Mayville Engineering Company Inc (MEC) 2024 Q3 法說會逐字稿

Good morning. Thank you for attending the Mayville Engineering Company third quarter 2024 earnings conference call. My name is Bridget, and I'll be your moderator for today.

早安.感謝您參加 Mayville Engineering Company 2024 年第三季財報電話會議。我叫布里奇特，我將擔任今天的主持人。

(Operator Instructions) I would now like to pass the conference over to our host, Stefan Neely with Vallum Advisors. Thank you, Stefan. You may proceed.

（操作員說明）我現在想將會議轉交給我們的主持人，Stefan Neely 和 Vallum Advisors。謝謝你，斯特凡。您可以繼續。

Thank you, operator. On behalf of our entire team, I'd like to welcome you to our third quarter 2024 results conference call. Leading the call today is MEC's President and CEO, Jag Reddy; and Todd Butz, Chief Financial Officer.

謝謝你，接線生。我謹代表我們整個團隊歡迎您參加我們的 2024 年第三季業績電話會議。今天主持電話會議的是 MEC 總裁兼執行長 Jag Reddy；和財務長 Todd Butz。

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. Except as required by law, we undertake no obligation to update our forward-looking statements.

今天的討論包含有關未來業務和財務預期的前瞻性陳述。由於各種風險和不確定性，包括我們向美國證券交易委員會提交的定期報告中所述的風險，實際結果可能與今天的前瞻性聲明中預測的結果有顯著差異。除法律要求外，我們不承擔更新前瞻性聲明的義務。

Further, this call will include a 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.

此外，本次電話會議也將討論某些非公認會計準則財務指標。這些指標與最接近的 GAAP 財務指標的調整包含在我們的季度收益新聞稿中，該新聞稿可在 mecinc.com 上取得。在我們準備好的發言之後，我們將開通提問熱線。

With that, I would like to turn the call over to Jag.

有了這個，我想把電話轉給賈格。

Thank you, Stefan, and good morning, everyone. Thank you for joining us today. During the third quarter, we continued to advance our strategic priorities despite a marked, near-term deceleration in customer order activity. This demand softening materialized at the beginning of August as customers took destocking actions to manage their high levels of dealer inventory.

謝謝你，斯特凡，大家早安。感謝您今天加入我們。在第三季度，儘管客戶訂單活動近期明顯放緩，但我們繼續推動我們的策略重點。隨著客戶採取去庫存行動來管理經銷商的高庫存，這種需求疲軟在八月初成為現實。

In response to the shifting demand conditions, we introduced a series of cost rationalization initiatives during the third quarter. This includes the reduction of production days, a 12% reduction in our labor force, the decision to permanently close our Wautoma facility in the fourth quarter, and other cost reduction actions.

為了因應不斷變化的需求狀況，我們在第三季推出了一系列成本合理化措施。這包括減少生產天數、減少 12% 的勞動力、決定在第四季度永久關閉我們的 Wautoma 工廠以及其他降低成本的行動。

The combination of these items are expected to result in an estimated $600,000 of restructuring expenses in the fourth quarter and $1 million to $3 million in annualized cost savings. In combination, these cost actions positioned us to deliver a 50 basis point increase in adjusted EBITDA margins as compared to last year. This demonstrates our ability to quickly navigate through a down cycle and execute in a challenging environment even as net sales declined by more than 14% versus the prior year period.

這些項目的結合預計將在第四季度帶來約 60 萬美元的重組費用，並節省 100 萬至 300 萬美元的年化成本。總的來說，這些成本行動使我們能夠將調整後的 EBITDA 利潤率比去年提高 50 個基點。這表明，即使淨銷售額比去年同期下降了 14% 以上，我們也有能力快速度過下行週期並在充滿挑戰的環境中執行任務。

While demand conditions have begun to stabilize during the fourth quarter, order rates are below our expectations. Our outlook for the year has always reflected a softening demand environment in the second half of the year, particularly in the commercial vehicle market.

儘管第四季需求狀況已開始穩定，但訂單率低於我們的預期。我們對今年的展望始終反映出下半年需求環境的疲軟，尤其是商用車市場。

However, the pace of demand weakness in our powersports, agriculture and construction end markets were greater than expected. Many customers cut production in response to lower order intake and to destock channel inventories. Given the current demand environment, we have opted to reduce our full year 2024 net sales, adjusted EBITDA, and CapEx guidance.

然而，我們的動力運動、農業和建築終端市場的需求疲軟速度超乎預期。許多客戶因訂單減少和渠道庫存減少而削減產量。鑑於當前的需求環境，我們選擇降低 2024 年全年淨銷售額、調整後的 EBITDA 和資本支出指引。

Our revised guidance accounts for reduced order activity during the second half of 2024, partially offset by recent cost actions, operational excellence initiatives, and commercial wins. Additionally, our revised guidance excludes any impact from our recent legal settlement with our former fitness customer. As customer equipment financing rates decline over the coming quarters, we anticipate a corresponding normalization in customer order activity and broader end market demand beginning in the first half of 2025.

我們修訂後的指引考慮了 2024 年下半年訂單活動的減少，但部分被最近的成本行動、卓越營運舉措和商業勝利所抵消。此外，我們修訂後的指導排除了我們最近與前健身客戶達成的法律和解的任何影響。隨著未來幾季客戶設備融資利率下降，我們預期客戶訂單活動和更廣泛的終端市場需求將從 2025 年上半年開始相應正常化。

As you will recall, we expect to deliver between $750 million and $850 million in revenues, expand adjusted EBITDA margin to between 14% and 16%, and generate free cash flow of between $65 million and $75 million by the end of 2026. We remain confident in our ability to achieve these targets even as near-term demand has softened. Importantly, the recent softening in demand has not resulted in any market share changes and our overall contracted base of revenue has not changed.

您可能還記得，我們​​預計到 2026 年底將實現 7.5 億至 8.5 億美元的收入，將調整後的 EBITDA 利潤率擴大至 14% 至 16%，並產生 6,500 萬至 7,500 萬美元的自由現金流。儘管近期需求有所疲軟，但我們仍對實現這些目標的能力充滿信心。重要的是，近期需求疲軟並未導致任何市場佔有率變化，我們的整體合約收入基礎也沒有改變。

It is worth noting that our 2026 targets represent a level of customer demand that we believe is consistent with normal non-recessionary economic conditions and end consumer demand. Even assuming normal customer project attrition of approximately $30 million per year, we have good visibility to the needed incremental net sales based on our ongoing new customer wins.

值得注意的是，我們的 2026 年目標代表了我們認為與正常非衰退經濟狀況和最終消費者需求一致的客戶需求水準。即使假設每年正常的客戶專案損耗約為 3,000 萬美元，我們也能很好地了解基於我們不斷贏得的新客戶所需的增量淨銷售額。

As of the end of the third quarter, the company has booked approximately $80 million in new project wins this year, inclusive of replacement products for end-of-life programs with launches occurring over the next two years.

截至第三季末，該公司今年已贏得約 8,000 萬美元的新項目，其中包括未來兩年推出的報廢項目的替代產品。

Turning now to a more detailed review of market conditions across our primary end markets. Let's begin with our commercial vehicle market, which represents approximately 38% of our trailing 12-month revenues. During the quarter, commercial vehicle revenues decreased by 9.9% on a year-over-year basis. This decrease was driven by 11.1% year-over-year decrease in North American Class 8 truck demand, partially offset by the ongoing new project launches and strategic pricing initiatives, which drove continued end market outperformance.

現在轉向對我們主要終端市場的市場狀況進行更詳細的審查。讓我們從商用車市場開始，該市場約占我們過去 12 個月收入的 38%。本季商用車營收年減 9.9%。這一下降是由於北美 8 級卡車需求年減 11.1%，部分被正在進行的新項目啟動和戰略定價舉措所抵消，從而推動了終端市場的持續優異表現。

Currently, ACT Research forecasts the Class 8 vehicle production to decrease 7.1% year-over-year in 2024 to approximately 316,000 units. ACT expects that OE builds will modestly increase each quarter through 2025 as demand troughs ahead of a recovery in 2026 due to industry emission standard changes. The current ACT forecast projects 2025 full year demand to decline by 10.6% relative to 2024, while 2026 production increases by 23.4%.

目前，ACT Research 預測 2024 年 8 級汽車產量將年減 7.1%，至約 31.6 萬輛。ACT 預計，由於行業排放標準的變化，需求在 2026 年復甦之前進入低谷，因此到 2025 年每個季度原配產量將小幅增長。目前的ACT預測預計2025年全年需求將較2024年下降10.6%，而2026年產量將成長23.4%。

Next is the construction and access market, which represented approximately 15% of our trailing 12-month revenues. Construction and access revenues decreased 23.5% on a year-over-year basis in the third quarter. This reflects softening demand across both nonresidential and public infrastructure markets, partially offset by ongoing new customer wins.

其次是建築和接入市場，約占我們過去 12 個月收入的 15%。第三季建築和接入收入年減 23.5%。這反映出非住宅和公共基礎設施市場的需求疲軟，但部分被不斷贏得的新客戶所抵消。

We expect to see demand softness year-over-year through the remainder of 2024 and into 2025 with expectations of modest improvements as infrastructure projects continue to accelerate and the interest rate environment continues to improve, supporting additional residential construction.

我們預計，從 2024 年剩餘時間到 2025 年，需求將逐年疲軟，隨著基礎設施項目繼續加速和利率環境持續改善，支持更多住宅建設，預計需求將略有改善。

The powersports market represented approximately 16% of our trailing 12-month revenues and decreased by 14.1% on a year-over-year basis in the third quarter. The performance during the quarter was driven by customer inventory destocking and softening consumer demand related to the continued elevated financing rates. This was partially offset by the impact of incremental volumes from new project startups.

動力運動市場約占我們過去 12 個月營收的 16%，第三季年減 14.1%。本季業績的推動因素是客戶庫存去庫存以及與融資利率持續上升相關的消費者需求疲軟。這被新專案啟動增量的影響部分抵消。

Given the current market conditions, we anticipate customers will continue to cut production and bolster demand through promotional activities to assist in relieving elevated dealer inventory levels. Additionally, as interest rates continue to fall, we expect consumer discretionary spending to gradually increase, resulting in increased end customer demand.

鑑於目前的市場狀況，我們預期客戶將繼續減產並透過促銷活動提振需求，以幫助緩解經銷商高庫存水準。此外，隨著利率持續下降，我們預期消費者可自由支配支出將逐漸增加，導致終端客戶需求增加。

Our agricultural market represented approximately 8% of trailing 12-month revenues and decreased by 31.1% on a year-over-year basis during the third quarter. Our results for this end market reflect softening demand across both our large and small ag markets. The outlook for ag has been increasingly uncertain given the impact of higher interest rates, inventory destocking, and lower crop prices. As we look forward, we expect that new program wins will primarily offset the demand softness in this end market in 2025.

我們的農產品市場約佔過去 12 個月營收的 8%，第三季年減 31.1%。我們對該終端市場的結果反映了我們大型和小型農業市場的需求疲軟。鑑於利率上升、庫存去庫存和農作物價格下跌的影響，農業前景越來越不確定。展望未來，我們預期新專案的成功將主要抵銷 2025 年該終端市場的需求疲軟。

Turning now to an overview of substantial new business wins during the third quarter. We continue to secure new awards based on our capacity in Hazel Park. We won the first of multiple pending awards for engine components for a commercial vehicle customer related to new emissions programs.

現在回顧一下第三季大量新業務的進展。我們繼續根據我們在 Hazel Park 的能力獲得新的獎項。我們為一家商用車客戶贏得了與新排放計劃相關的多個待定引擎組件獎項中的第一個獎項。

During the third quarter, we continued to expand share with one of our key engine customers. We secured additional content related to heavy-duty engines, but also expanded content related to power generation supporting the rapid expansion of data centers. Given the regulatory changes on heavy-duty engines and the secular trend of data center expansion, we expect to continue to expand new awards with this customer.

第三季度，我們繼續擴大與主要引擎客戶之一的份額。我們獲得了與重型引擎相關的附加內容，同時也擴展了與支援資料中心快速擴展的發電相關的內容。鑑於重型引擎的監管變化和資料中心擴張的長期趨勢，我們預計將繼續與該客戶擴大新的獎項。

In the quarter, we secured a new multiyear aluminum extrusion program related to a new mass public transit expansion. This program leveraged existing relationships through our MSA acquisition and will lead to future growth over the coming years. We have continued to gain additional market share as our commercial vehicle customers plan for their vehicle updates, both on next-generation products and battery electric vehicle platforms. We expect to continue to grow share over the next two years with the amount of change that will occur in this industry.

在本季度，我們獲得了與新的公共交通擴建相關的新的多年期鋁擠型計畫。該計劃透過收購 MSA 充分利用了現有關係，並將在未來幾年帶來成長。隨著我們的商用車客戶計劃在下一代產品和電池電動車平台上進行車輛更新，我們不斷獲得額外的市場份額。隨著該行業發生的變化，我們預計未來兩年份額將繼續增長。

Lastly, as we continue to pursue diversification of our end markets, we currently are working with existing and new OEMs to support their cooling and power generation programs related to data centers and are confident that these potential programs could generate significant revenues in 2026 and beyond.

最後，隨著我們繼續追求終端市場的多元化，我們目前正在與現有和新的OEM 合作，支持他們與資料中心相關的冷卻和發電項目，並相信這些潛在項目可以在2026 年及以後產生可觀的收入。

While our operations team was focused on responding to changes in customer demand during the quarter, the execution of our MBX framework and the culture of continuous improvement remains a fixture for MEC. Highlighted by over 225 MBX Kaizen events since launching the MBX program in late 2022, we continue to advance our progress on our strategic goals.

雖然我們的營運團隊在本季專注於回應客戶需求的變化，但 MBX 框架的執行和持續改進的文化仍然是 MEC 的固定措施。自 2022 年底啟動 MBX 計畫以來，我們舉辦了超過 225 場 MBX Kaizen 活動，繼續推進我們的策略目標的進展。

Our MBX initiatives continue to drive strategic pricing improvements and overall cost discipline. This execution will maximize our operating leverage through the cycle, position us for ratable long-term improvements in our financial profile, and drive sustainable shareholder value.

我們的 MBX 計劃繼續推動策略定價改善和整體成本控制。這項執行將在整個週期中最大限度地提高我們的營運槓桿，使我們能夠實現財務狀況的長期顯著改善，並推動可持續的股東價值。

In terms of capital allocation, our strong free cash flow generation has allowed us to reduce our net leverage to 1.6 times as of the end of the quarter. This is well within our targeted net leverage ratio range of between 1.5 times and 2 times by the end of 2024.

在資本配置方面，我們強勁的自由現金流產生使我們能夠將淨槓桿率降低至截至本季末的1.6倍。這完全在我們到 2024 年底前 1.5 倍至 2 倍的目標淨槓桿率範圍內。

As we have continued to reduce our net leverage, we have been increasingly committed to a systematic approach to share repurchases under our existing $25 million authorization. To that end, during the quarter, we repurchased $1 million of company common stock with $23 million remaining under the existing authorization, we will continue to repurchase shares on a regular basis going forward.

隨著我們繼續降低淨槓桿率，我們越來越致力於在現有的 2500 萬美元授權下採用系統化的方法進行股票回購。為此，本季我們回購了 100 萬美元的公司普通股，現有授權下剩餘 2,300 萬美元，我們將繼續定期回購股票。

Additionally, as previously announced, we settled an ongoing legal dispute with the former fitness customer. This resulted in MEC receiving a gross cash settlement of $25.5 million in the fourth quarter of this year. I am pleased with this outcome, and I am grateful for the hard work of our team in helping resolve this matter in a way that benefits all stakeholders. We will utilize some of the proceeds to pay down debt and use a portion of the proceeds for share repurchases.

此外，正如先前宣布的，我們解決了與前健身客戶之間持續存在的法律糾紛。這導致 MEC 在今年第四季獲得了 2550 萬美元的現金和解總額。我對這一結果感到滿意，並感謝我們團隊的辛勤工作，以有利於所有利益相關者的方式幫助解決這個問題。我們將利用部分收益來償還債務，並將部分收益用於股票回購。

Our strengthening financial position will allow us to further focus on the execution of our long-term strategy going forward. We will remain highly disciplined in our capital allocation approach, continuing to prioritize debt repayment, opportunistic share repurchases, and accretive strategic acquisitions.

我們不斷增強的財務狀況將使我們能夠進一步專注於執行未來的長期策略。我們將在資本配置方法上保持高度紀律，繼續優先考慮債務償還、機會性股票回購和增值策略收購。

In summary, I am very proud of our team's strategic execution, particularly in response to the near-term softness in end market demand. Their hard work and unwavering commitment have allowed us to rapidly adjust our cost structure to maintain margins and manage our utilization to correspond with customer demand.

總而言之，我對我們團隊的策略執行力感到非常自豪，特別是在應對近期終端市場需求疲軟方面。他們的辛勤工作和堅定不移的承諾使我們能夠迅速調整成本結構以維持利潤並管理我們的利用率以滿足客戶需求。

The response of our team reflects the successful strategic adoption of our MBX framework, which continues to be the bedrock of our strategy. I believe the cost actions taken are repositioning the business and building a platform of growth to deliver on our 2026 financial targets and value to our shareholders.

我們團隊的反應反映了 MBX 框架的成功策略採用，該框架仍然是我們策略的基石。我相信所採取的成本行動正在重新定位業務並建立成長平台，以實現我們的 2026 年財務目標和為股東創造的價值。

With that, I will now turn the call over to Todd to review our financial results.

現在，我將把電話轉給托德，以審查我們的財務表現。

Thank you, Jag. I'll begin my prepared remarks with an overview of our third quarter financial performance, followed by an update on our balance sheet and liquidity, and conclude with a discussion of our updated 2024 guidance. Total sales for the third quarter decreased 14.4% on a year-over-year basis to $135.4 million. The decrease in net sales reflects softening customer demand across all our key end markets due to channel inventory rationalization and softer customer demand, partially offset by ongoing new project ramp-ups.

謝謝你，賈格。我將首先概述我們第三季的財務業績，然後介紹我們的資產負債表和流動性的最新情況，最後討論我們更新的 2024 年指導。第三季總銷售額年減 14.4% 至 1.354 億美元。淨銷售額的下降反映了我們所有主要終端市場的客戶需求因通路庫存合理化和客戶需求疲軟而疲軟，但部分被持續的新項目增加所抵消。

Our manufacturing margin was $17.1 million in the third quarter as compared to $19 million in the same prior year period. The decrease was primarily driven by the corresponding decrease in net sales. Our manufacturing margin rate was 12.6% for the third quarter of 2024 as compared to 12% for the prior year period or an increase of 60 basis points. The improvement in our manufacturing margin rate reflects the impact of our ongoing MBX and pricing initiatives, labor force reduction decisions, and other cost reduction actions.

第三季我們的製造利潤為 1,710 萬美元，而去年同期為 1,900 萬美元。這一下降主要是由於淨銷售額相應下降所致。2024 年第三季我們的製造業利潤率為 12.6%，比去年同期的 12% 增加了 60 個基點。我們製造利潤率的提高反映了我們正在進行的 MBX 和定價計劃、勞動力減少決策以及其他成本削減行動的影響。

Other selling, general, and administrative expenses were $7.6 million for the third quarter of 2024 as compared to $8.6 million for the same prior year period. The decrease was primarily driven by a reduction in legal expenses relating to our former fitness customer and nonrecurring costs incurred in the prior year period associated with the MSA acquisition.

2024 年第三季的其他銷售、一般和管理費用為 760 萬美元，而去年同期為 860 萬美元。這一下降主要是由於與我們前健身客戶相關的法律費用以及上一年期間與 MSA 收購相關的非經常性費用減少所致。

Interest expense was $2.7 million for the third quarter of 2024 as compared to $3.9 million in the prior year period due to a reduction in borrowings and lower interest rates relative to the third quarter of last year. The decrease of $57.7 million in the borrowings since the third quarter of the prior year reflects our continued strong free cash flow generation over the past year.

2024 年第三季的利息支出為 270 萬美元，而去年同期為 390 萬美元，原因是藉款減少且利率相對於去年第三季較低。自去年第三季以來，借款減少了 5,770 萬美元，反映出我們在過去一年中持續強勁的自由現金流產生。

Adjusted EBITDA for the third quarter was $17.1 million versus $19.2 million for the same prior year period. Adjusted EBITDA margin percent increased by 50 basis points to 12.6% in the current quarter as compared to 12.1% for the same prior year period and represents a decremental rate of under 10%, which is well below our historical average of 17%.

第三季調整後 EBITDA 為 1,710 萬美元，去年同期為 1,920 萬美元。本季調整後 EBITDA 利潤率成長 50 個基點，達到 12.6%，而去年同期為 12.1%，下降幅度不到 10%，遠低於我們 17% 的歷史平均值。

The increase in our adjusted EBITDA margin was primarily due to the ongoing MBX and pricing initiatives, coupled with the impact of our decisive cost rationalization efforts enacted during the quarter, and is indicative of the flexibility we have in order to quickly respond to customer demand changes.

我們調整後的 EBITDA 利潤率的增加主要是由於正在進行的 MBX 和定價舉措，加上我們在本季度實施的決定性成本合理化努力的影響，這表明我們擁有快速響應客戶需求變化的靈活性。

Turning now to our statement of cash flows and balance sheet. Free cash flow during the third quarter of 2024 was $15.1 million as compared to $16.1 million in the prior year period. The decrease in free cash flow as compared to the prior year reflects the impact of lower sales, partially offset by our ongoing focus on net working capital efficiencies.

現在轉向我們的現金流量表和資產負債表。2024 年第三季的自由現金流為 1,510 萬美元，去年同期為 1,610 萬美元。與前一年相比，自由現金流的減少反映了銷售額下降的影響，但我們對淨營運資本效率的持續關注部分抵消了這一影響。

As of the end of the third quarter of 2024, our debt, which includes bank debt, financing agreements, finance lease obligations was $114.2 million as compared to $171.9 million at the end of the third quarter of 2023 and resulted in a net leverage ratio of 1.6 times as of September 30.

截至 2024 年第三季末，我們的債務（包括銀行債務、融資協議、融資租賃義務）為 1.142 億美元，而 2023 年第三季末為 1.719 億美元，淨槓桿率為截至9 月30 日為1.6 倍。

As Jay mentioned, we are pleased with the outcome of our recent settlement. And if we were to factor in the $25.5 million of cash proceeds received this past week, our net leverage ratio would be less than 1.25 times as of the end of the third quarter.

正如傑伊所提到的，我們對最近的和解結果感到滿意。如果我們考慮到上週收到的 2,550 萬美元現金收益，截至第三季末，我們的淨槓桿率將低於 1.25 倍。

In light of our third-quarter results and our current outlook for the rest of the year, we are reiterating our full-year financial guidance for free cash flow while updating our guidance for full-year net sales, adjusted EBITDA, and CapEx. Keep in mind, this excludes any impact from our recent lawsuit settlement.

鑑於我們的第三季業績和目前對今年剩餘時間的展望，我們重申對自由現金流的全年財務指引，同時更新全年淨銷售額、調整後 EBITDA 和資本支出的指引。請記住，這不包括我們最近的訴訟和解的任何影響。

For 2024, we now expect the following: net sales between $580 million and $590 million, adjusted EBITDA of between $63 million and $66 million, and capital expenditures of between $13 million and $15 million. This revised guidance reflects the near-term impact of our recent customer production changes due to lower demand and inventory destocking activities.

對於2024 年，我們目前的預期如下：淨銷售額在5.8 億美元至5.9 億美元之間，調整後EBITDA 在6,300 萬美元至6,600 萬美元之間，資本支出在1,300 萬美元至1,500 萬美元之間。此修訂後的指導反映了由於需求下降和庫存去庫存活動而導致我們最近的客戶生產變化的近期影響。

We expect the fourth quarter to be a low point in the cycle as sales are expected to decrease sequentially by 4% to 11%. As a result of these sales changes, we have made the decision to shut down many of our facilities for extended periods of time during the holidays in order to further reduce costs.

我們預計第四季將是周期的低點，銷售額預計將環比下降 4% 至 11%。由於這些銷售變化，我們決定在假期期間延長關閉許多設施，以進一步降低成本。

Our expected fourth quarter adjusted EBITDA returns are in the range of $8 million to $11 million. Again, we expect this to be a short-term issue as we continue to win new work and execute our strategy, and remain confident in achieving our previously stated 2026 goals. For free cash flow, we continue to expect free cash flow will be in the range between $45 million and $55 million, which again excludes any impact from our recent settlement.

我們預計第四季度調整後 EBITDA 回報率在 800 萬美元至 1100 萬美元之間。同樣，我們預計這將是一個短期問題，因為我們將繼續贏得新工作並執行我們的策略，並對實現我們先前提出的 2026 年目標保持信心。對於自由現金流，我們仍然預計自由現金流將在 4500 萬美元至 5500 萬美元之間，這再次排除了我們最近和解的任何影響。

With that, operator, that concludes our prepared remarks. Please open the line for questions as we begin our question-and-answer session.

操作員，我們準備好的發言到此結束。當我們開始問答環節時，請打開提問專線。

(Operator Instructions)

（操作員說明）

Mic Dobre, Baird.

麥克·多布雷，貝爾德。

Thank you and good morning everyone. My first question -- yes. Digging into your fourth quarter outlook, can you maybe break it down a little bit in terms of what your expectations are for manufacturing margin and how you think about SG&A sequentially?

謝謝大家，早安。我的第一個問題——是的。深入研究第四季度的前景，您能否稍微細分一下您對製造利潤率的預期以及您對 SG&A 的看法？

Yes. So Mic, as you think about the fourth quarter, sequentially, we would expect manufacturing margin to be down slightly again as compared to Q3. Keep in mind that when you think of our fixed versus variable cost, fixed represents about 55% of our total cost makeup. And so given the low expectation of $120 million to $130 million volume in Q4, I think we're doing everything we can to get the variable cost out, but that will lead to and drive under absorption.

是的。因此，Mic，當您考慮第四季時，我們預計製造利潤率將比第三季再次略有下降。請記住，當您考慮我們的固定成本與變動成本時，固定成本約占我們總成本組成的 55%。因此，考慮到第四季度銷量為 1.2 億至 1.3 億美元的低預期，我認為我們正在盡一切努力消除可變成本，但這將導致吸收不足。

So SG&A, we did make some changes within SG&A, and that was part of our other cost reduction activities. So we will see a favorable impact on that as we look into the Q4. And then you can see that the expected EBITDA margin profile is in that 7.5%, 8% to maybe 9% to 10% range. So certainly, it's a low point in the cycle, but we feel like we've done everything right to position ourselves as the markets rebound to really take advantage and scale up.

因此，SG&A，我們確實在 SG&A 內部做出了一些改變，這是我們其他成本削減活動的一部分。因此，當我們研究第四季時，我們將看到對此的有利影響。然後你可以看到預期的 EBITDA 利潤率在 7.5%、8% 到 9% 到 10% 的範圍內。當然，這是周期中的低點，但我們認為，隨著市場反彈，我們已經做了一切正確的事情來定位自己，以真正利用並擴大規模。

I think more importantly is as we enter 2025, I think we've cost positioned the business well that when we come out of the quarter, we can see incremental margin rates that are in that low to mid-20% range. So I think, again, this is a low point, and we'll come out of it very quickly.

我認為更重要的是，當我們進入2025 年時，我認為我們已經對業務進行了很好的成本定位，當我們本季度結束時，我們可以看到增量利潤率在20% 的低至中範圍內。所以我再次認為，這是一個低點，我們很快就會走出困境。

Yeah. Just to add to that, Mic, we have made the decision to extend shutdowns during Thanksgiving week, Christmas holidays, pretty much every single one of our plants. And we have informed our customers that we'll be shutting down for extended periods and gave them almost 60-day notice so that we could continue to produce and ship for them outside of those shutdown days, right?

是的。除此之外，麥克風，我們已決定延長感恩節週、聖誕節假期期間的停工時間，幾乎所有工廠都將停工。我們已經通知客戶，我們將延長停產時間，並提前近 60 天通知他們，以便我們可以在停產日之外繼續為他們生產和運輸，對吧？

So this is first time in a very long time as a company, we have pulled every lever possible to reduce our cost structure, take out variable costs as much as we can, and also resize our SG&A and other elements of our fixed costs as well. So as the demand comes back going into first half, we are really well positioned to take advantage of that reduced cost structure and continue to drive better margin profile for the business going forward.

因此，作為一家公司，這是很長一段時間以來的第一次，我們竭盡全力降低成本結構，盡可能地消除可變成本，並調整 SG&A 和固定成本的其他要素。因此，隨著上半年需求的回升，我們確實處於有利位置，可以利用成本結構降低的優勢，並繼續為未來的業務帶來更好的利潤率。

But just to put a finer point here, looking at my model here, I'm guessing that manufacturing margin can be somewhere around 8%, 8.5%. Is that a fair way to think about it?

但為了更詳細地說明一點，看看我的模型，我猜製造利潤率可能在 8%、8.5% 左右。這是一個公平的思考方式嗎？

Yes. I would say it's a fair way to characterize it, yes.

是的。我想說這是描述它的一個公平的方式，是的。

So when you look at the revenue for the fourth quarter, I think the midpoint implies something like $125 million. Is that in line with the orders that you're getting from the customers? Meaning your book-to-bill in terms of that revenue? Is it [1]? Is it less than that? Are you still burning through some backlog of business? Or how should we think about that?

因此，當你查看第四季度的收入時，我認為中點意味著 1.25 億美元左右。這與您從客戶收到的訂單一致嗎？指的是您的訂單到帳單收入嗎？是嗎[1]？是不是比這個還少？您還在為積壓的業務而苦惱嗎？或者說我們該如何思考這個問題？

Yeah. I would say that is firm in orders, right? It's not backlog. It's not anything else that we need to go get or fill and really represents what we see today as our Q4 volume at that midpoint. And again, we've restructured and positioned well. We have not lost any orders. I think that's a very important point, as Jag mentioned earlier, and we really stand in a good position as we look to 2025.

是的。我想說的是訂單是堅定的，對嗎？這不是積壓。這不是我們需要獲取或填充的任何其他東西，它真正代表了我們今天所看到的第四季度的中點數量。我們再次進行了重組並進行了良好的定位。我們沒有遺失任何訂單。我認為這是非常重要的一點，正如 Jag 之前提到的，展望 2025 年，我們確實處於有利位置。

Yes. Let me reinforce that. We have not had any material market share losses. We kept pretty much all of our existing business. We continue to add new business. As I mentioned in my prepared remarks, year-to-date, we have won $80 million of new business.

是的。讓我再強調一下。我們沒有出現任何重大的市佔率損失。我們保留了幾乎所有現有業務。我們不斷增加新業務。正如我在準備好的發言中提到的，今年迄今為止，我們已經贏得了 8000 萬美元的新業務。

Our run rate for the last couple of years has been $80 million to $90 million of new business on an annual basis, ending Q3 at $80 million of new business really is a very good book of business we're booking. And more importantly, preserving our share and in many cases, expanding our share within our customer base.

過去幾年我們的新業務運作率為每年 8,000 萬至 9,000 萬美元，第三季結束時新業務為 8,000 萬美元，這確實是我們預訂的非常好的業務。更重要的是，保持我們的份額，並在許多情況下擴大我們在客戶群中的份額。

Okay. So the fourth quarter, you're basically producing at the sort of levels that the market allows from a demand standpoint. I guess my final question is -- and I recognize we'll get to specific guidance later on. But as you think about 2025, at least to me, it's not evident that the fourth quarter marks the trough or that you're going to see significant improvement sequentially at least in the first half of the year because virtually every vertical you have here, commercial vehicles still, it's got production issues, agriculture.

好的。因此，從需求的角度來看，第四季的生產基本上處於市場允許的水平。我想我的最後一個問題是──我知道我們稍後會得到具體的指導。但當你想到 2025 年時，至少對我來說，第四季度標誌著低谷的跡象並不明顯，或者至少在今年上半年你會看到連續的顯著改善，因為幾乎每個垂直領域，商用車子仍然有生產問題，農業。

We heard from AGCO the other day, production cuts are stretching into 2025. We're probably going to hear the same from CNH and Deere, construction and access, Oshkosh is cutting production in aerial work platforms and telehandlers. So it seems like this is an issue that stretches into 2025. I'm curious as to what your perspective is on that. And then if I'm correct in my assertion that this is stretching into '25, what tools do you have at your disposal to get manufacturing margin or overall margin to improve relative to what we're seeing in the fourth quarter? Thank you.

前幾天我們從 AGCO 獲悉，減產將持續到 2025 年。我們可能會從 CNH 和迪爾、建築和通道部門聽到同樣的消息，奧什科甚正在削減高空作業平台和伸縮臂叉裝機的產量。因此，這個問題似乎會持續到 2025 年。我很好奇你對此有何看法。如果我的斷言是正確的，即這種情況會持續到 25 年，那麼您可以使用哪些工具來提高製造利潤率或整體利潤率（相對於我們在第四季度看到的情況）？謝謝。

Yes. A significant end-user demand issues that you raised are related to financing rates and excessive dealer inventories that many of our publicly traded customers have talked about extensively in their earnings calls over the past few months. So we have appropriately adjusted our cost structure and our capacities to reflect that.

是的。您提出的一個重要的最終用戶需求問題與融資利率和過多的經銷商庫存有關，我們的許多上市客戶在過去幾個月的財報電話會議中廣泛討論了這些問題。因此，我們適當調整了我們的成本結構和能力來反映這一點。

Going forward, our expectation, Mic, is that powersports would be the first end market to recover as interest rate cuts take hold. Right after powersports, we expect powersports to recover sometime in the first half, call it, late Q1, early Q2, or sometime in Q2. Construction access is probably Q2 time period is where we expect construction access market to start seeing an uptick back or at least normalization levels. CV market, the data is well known and well published, as we mentioned, based on ACT research.

展望未來，Mic，我們的預期是，隨著降息的實施，動力運動將成為第一個復甦的終端市場。在 powersports 之後，我們預計 powersports 將在上半年的某個時候恢復，稱之為第一季末、第二季度初或第二季度的某個時候。施工准入可能是在第二季度，我們預計施工准入市場將開始回升或至少達到正常化水準。正如我們所提到的，基於 ACT 研究的 CV 市場數據眾所周知且已廣泛發布。

Second half, we'll start to see a pickup, even though sequentially quarter-over-quarter next year, CV will continue to step up. And then ag, I think, is in a longer cycle of a downturn, and we don't expect ag to recover in 2025. Having said that, ag is only 8% of our total revenues, right? So we can just beat up on ag end market all day long, but it's only 8% of our total revenues, right? So we're still 38% in CV, 15% to 18% in other two end markets I just mentioned. So I think we just need to think about, right? Yeah, ag is in a downturn, and that's the news we hear all day long, but that's only 8% of our overall sales.

下半年，我們將開始看到回升，儘管明年環比來看，CV 將繼續上升。然後我認為農業正處於更長的低迷週期，我們預計農業不會在 2025 年復甦。話雖如此，農業只占我們總收入的 8%，對嗎？所以我們可以整天在農業端市場上拼搏，但這只占我們總收入的8%，對吧？所以我們在商用車市場上的市佔率仍然是 38%，在我剛才提到的其他兩個終端市場上我們仍然是 15% 到 18%。所以我想我們只需要思考一下，對嗎？是的，農業正處於低迷時期，這是我們整天聽到的消息，但這只占我們總銷售額的 8%。

Okay, good luck.

好的，祝你好運。

Thank you.

謝謝。

Ted Jackson, Northland Securities.

特德傑克遜，北國證券。

Thank you, very much. So a couple of questions. So let's just start like most of it is pretty easy. The $600,000 charge, just kind of curious, are we going to see that above or below the operating income line in the fourth quarter? And will it be called out as far as a singular line item or will just be inside of your SG&A expenses?

非常感謝。有幾個問題。所以讓我們開始吧，因為大部分事情都很簡單。60 萬美元的費用，只是有點好奇，我們會看到第四季的營業收入線之上還是之下？它會作為一個單獨的項目列出，還是只包含在您的 SG&A 費用中？

No, it will be above, and it will be called out separately. Certainly, as we mentioned in the fourth quarter, we will be shutting that facility down, preparing it for an ultimate potential sale as we look into the early part of 2025. So those items will be construed as restructure costs and be called out separately and clearly defined in our K.

不，會在上面，而且會單獨叫出來。當然，正如我們在第四季度提到的，我們將關閉該設施，為 2025 年初的最終潛在出售做好準備。因此，這些項目將被解釋為重組成本，並在我們的 K.

Okay. And then on the $1 million to $3 million in annual savings, is that something that we should expect to see beginning in, I don't know, in the first quarter of '25 or will that happen in the fourth quarter of '25? And then will it -- I assume it will be something that builds over time? Or is it will be kind of a onetime shot?

好的。然後，關於每年節省 100 萬至 300 萬美元，我不知道，這是我們應該期望在 25 年第一季開始看到的事情，還是會在 25 年第四季發生？然後它會——我認為它會隨著時間的推移而建立嗎？或者這只是一次性的？

No, I think you'll see that right away coming into Q1 of next year, but let's call it mid-quarter because, again, our expectation is to have that facility completely closed and positioned for sale. And hopefully, we've seen good interest. And so hopefully, we can exit that completely in the first quarter and have that savings. And so again, we should see that beginning in the first part of 2025.

不，我想你會在明年第一季看到這一點，但我們稱之為季度中期，因為我們的期望是完全關閉設施並準備出售。希望我們已經看到了好的興趣。因此，希望我們能夠在第一季完全退出並節省開支。同樣，我們應該會在 2025 年上半年看到這一點。

And then when we think about those savings, would we see that more on the cost of goods sold line or more within the OpEx lines?

然後，當我們考慮這些節省時，我們會看到更多的是銷售成本還是營運支出？

Yeah, it will be mostly in the cost of sales line. We did some reposition like we mentioned on SG&A, which will be savings. But the bulk of that really is all of the fixed costs that related to the plant and then other some direct headcount reductions that we've made.

是的，主要是銷售成本。我們做了一些重新定位，就像我們在 SG&A 中提到的那樣，這將節省開支。但其中大部分實際上是與工廠相關的所有固定成本，以及我們所做的其他一些直接裁員。

And then with the Peloton settlement, a couple of questions there is where will we see that on the cash flow line? Will that show up in kind of the investing side of things? Where will it show up in there? And then you mentioned in your presentation that you used those funds already to pay down debt and to repurchase stock in the quarter. Could you tell us how much stock you repurchased with it and how much of it went to debt reduction?

然後，隨著 Peloton 和解，有幾個問題是我們將在現金流線上的哪裡看到它？這會反映在投資方面嗎？它會出現在哪裡？然後您在演示中提到，您已經使用這些資金來償還債務並在本季回購股票。您能告訴我們您用它回購了多少股票，其中有多少用於減債嗎？

At this point, obviously, as you know, we have a line of credit, it's a sweep account. So any collections on a daily basis that we receive go in and reduce debt overnight. So we have yet to deploy the share repurchase at this point. All that was used for debt reduction on the intraday, but we -- as Jag mentioned, we are looking to have a more programmatic stock repurchase, and we will expect in the fourth quarter to allocate some of those proceeds to stock repurchase.

在這一點上，顯然，如你所知，我們有信用額度，這是一個掃款帳戶。因此，我們每天收到的任何收款都會在一夜之間減少債務。因此，我們目前尚未部署股票回購。所有這些都用於盤中減少債務，但正如賈格所提到的，我們希望進行更具程序性的股票回購，我們預計在第四季度將其中一些收益分配給股票回購。

As it relates to free cash flow, that will show up in the operational line. But when you think about our annual disclosure and our 10-K, that will be clearly delineated as to where in the financial statements as well as where in the cash flow line that those proceeds went through.

由於它與自由現金流相關，因此將顯示在營運線中。但是，當您考慮我們的年度揭露和 10-K 時，就會清楚描述這些收益在財務報表中的哪個位置以及在現金流量線中的哪個位置。

But you're saying that will show up within operating activities. I was a little surprised by that, but --

但你說這會在營運活動中反映出來。我對此感到有點驚訝，但是--

Yeah.

是的。

Okay.

好的。

From the free cash flow. Yeah,

來自自由現金流。是的，

Okay. And then going back into some of the guidance and stuff, I mean you've got some tough comps in the first half of the year. Is it fair to assume as we think about the -- given the fact that you're going to have a relatively weak second half of '24 that the way you're laying it out that just because of the comps that we should see growth return in the second half, just you saying just as we roll through your guidance that starting with probably the third quarter and then with the fourth quarter that we should see revenue growth from the prior year. And then it sounds like you're viewing it as something that would accelerate maybe in terms of actual growth in 2026.

好的。然後回到一些指導和內容，我的意思是你在今年上半年遇到了一些艱難的競爭。考慮到 24 年下半年的表現將相對較弱，我們這樣假設是否公平？ 僅僅因為我們應該看到增長的比較下半年回歸，正如您所說，就在我們回顧您的指導時，可能從第三季度開始，然後從第四季度開始，我們應該會看到比前一年的收入成長。聽起來你認為它可能會在 2026 年實現實際成長加速。

Yes, I would say that's a very fair depiction of what we would expect.

是的，我想說這是對我們期望的非常公平的描述。

Okay, that's it for me. Thanks.

好吧，我就這樣了。謝謝。

Natalia Bach, Citi.

娜塔莉亞·巴赫，花旗銀行。

Hi, good morning. This is Natalia Bach from Citigroup on behalf of Andy Kaplowitz. Good morning. I guess my first question, you revised your '24 guidance citing softness in customer demand. But in the presentation, I noticed you kept your organic net sales growth of 1.5% to 2.5% for the year. Can you help us understand why that is?

嗨，早安。我是來自花旗集團的納塔莉亞·巴赫（代表安迪·卡普洛維茲）。早安.我想我的第一個問題是，您以客戶需求疲軟為由修改了 24 年指引。但在演示中，我注意到你們今年的有機淨銷售額成長率維持在 1.5% 至 2.5%。你能幫助我們理解這是為什麼嗎？

That is without -- so we kind of separated the two, meaning organic growth, that is new wins and opportunities we've done, and we try to separate that slightly from when you look at the market and destocking, right, and the impact that, that has had. So we still feel like we're on pace to continue to have -- year-over-year, it will be kind of flat, potentially up slightly. So we might see that year-over-year be a little better, but we were trying to exclude a little bit of the impact of destocking.

那是沒有- 所以我們將兩者分開，這意味著有機增長，這是我們所做的新的勝利和機遇，我們嘗試將其與您觀察市場和去庫存時的情況稍微分開，對吧，以及影響那個，那個已經有了。因此，我們仍然覺得我們的增速將繼續保持下去——同比，它將持平，可能會略有上升。因此，我們可能會看到同比情況會好一些，但我們試圖排除一些去庫存的影響。

Got it. Okay. Helpful. And then maybe just focusing on a specific end market, particularly powersports. You cited that you're gaining such growing market share, but can you talk about who you're taking market share from? And despite the softer macro outlook, what initiatives are you implementing or taking actions to gain this market share?

知道了。好的。有幫助。然後也許只專注於特定的終端市場，尤其是動力運動市場。您提到您正在獲得如此增長的市場份額，但是您能談談您從誰那裡奪走了市場份額嗎？儘管宏觀前景疲軟，您正在實施或採取哪些舉措來獲得這一市場份額？

Yeah. Natalia, we talked about bringing on a brand-new customer in the powersports market at the beginning of the year. That customer program went into production earlier this year. That is what mostly we're talking about a new customer win and a market share gain. Similarly, we have also picked up new programs with existing customers as well. These are -- both of these customers produce side-by-sides and vehicles in that nature. So those are the two customers where we have gained a pretty good share this year.

是的。娜塔莉亞，我們在年初談到了在動力運動市場引入一個全新客戶的問題。該客戶計劃於今年稍早投入生產。這就是我們主要談論的贏得新客戶和增加市場份額的原因。同樣，我們也與現有客戶簽訂了新計畫。這些客戶都並行生產這種性質的車輛。因此，我們今年在這兩個客戶中獲得了相當不錯的份額。

Okay. Helpful. And then my last question, just on free cash flow. You had pretty good free cash flow generation year-to-date, and you maintained your guidance for the year. I'm just curious from your perspective, what's going right there? Are you -- what are you like optimizing in terms of working capital? Or what initiatives are you doing to continue to generate this strong free cash flow?

好的。有幫助。然後是我的最後一個問題，關於自由現金流。今年迄今為止，您的自由現金流產生相當不錯，並且維持了今年的指導。我只是好奇從你的角度來看，那裡發生了什麼事？您想在營運資本方面進行哪些優化？或者您正在採取哪些措施來繼續產生強勁的自由現金流？

Absolutely. As we publicly discussed in the past couple of quarters, our MBX program and our intense focus on reducing our working capital, reducing our inventories, collecting our outstanding receivables faster, and adjusting our payable terms with our suppliers. We pulled all of those levers. Since 2022 -- we ended 2022 at 6.2 turns of inventory. We ended Q3 around 9 turns of inventory. So you can see that level of improvement in how we're managing our business and how we're managing our working capital, all of that is reading out in our free cash flow generation.

絕對地。正如我們在過去幾個季度公開討論的那樣，我們的 MBX 計劃以及我們對減少營運資本、減少庫存、更快地收回未清應收帳款以及調整與供應商的應付條款的強烈關注。我們拉動了所有這些槓桿。自 2022 年以來—截至 2022 年，我們的庫存週轉率為 6.2 倍。第三季末，我們的庫存週轉量約為 9 週。因此，您可以看到我們在管理業務和管理營運資本方面的改進程度，所有這些都在我們的自由現金流產生中體現出來。

Very helpful. That's all my questions. Thank you.

非常有幫助。這就是我的所有問題。謝謝。

Thank you.

謝謝。

(Operator Instructions) There are no additional questions waiting at this time. I would like to pass the conference over to our management team for closing remarks.

（操作員說明） 目前沒有其他問題。我想將會議轉交給我們的管理團隊進行閉幕致詞。

Once again, thank you for joining our call. We appreciate your continued support of MEC, and we look forward to updating you on our progress next quarter. Should you have any questions, please contact Noel Ryan or Stefan Neely at Vallum, our Investor Relations Counsel. This concludes our call today. You may now disconnect.

再次感謝您加入我們的通話。我們感謝您對 MEC 的持續支持，並期待在下個季度向您通報我們的最新進展。如果您有任何疑問，請聯絡我們的投資者關係顧問 Vallum 的 Noel Ryan 或 Stefan Neely。我們今天的電話會議到此結束。您現在可以斷開連線。

That concludes the Mayville Engineering Company third quarter 2024 earnings conference call. Thank you for your participation, and enjoy the rest of your day.

Mayville Engineering Company 2024 年第三季財報電話會議至此結束。感謝您的參與，祝您有個愉快的一天。