Mayville Engineering Company, Inc. (MEC) Q1 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us, and welcome to the Mayville Engineering Company, Inc. 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 1 to raise your hand. To withdraw your question, please press star 1 again. We will now hand the conference over to Stefan Neely with Balum Advisors. Please go ahead. Thank you, operator.

On behalf of our entire team, I would like to welcome you to our first quarter 2026 results conference call. Leading the call today is Mayville Engineering Company, Inc.'s President and CEO, Jag Reddy, and Rochelle 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 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. 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 Jag.

Thank you, Stefan, and good morning, everyone. Our first quarter results exceeded our expectations, driven by strong top-line momentum in our data center and critical power end 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 end 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 emissions standards, anticipated prebuy 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 cost 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 nonresidential activity, although demand remains more customer specific than broad based. In powersports, 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 address their evolving needs and enable 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 launch 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 critical power market, 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 2.5x, 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 are still assessing the full scope of this opportunity and the related capital requirements, we expect growth capital investment to increase above the $5 million to $10 million level we have historically averaged. In 2026, that investment will remain focused on supporting current program launches and selectively expanding 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 Mayville Engineering Company, Inc. to deliver stronger operating performance and create a solid foundation for sustainable growth. With that, I would like to turn the call over to Rochelle.

Thank you, Jag, and good morning, everyone. Total sales for the first quarter increased 6.8% year over year to $144.8 million. Excluding the impact of the AccuFab acquisition, organic net sales declined by 8.2% compared to the prior-year period. Our manufacturing margin was 7% for the quarter compared to 11.3% for the prior-year period. The decrease in our manufacturing margin was due to $1.2 million of data center and critical power-related project launch costs, nonrecurring restructuring costs, and lower volumes in our legacy end markets. These factors were partially offset by the higher-margin sales contribution from the AccuFab acquisition. Other selling, general, and administrative expenses were $9.2 million, or 6.3% of net sales for the quarter, as compared to $8.7 million, or 6.4% of net sales for the same prior-year period. The increase in these expenses primarily reflects incremental SG&A expense associated with the AccuFab acquisition. Interest expense was $3.7 million for the quarter as compared to $1.6 million in the prior-year period. The increase was driven by higher borrowings resulting from the AccuFab acquisition, which was completed during the third quarter of last year. Adjusted EBITDA margin was 4.5% for the quarter, compared to 9% in the prior-year period. The decrease reflects lower legacy end market volumes and $1.2 million of project launch costs, partially offset by the benefit of the AccuFab acquisition. During the quarter, we also continued to execute our previously announced footprint optimization actions, including the consolidation of four warehouse locations and one manufacturing facility. We expect these actions to generate annualized savings of approximately $1 million to $2 million and they are already contemplated within our full-year outlook. Turning now to our cash flow and the balance sheet. Free cash flow during the quarter was a use of $6.9 million as compared to $5.4 million provided in the prior-year period. The year-over-year decrease was primarily driven by lower operating cash flow as a result of reduced profitability, together with a $1.2 million increase in capital expenditures. The increase in capital spending was primarily related to equipment investments supporting the launch of new data center and critical power programs. At the end of the first quarter, our net debt was $219.2 million, up from $80.4 million at the end of 2025. Our increased debt resulted in our bank covenant net leverage ratio of 4.4x as of March 31. Now turning to a review of our outlook for the second quarter and the full year. For the second quarter of 2026, we currently expect net sales of between $145 million and $155 million and adjusted EBITDA of between $10 million and $13 million. Our second quarter outlook reflects continued launch-related costs and margin pressure early in the quarter, with improvement expected as the quarter progresses and additional data center and critical power programs move into full production. For the full year, we refined our financial guidance by raising the low end of our previously announced guidance while maintaining the high end of the range. We now expect net sales of between $590 million and $620 million, adjusted EBITDA between $52 million and $60 million, and free cash flow of between $25 million and $35 million. This outlook reflects a full year of AccuFab ownership, $50 million to $60 million of incremental cross-selling revenue, and a gradual improvement in legacy end market demand primarily in the second half of the year. In summary, our first quarter results were consistent with the operating conditions we outlined coming into the year. While profitability and cash flow were affected by launch-related costs and continued softness in legacy markets, those pressures are temporary and remain embedded within our outlook. As production levels increase and utilization improves, we expect better absorption, stronger margin conversion, and improved cash generation over the remainder of the year. With continued working capital discipline and targeted capital spending, we believe we are positioned to support growth while also making measurable progress on deleveraging. With that, we are ready to open the line for questions. Thank you.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Michael Shlisky with D.A. Davidson. Your line is open. Please go ahead.

Yes, hi. Good morning. Thanks for taking my questions. I wanted to ask maybe a two-part question about the non-data center end markets and legacy end markets here, and your commentary in the slides. The ag market you were saying was going to be down mid-teens, and now you are saying it is flat. So my question is whether that change in outlook from down mid-teens to flat is due to how you feel about the very end of the year and what OEMs are telling you about ramping up for 2027, asking suppliers like Mayville Engineering Company, Inc. to build stuff in late 2026. If that is the first part of the question, then on the construction and access side, I have sensed so far this early season that most construction companies, including the largest ones, are taking their outlooks up, mostly construction equipment OEMs. You took your outlook here down from last quarter. So I am curious whether there is some kind of a year-end dynamic where they are asking you to slow down in advance of some challenges they might be seeing in 2027. Just some more detail about both those end markets would be appreciated.

First of all, Mike, on the ag market, we are seeing good strength in the small ag turf care segment. We are approximately 45%/55% mix between large ag and small ag. So the small ag and turf care segment strength is offsetting the declines in the large ag segment. That is the reason for our change in our outlook for the ag segment. On construction and access, again, as you recall, we are approximately 45%/55% heavy construction versus access. Our heavy construction segment continues to show a good amount of strength driven by nonresidential demand, some of it driven by data center buildout as well. But in the access segment, we anticipated, coming out of last quarter’s earnings call, the access segment to accelerate this year. So far, we have not seen that. Hence, our change in our assumptions for the construction and access segment to be flat versus slightly up.

Turning to data center, I would like to get a feel for more detail as to how you are looking to accommodate some of the demand that has been rolling in or some of the quoting you have been doing. I think you mentioned elsewhere in the business you closed some footprint, so I want to make sure you have a plan. Do you plan to open brand-new footprint at this point, given the level of demand, or are you still looking to convert existing buildings to data center? Just some more detail as to how this might all play out, and the investments that you are making now. Are those in people or in machines to accommodate some of that near-term demand?

Let me address that, Mike. We announced closure of four locations. Those are mostly warehouses that we consolidated into our manufacturing sites. That was the restructuring we announced last year in the second half, and we just wrapped those up. We are not in the process of closing any manufacturing footprint. We have converted approximately six plants, going to potentially a seventh plant as well, to data center manufacturing. So we are retooling between six and seven plants as we speak to produce data center products. We continue to add capital as needed in these locations and to offset existing manufacturing assets to take on additional data center volumes. We do see significant growth in the data center volumes. Every quarter, as you all have seen, we continue to step up our cross-selling synergies. Pre-acquisition closing, we were in the single digits; now we are up to $50 million to $60 million of cross-selling synergies in 2026 alone. I continue to be very bullish on data center volumes. At the same time, we have not exited any of our legacy customer programs. We continue to be able to support our legacy customers with their volumes. As we talk about multiple end markets, we really have not seen broad-based recovery in our legacy end markets, so at this stage, we are able to support our legacy customers as they continue to ramp and also take on incremental data center volumes in these seven locations.

A lot of headlines and stories about changes in the Section 232 tariffs and cost of steel and other metals. Could you outline how any of this might be impacting you directly over the last few months? Are you a beneficiary since you are almost entirely U.S. based? Are you seeing some customers, old and new, coming to you to say, how can you help us best structure ourselves for these tariffs?

100% of our steel is procured from domestic sources. That way, we have been reasonably insulated from supply challenges. We pass on any increases in steel prices to our customers, so I would say that it has not impacted us. At the same time, approximately 30% to 40% of our aluminum is imported from Canada, and we are trying to mitigate that, but it is challenging. The rest of our aluminum is sourced domestically. We are able to support many of our aluminum customers with their demand and needs. We are seeing some challenges where some of our customers are going on allocation with other suppliers on aluminum. Fortunately, we are in a good position to continue to support our customers as their demand increases or they switch from another supplier that is unable to supply aluminum to Mayville Engineering Company, Inc. In general, on tariff impacts, I would say that we have not been either positively or negatively impacted. You have seen some of our customers and their competitors publicly talk about it. It has not really impacted our mix so far.

Your next question comes from the line of Ross Sparendlik with William Blair. Your line is open. Please go ahead.

Hey, good morning.

Morning, Ross.

Sounds like you guys have been busy with the problems I have here.

Maybe starting with the new customer wins and continued momentum in data centers in the first quarter. Anything one-time in nature to call out, or are you sensing that customer buying patterns have started to change here within the data centers power market?

Good question, Ross. In the data center market, some of the significant wins we had in Q1 actually came from two brand-new customers to Mayville Engineering Company, Inc. and AccuFab. We never did business with them pre-AccuFab. Those two customers significantly contributed to the wins in Q1. We expect those two customers in particular to continue to grow with us as the year progresses and into the future. We are seeing a significant switch in our data center OEM customer purchasing behavior where, similar to our legacy end markets, many of these customers are looking to completely outsource fabrication and step up their manufacturing process to someone like Mayville Engineering Company, Inc. Think about our legacy customers in ag or construction or commercial vehicles — over the decades, they exited fab operations to suppliers like us. We are seeing a similar process happening, slowly but steadily, in data center and critical power customers. We see that as a long-term secular tailwind for the fabrication industry, and being the largest fabricator in North America, we are able to offer significant capacity to these OEMs and capture a significant portion of that outsourcing that is starting in this industry. All of those are positives and tailwinds for the industry and for Mayville Engineering Company, Inc. going into the future.

When we think about the larger potential OEM customers out there within data centers, can you give us a sense of where your penetration rate is as you think about the pipeline of opportunities and who you are speaking with?

Our penetration at this point, taking the top 10 potential or existing customers, is low single digits or less. We are sub-5% penetration, and hence my optimism for the industry and for our customers is that as we go into the rest of this year or the second half, we continue to get significant inquiries. We continue to qualify these opportunities. Even after raising our cross-selling synergies for the year, our qualified pipeline remains really strong and gives me a lot of comfort that this is a multiyear secular growth opportunity for Mayville Engineering Company, Inc.

It sounds like the whole market is heading for a capacity squeeze. If the broader end markets start to recover here, how do you feel like you are positioned to handle legacy customers?

Our intent is to continue to serve our longstanding legacy customers as they build out their volumes into the second half and into 2027. We are constantly evaluating plant by plant, manufacturing operation by manufacturing operation, and continue to see where we have to offset some capital to increase capacity. Some of my comments in our prepared remarks allude to the fact that we are looking at, potentially in the long run, a significant organic investment opportunity as we think about expanding capacity for data center customers while continuing to serve our legacy customers.

Would that imply the optionality at Hazel Park? I believe you still have additional square footage there.

Absolutely. That has been a long time coming, the Hazel Park story. We just put approximately $55 million of data center products into Hazel Park in Q1 and Q2. We are ramping approximately $55 million worth of data center products in Hazel Park. We think we can fill up Hazel Park, and we have always said that. The current space we have — not the sublease space — supports $100 million worth of capacity. What we do need is some capital assets to continue to go in because the mix of operations for data centers is slightly different than our legacy customer products. With all of that, we continue to be bullish on Hazel Park being filled up in the next year or so.

Very nice quarter, all things considered. I will pass along.

Thank you, Ross.

Your next question comes from the line of Greg Palm with Craig-Hallum. Your line is open. Please go ahead.

Good morning, Greg.

Thanks. Can you talk about how some of these early launches in data center and critical power are going, just in light of the comments last quarter? It seems like everything is on track, and you are starting to see the margin improvements. What else is top of mind as we launch more of these projects this quarter and in the second half?

As we pointed out in the prepared remarks, we invested in these product launch costs and we spent about $1.2 million in Q1 and in Q4, and those were to be ahead of these launches. We see that continuing into Q2, but then after that, as we hit full run-rate production levels, we are seeing improvement. In fact, in Q1, as we exited the quarter, we saw that improvement happen as we had several programs hit full production run rate. We are very optimistic that we made those investments and did the right thing to create an effective onboarding program so that as we do new programs and new launches, we know what the upfront investment is, and then when we hit full run-rate production levels, we are back to the margin levels of the overall end market.

On the existing customers in data centers, what are you seeing in terms of order progression? Are orders getting larger because they are outsourcing more business to you, or because they are winning a lot more business themselves? It feels like you are going to have a big ramp from existing customers and will be layering on brand-new customers as well, which presumably would follow a similar path of accelerated activity. Walk us through those dynamics.

You are asking in the context of data center customers, existing versus new. That is right. As I mentioned, we brought on two brand-new customers to Mayville Engineering Company, Inc. since the acquisition closed. We expect a couple more brand-new customers that are in the works to become our customers later this year. Outside of those brand-new logos, AccuFab’s legacy data center customers continue to ramp significantly. That has been another tailwind. I shared examples in the past about volumes doubling, tripling, quadrupling on products that AccuFab historically manufactured for some of these customers as they win significant new projects and volumes for their own product lines. Hence, those legacy customers are looking at their own footprint and resources and making choices around outsourcing additional work to suppliers like us. So there is new customer growth, existing customer volume growth, and existing customer market share gains. That is how I would position the growth we are seeing in this end market.

I want to follow up on a comment about Hazel Park. I think you said you could generate $100 million out of that facility, specifically related to data center. Is that correct?

No. That is the total capacity. Historically, we have always thought of Hazel Park being a $100 million plant. As I just said, we put $55 million worth of data center work into that plant. We still have another $15 million to $20 million of legacy customer work in that plant today. You can do the math and say, can we put another $25 million of data center work into Hazel Park? Absolutely. That is what we are trying to do.

Last question from me is about the full-year guide. Backing into the second half, it implies an EBITDA run rate on a quarterly basis that is pretty close to $20 million. We would already be at low double-digit margins in the second half if that is the case. I assume next year, as volumes recover further and mix gets more positive from data centers, it would support even higher margins. It is a big step-up in both absolute EBITDA and margins that is being considered for the second half of this year.

When you look at our legacy business, you can look back to 2024 when we were hitting roughly $600 million in that base business alone. Our margins were at that point well in excess of where we are today. We are on our way towards that 15% plus that we would like to be long term. You throw in 20% plus in the data center and critical power, which is 20% margins, and yes, we see a clear path to that 50/15% plus as we move into the future.

Thanks.

Thanks, Greg.

As a reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your next question comes from Edward Randolph Jackson with Northland Securities. Your line is open. Please go ahead.

Thank you very much. Congrats on the quarter.

Good morning, Ted.

I want to touch on the second quarter guidance. You are looking for a midpoint of $150 million. It is comfortably above the consensus view. The legacy markets themselves, at least in the first part of this year, are underperforming, with a better outlook maybe in some of them as you get to the second half. To hit the midpoint, that would tell me that perhaps you are going to see more business coming out of the data center and power side of things than perhaps you thought going into the year. Do you see that business being able to hit your 20% of revenue target in the second quarter alone?

In the second quarter alone, no. We still really look at that being second half of the year when it is going to hit those levels and actually almost outperform at that point. In Q2, we will still be launching programs and probably will not hit full-run production rates until late in Q2. So really, it is a second-half focus for data center and critical power being at full production run rates.

What is a full production run rate for data center and critical power?

We have always targeted, and publicly commented, that our ambition is to be at 25% of our total volumes in the data center and critical power end market. I do see that target within our reach on an exit run rate for 2026 and certainly for 2027.

Shifting back into the second quarter, is there any particular legacy market that you are expecting to have some kind of bulge in terms of ability to generate some revenue that then falls away? Powersports comes to mind because you have had some performance there, but you keep highlighting it has been driven by very project-oriented stuff, and it is not long-tailed customer wins. I am trying to understand how to get to the $150 million if it is not coming from a faster ramp in the data center and power market.

We looked at commercial vehicles ramping starting in May. May and June could have a slightly higher commercial vehicle run rate as our OEMs ramp. Powersports is probably not the end market that I would expect to help us in Q2. We continue to see significant outsourcing to Asia from our powersports customers. The discrete programs we talked about were specific aluminum-related projects. As we had the materials and the capacity, we took on some quick-run projects that will exit in Q2. That is not a long-term run-rate type of business in powersports that is going to help us in Q2.

Shifting over to capacity, you have one of the better problems that a manufacturing company can have, which is demand pushing you to capacity constraints. Given your current footprint and the potential for a lot of your legacy to turn around at the same time that the data center market is coming, how much revenue do you think you could run through your existing footprint, and what does it take to do it? At your current level, where could you take your revenue run rate to, and then, all else being equal with the same footprint, how could you take your revenue higher over the steps?

I will give you a couple of numbers, Ted. As we look at our current capacity and current programs that we have won and those of our legacy customers, we are going to top out, with no further investments, around $850 million in revenue. What that means is we have to continue to invest. Given the mix differences between data center products and our legacy products, we will potentially run out of capacity after $850 million of revenue. More importantly, we probably have to think about an organic investment somewhere on the Eastern Seaboard, where we are currently running out of capacity for data center customers. We have capacity in the Midwest, but some of the products we are manufacturing for some data center customers are large in volume and significantly expensive to ship across the country. That is something that we are evaluating. We are at the early stages of that analysis: how to fill existing capacity first, the timeline by which we will run out of our existing capacity, and how we expand our capacity organically.

That $850 million run rate without further investment — is that running the same shift counts, or are you getting there by adding shifts?

We are feverishly adding people and shifts to our plants in the last four to five months. Some of our plants are running seven days a week. Some are running full 24 hours and five days a week. We are running 10% to 12% overtime in many of our plants right now and continuing to hire in many plants that are seeing volume growth, particularly driven by data center customers.

It seems like the problems that you are solving are a lot of fun. It is pretty exciting to see what is in front of you. I will get out of the line. Thanks again for taking the questions, and congrats on the results.

Thank you, Ted.

There are no further questions. Oh, apologies. Your next question comes from the line of Andrew Kaplowitz with Citibank. Your line is open. Please go ahead.

Hi, good morning. This is Natalia on behalf of Andy Kaplowitz.

Morning, Natalia.

As you continue to highlight strong momentum within data center and critical power, yet your broader other end market outlook is flat for FY 2026, can you help us unpack what areas within that category are offsetting the data center and critical power-related strength? I think you mentioned on your side there is modest activity from those growth initiatives.

As we mentioned earlier, Natalia, ag is flat, construction and access is flat. Powersports we actually think will be a headwind for us in the second half and into 2027. Our commercial vehicle market — our current forecast guidance assumes a 240 thousand unit build for the year. That is higher than what we started the year with, but at the same time it is lower than what ACT is projecting today. We have not seen that ramp yet. We are in the window right now. We should see that in May and June going into Q3 with our commercial vehicle customers. That is giving us a bit of a pause in terms of legacy end markets all in, while we see strength in our data center and critical power market.

I appreciate that, but I was curious about your “other” end market on your slide with the outlook.

I think the biggest thing here is as we have been growing in data center and critical power, we have really been focused on growth initiatives there. “Other” is things that come in more as one-off pieces of business or different opportunities. Our extrusion business has a lot in here, but the extrusion business we are winning is actually data center and critical power classified. So we are seeing a big piece of what maybe would have been growth in extrusion here in “other” be extrusion growth in data center and critical power. Some of this is really reclassification from “other” into data center and critical power.

Got it. Makes sense. Much appreciated. One last question: margins are still under pressure and leverage is elevated. What gives you confidence that Mayville Engineering Company, Inc. can generate sufficient free cash flow to both delever and continue investing in these growth initiatives?

We are focused on delevering. That has been something that we have a proven track record of doing as we do acquisitions. There is a 12- to 18-month time of absorbing the acquisition and then working to pay that down. What we see as the true opportunity is as we move into the second half of this year and have both strong sales for data center and critical power at higher margin, plus some expectation of the commercial vehicle market coming back in the second half, we will be able to generate additional cash flow to focus on delevering, with the goal of being below 3x as we exit this year. It is very second-half weighted, but with what we are seeing with the launches and the confidence we gained exiting Q1 — sales coming to fruition and the margin and results associated with it — we feel good about it.

Great. Thank you so much.

We have a question from Greg Palm with Craig-Hallum. Your line is open. Please go ahead.

Thanks. I thought this one would have gotten asked, so since I am back in the queue, I will ask it now. As it relates to commercial vehicle, I understand and can appreciate your conservatism. Let us assume, hypothetically, that the build rate or the production increase ends up being at the 9% rate or something in the high single digits for fiscal 2026. Is there a reason why your segment results would deviate significantly from that?

They should not, Greg. If the market actually builds up that 9% plus build rate — and let me remind you that the 9% is retail sales, which is how ACT would report, and that is pretty close to the build rates anyway — but if it is approximately 9% build rate, we should see a very similar tailwind for our segment revenue.

Going back to data centers, are most of the awards or contracts you are seeing today more project-based with a definitive timeline, and are there potential discussions to enter into more long-term frame agreements or multiyear capacity arrangements?

Since the acquisition, a significant portion of our wins have been for long-running products. These customers continue to offer into various data center projects. I can only think of maybe one program where it was one customer-specific program, a small program. Generally speaking, these are long-tail, long-run product lines where we are winning. At the same time, we are beginning conversations with these customers regarding potential capacity reservations and potential long-term agreements. Those are the conversations our teams are beginning to have with our data center and critical power customers.

Appreciate the color.

Thank you, Greg.

And this concludes today’s Q&A session. I will now turn the call back to Jag Reddy for closing remarks.

Before we conclude, I want to again thank our team members for their continued strong focus and execution, and our shareholders for their ongoing support. While we recognize the near-term challenges in several of our legacy markets, we are confident in the progress we are making to position Mayville Engineering Company, Inc. for durable, high-margin growth in the years ahead. We look forward to sharing our continued progress with you. Thank you for joining us today.

This concludes today’s call. Thank you for attending. You may now disconnect.