Mayville, Wisconsin-based Mayville Engineering Company, a manufacturing supplier to the powersports industry, announced results for the first quarter ended March 31, 2022.
“We are proud to deliver significantly improved performance this quarter, despite the ongoing macroeconomic headwinds,” said Robert D. Kamphuis, chairman, president and CEO . “We continue to execute effectively and manage through the ongoing supply chain constraints that are impacting many of our customers. We are also moving quickly to adapt, realign and grow our Hazel Park, Michigan capacity for current customers that are looking to expand their business with MEC.”
First Quarter 2022 Highlights:
Net sales increased approximately 21% to $136.3 million as compared to prior year period
Recorded net income of $3.8 million, a 50% increase over the prior year period
Basic earnings per share increased $0.06 to $0.19 as compared to prior year period
Delivered Adjusted EBITDA of $14.8 million, up from $13.0 million for the same prior year period
Repurposing and growing Hazel Park, Michigan capacities for current customers underway
CEO Robert D. Kamphuis announced plans to retire on September 30, 2022
Company reiterates 2022 guidance
First Quarter Financial Results
Net sales were $136.3 million for the first quarter of 2022, as compared to $112.6 million for same prior year period. The 21% increase was primarily driven by contractual raw material price pass-throughs to customers, commercial pricing increases, and improved volumes.
Manufacturing margins were $14.9 million for the first quarter of 2022, in line with the $14.8 million for the same prior year period. The slight increase was driven by the impact of higher demand and commercial pricing, offset by Hazel Park transition costs of $1.9 million in the quarter.
Profit sharing, bonuses, and deferred compensation expenses were $2.6 million for the first quarter of 2022, a decrease from the $2.9 million recorded for the same prior year period. The $0.3 million decrease is primarily related to a decrease in deferred compensation expense offset by increases in expected annual discretionary retirement benefit contributions and bonus expense.
Other selling, general and administrative expenses were $5.7 million for the first quarter of 2022 as compared to $4.7 million for the same prior year period. The $1.0 million increase was principally attributable to higher consulting and professional fees, wages and benefits, information technology and travel and entertainment expenses.
Interest expense was $0.6 million for the first quarter of 2022 and $0.5 million for the same prior year period due to higher average borrowings.
Income tax expense was $1.2 million for the first quarter of 2022 and $1.0 million for the same prior year period. Federal income tax expenses will be offset against our federal net operating loss carryforward of approximately $18.5 million until it is fully utilized.
Balance Sheet and Liquidity
Net debt was $86.8 million as of March 31, 2022, which is comprised of the outstanding balance on the Company’s revolver, finance lease liabilities, and equipment financing agreements.
The company adopted the annual reporting guidance under ASC 842 Leases on January 1, 2022. As a result, the Company has approximately $39.1 million in right-of-use assets, $4.7 million in current liabilities and $34.7 million in long term liabilities related to operating leases as of March 31, 2022.
Capital expenditures were in line with internal expectations at $13.0 million for the first quarter, as compared to $5.6 million in the same period of last year. The increase relates to ongoing investment in new technology and automation and repurposing of assets at the Company’s Hazel Park, Michigan facility, which is expected to continue throughout 2022.
During the quarter, the Company amended its credit agreement to expand its capital expenditure plans of up to $65.0 million during 2022 as it continues to invest in technology and automation to drive efficiency improvements and secure new business opportunities.
The Company is reiterating its 2022 financial outlook provided earlier this year and continues to expect:
Net sales of between $480 million and $530 million,
Adjusted EBITDA between $58 million and $70 million.
This outlook assumes no revenues associated with the fitness customer.
In addition, the Company expects capital expenditures for 2022 to be in between $55 and $65 million, which will be focused primarily on investments in new technology and automation, adding equipment relating to new programs with existing customers, and the repurposing of assets at the new Hazel Park, Michigan facility.
Kamphuis commented, “While pandemic and supply chain disruptions persist, demand dynamics remain robust, and we anticipate our volumes will gradually improve as we move through the second half of 2022 and our customers’ supply chain challenges start to improve. We continue to expand our existing relationships and convert new business opportunities as companies look to avail themselves of our market leading operational expertise and unparalleled flexible production capabilities. Our future prospects remain bright with the low end of our 2022 outlook representing considerable projected growth over recent years’ results.”