Mayville Engineering Q3 Sales Rise 18% on Datacenter Growth

Mayville Engineering Company (NYSE: MEC) reported an 18.1% increase in third-quarter 2026 sales as rapid growth in its Datacenter & Critical Power business combined with recoveries in commercial vehicles and construction equipment. Higher volumes lifted adjusted EBITDA, although launch expenses, outsourcing and premium labor costs limited margin expansion and contributed to negative free cash flow.

Net sales rose to $170.4 million from $144.3 million in the third quarter of 2025. Adjusted EBITDA increased 20.4% to $17.0 million, while adjusted EBITDA margin edged up to 10.0% from 9.8%. Net income was $0.4 million, compared with a $2.7 million loss a year earlier.

Adjusted net income increased to $4.0 million from $2.0 million, and adjusted diluted earnings per share rose to $0.15 from $0.10. The weighted average diluted share count increased to 25.8 million from 20.4 million.

Operating cash flow totaled $4.3 million, but capital spending of $7.7 million resulted in negative free cash flow of $3.3 million, compared with negative $1.1 million in the prior-year period.

Datacenter business gains scale

Datacenter & Critical Power, or DCP, was the largest source of quarterly growth. Sales in the business increased 64.9% to $37.2 million, adding $14.6 million of year-over-year revenue. The segment accounted for 22% of total sales, up from 16% in the third quarter of 2025.

MEC said its qualified DCP opportunity pipeline exceeds $200 million. The company secured about $45 million of new awards during the quarter and has received approximately $180 million of awards since the third quarter of 2025. Programs already awarded are expected to generate roughly $70 million of incremental sales when they reach full production.

The company expects cumulative annual DCP revenue of $180 million to $210 million by fiscal 2028. Its Thomson, Georgia, facility is expected to add about $50 million of annual capacity by that year.

Commercial Vehicle sales increased 34.7%, or $13.9 million, to $52.8 million as the market continued to recover. Construction & Access revenue rose 9.3%, or $2.1 million, to $24.2 million.

Those gains were partly offset by a 26.9% decline in Powersports sales to $16.8 million, a reduction of $6.2 million. Agriculture revenue fell by $1.0 million to $7.3 million, while Military sales declined by $0.3 million to $7.2 million.

Volume and mix contributed $5.9 million to the year-over-year increase in adjusted EBITDA. That benefit was partly offset by $1.9 million of premium labor and outsourcing costs and $1.1 million of launch expenses. MEC said DCP utilization helped adjusted EBITDA margin improve by about 190 basis points sequentially, but launch costs and underused facilities weighted toward Agriculture and Powersports remained constraints.

2026 outlook includes negative free cash flow

For 2026, MEC expects revenue of $630 million to $640 million, representing growth of 15% to 17% from $546.5 million in 2025. Adjusted EBITDA is projected at $48 million to $52 million, up 2% to 10% from the prior year.

The company expects full-year free cash flow between negative $16 million and negative $6 million, compared with positive $26.9 million in 2025. MEC attributed the lower cash generation to investments supporting future organic growth in Datacenter & Critical Power. Capital expenditures are expected to total $25 million to $35 million, including the initial investment in the Thomson facility.

Management expects seasonal softness and shifting customer timelines to affect volumes through the end of 2026. Full-year DCP revenue is projected to grow 50%, including the Accu-Fab acquisition, while Commercial Vehicle revenue is expected to post high-single-digit growth and Construction & Access mid-single-digit growth. Powersports, Agriculture and Military are expected to decline.

MEC anticipates $6 million to $7 million of DCP launch costs in 2026 and $2 million to $3 million of outsourcing costs in the second half. The company expects those launch and outsourcing costs to begin moderating in early 2027 as targeted capacity investments are deployed.

DCP expected to lead preliminary 2027 growth

MEC’s preliminary 2027 assumptions call for more than 50% growth in DCP, which is expected to represent about 25% of net sales. Commercial Vehicle revenue is expected to grow at a mid-to-high-single-digit rate, and Construction & Access and Military are each projected to increase at mid-single-digit rates.

The outlook remains mixed elsewhere. MEC expects Powersports revenue to decline 10% to 20% as customers move programs to Asia, while Agriculture is projected to fall 5% to 15% amid lower crop prices and elevated input costs. The company is rebalancing its manufacturing footprint to address underutilization at facilities with high Powersports exposure.

MEC ended the quarter with net debt of $147 million and a net leverage ratio of 2.9 times trailing 12-month adjusted EBITDA, down from 3.7 times at the end of 2025. Near-term capital allocation priorities include debt repayment and organic growth investment, while the company also continues to consider bolt-on acquisitions in complementary markets.