Rachele will discuss in greater detail later on the written criteria we apply to these capital investments. Second, deleveraging. As production volumes increase and profitability improves, we expect earnings growth and cash generation to become increasingly important drivers of leverage reduction. Our long-term net leverage target remains 2.5 times, and the actions we took this quarter represent a meaningful step toward achieving this objective. Third, accretive M&A. We will remain opportunistic, pursuing acquisitions that strengthen our competitive position, expand capacity, and support long-term value creation. With conditions improving across our legacy and markets, Accelerating momentum in data center and critical power and a significantly stronger balance sheet, we are well positioned to deliver profitable growth and create lasting shareholder value. We believe we are entering a transformative chapter defined by expanding capacity, accelerating growth, improving profitability, and rising returns on invested capital. The investments we are making Today, our building is stronger, more competitive company, and positioning us for meaningful value creation in the years ahead. With that, I would like to turn the call over to Rachele.