Mayville Engineering Firm, Inc. (NYSE:MEC) Q3 2022 Earnings Convention Name November 2, 2022 10:00 AM ET
Firm Members
Nathan Elwell – IR
Jag Reddy – President and CEO
Todd Butz – CFO
Ryan Raber – EVP, Technique, Gross sales and Advertising and marketing
Convention Name Members
Vlad Bystricky – Citigroup
Mig Dobre – Baird
Operator
Good morning, and thanks for attending right now’s Mayville Engineering Firm 2022 Earnings Convention Name. My title is Daniel and I can be your moderator for right now’s name [Operator Instructions].
I might now wish to cross the convention over to our host, Nathan Elwell. Nathan, please proceed.
Nathan Elwell
Thanks. Welcome everybody, and thanks for becoming a member of us on right now’s name. A number of fast objects earlier than we start. First, please word that a number of the info that you’ll hear throughout this name will include forward-looking statements inside the which means of Part 21(a) of the Securities Change Act of 1934 as amended. Such statements categorical our expectations, anticipations, beliefs, estimates, intentions, plans and forecasts. As a result of these forward-looking statements contain dangers, assumptions and uncertainties, and our precise outcomes may differ materially from these within the forward-looking occasions.
For extra info relating to such dangers and uncertainties, please see our filings with the Securities and Change Fee, together with our filings on Kind 10-Ok for the interval ended December 31, 2021. We assume no obligation and don’t intend to replace any such forward-looking statements, besides as required by federal securities legal guidelines.
Second, this name will contain a dialogue of sure non-GAAP monetary measures. Reconciliation of those measures to the closest GAAP monetary measure is included within the earnings press launch, which is offered at mecinc.com.
Becoming a member of me on the decision right now are Jag Reddy, President and Chief Govt Officer; Todd Butz, Chief Monetary Officer, Rand Stille, Chief Working Officer and Ryan Raber, EVP of Technique, Gross sales & Advertising and marketing.
Jag will start along with his ideas on the quarter and the tip markets we serve, new enterprise and future plans, adopted by Todd, who will evaluate the monetary outcomes and steerage. Please word that accompanying slides can be found through the webcast and on the Buyers part of the corporate’s web site at mecinc.com.
With that, I am going to hand the decision over to Jag, please go forward.
Jag Reddy
Thanks, Nathan, and Good morning, everybody. I am on Slide three. Our group executed successfully this quarter, producing robust enhancements throughout the board. Web gross sales grew roughly 25%. Adjusted EBITDA elevated roughly 61% and our web revenue elevated considerably when in comparison with the third quarter of 2021. The enhancements have been primarily pushed by quantity development, business pricing will increase and higher absorption of producing prices. I’m happy to report that we commenced manufacturing at our state-of-the-art facility in Hazel Park, Michigan throughout the quarter as deliberate.
Moreover, I’m excited to announce that we launched MEC Enterprise Excellence or MBX, to drive operational and business excellence. I consider this can be a recreation changer for MEC and we’ll talk about this in additional element. We’re refining our full 12 months steerage that was initially offered in February, which Todd will talk about later.
After 100 days, I wished to share a few of my observations and reflections as summarized on Slide 4. I had the chance to go to all 18 of our manufacturing crops and have met with tons of of our group members throughout the group. I’ve additionally met with a lot of our prospects and realized extra about how very important MEC is to their ongoing success. It’s clear to me that we’re an integral a part of our prospects’ future enlargement plans.
Via my web site visits and conferences with our prospects, I’ve recognized the next observations as key to our future success. Our firm tradition is a direct results of our hard-working staff taking nice delight of their work to help our prospects’ wants. This has deepened relationships with prospects and enabled us to develop profitably in recent times.
Moreover, the secular developments of reshoring and outsourcing have been confirmed by our prospects. Our investments in automation will help value reductions, quantity productiveness and high quality to fulfill the elevated calls for pushed by macro developments.
MEC capability utilization may be improved as we common 2 shifts per day, 4 days per week with some weekend work. Though, a few of our websites current hiring challenges, we see a latest enchancment in labor availability. We see the potential for vital development over the subsequent 5 years with continued developments of reshoring and outsourcing.
Our targeted enlargement into rising applied sciences and adjoining areas will assist MEC preserve and broaden our management place. We’ve extra room for margin enlargement by continued worth pricing even past the pricing actions taken throughout 2022. We even have vital alternatives to enhance our operations by standardization, lean manufacturing and automation.
As we speak, I’m happy to stipulate the strategic priorities that may assist us obtain our worthwhile development aspirations. I’m now on Slide 5. Relating to worthwhile development over the subsequent 5 years, we have to seize the alternatives with present prospects whereas additionally diversifying into markets and functions equivalent to electrical autos and renewables. We can also broaden our design, prototyping and aftermarket companies to higher help our prospects’ wants.
EBITDA margin enlargement past 15% may be achieved by business and operational excellence by strategic and worth pricing, productiveness enhancements, capability utilization and buying and provide chain enhancements. By way of capital allocation, beginning in 2023, we’ll return to normalized CapEx spending ranges of $20 million to $25 million per 12 months.
We plan to focus our M&A actions — targets in adjoining markets, particularly lighter weight supplies equivalent to aluminum, plastics and composites and design and prototyping companies. I stay assured that we now have the group and experience to execute the strategic initiatives and to drive long-term worthwhile development at MEC.
Now I wish to flip your consideration to our trade outlook and up to date buyer wins. I am on Slide six. We at present serve 5 main finish markets, all of which proceed to forecast constructive near-term demand outlooks. The business car market is our largest market and continues to forecast robust demand by the primary half of 2023.
The trade is predicting a slowdown within the second half of 2023 as a result of anticipated emissions regulation change in 2024. The emissions change will once more drive elevated demand within the subsequent years.
Present ACT forecast predicts 310,000 items in 2022, adopted by 296,000 items in 2023. Whereas provide chain constraints have continued to impression some CT prospects, we count on to see sequential will increase over the subsequent couple of quarters as a result of sizable backlogs at OEMs. We proceed to watch weakening freight fundamentals and forecasted sequential declines by the second half of 2023 and stay able to adapt to any market modifications.
Powersports proceed to be an vital marketplace for us, whereas exhibiting some indicators of softening, retail demand stays usually constructive. Low supplier inventories will proceed to drive constant volumes for the merchandise we ship. We consider our prospects will proceed to meet retail demand and restart the supplier channel into 2023.
In fact, the powersports market is delicate to discretionary spending and rates of interest, and we’re preserving a detailed eye on this trade. As talked about on our earlier calls, we now have had many mission wins with present and new prospects, which can present a buffer to potential market softness.
The development and entry tools finish markets at the moment are beginning to see the impression of rising rates of interest and softening of the housing market. Nevertheless, non-residential, infrastructure and oil and fuel markets are seeing some enchancment as we glance in the direction of 2023.
The necessity to restock fleets, given fleet age and low supplier inventories continues to drive near-term volumes and are anticipated to offset weak spot within the residential development market. We proceed to see strengthening demand within the ag market, low international shares, robust crop costs and low new and used machine stock will preserve quantity development within the near-term.
And at last, although the smallest of our finish markets, our army phase stays secure. Our prospects have stable backlogs for U.S. authorities contracts, and we proceed to see good volumes primarily based on new car introductions.
Whereas provide chain disruptions have continued to persist all through our buyer base, we anticipate these provide chain constraints to ease as we transfer into 2023. Importantly, our new enterprise pipeline stays robust. We’ve continued to pursue and convert alternatives with our present buyer base whereas specializing in new prospects and new markets to drive additional diversification.
Let me stroll by a couple of of the thrilling alternatives on Slide seven. We not too long ago received a big household of elements for an electrical side-by-side that may make up the battery enclosure on the car. Manufacturing of this side-by-side mannequin will totally launch in 2023 and was an ideal instance of utilizing our manufacturing experience to design a cheap resolution for a brand-new product for an present buyer.
Final quarter, we made vital progress in working with a brand new potential buyer that focuses on thermal administration of electrical car batteries and battery enclosures. The household of elements work coding can be utilized in a number of functions and supply us with an ideal alternative to broaden into the EV area.
Not too long ago, we have been awarded a high-value takeover mission for a present ag buyer, supporting a product household for top horsepower tractors. Based mostly on our historical past of quick-turn merchandise, MEC received the enterprise for this thrilling mission.
Constructing on our earlier win within the light-duty truck market, we now have continued to have interaction with a market-leading engine producer to develop extra alternatives on this new product platform. We’ve been capable of win incremental enterprise as this mission reaches the conclusion of its design section and shifts into manufacturing. Alternatives for reshoring tasks proceed to develop, and I am happy to report that we closed out a mission for a business car buyer within the final quarter.
We’re scheduled to begin manufacturing in early 2023, bringing manufacturing to the U.S., changing an Asian provider. We are also capable of broaden with a brand new buyer within the industrial infrastructure area to provide structural parts and enclosures. Whereas this relationship is new, we now have been capable of rapidly help pressing product wants and count on to develop this enterprise within the years forward.
Total, it’s clear that each our enterprise with present prospects, plus our pipeline of tasks with each present and new prospects stays robust as we glance in the direction of 2023. As I mentioned once I joined, my preliminary focus can be on accelerating our use of innovation, expertise and lean manufacturing initiatives to assist drive worthwhile development.
The launch of MEC Enterprise Excellence, or MBX program is a vital first step in that course of as summarized on Slide eight. The main target of MBX is to drive operational and business excellence throughout the corporate, and it is going to be an important product of attaining our worthwhile development potential within the years forward.
Whereas MEC has persistently used lean instruments inside our operations for a few years, the devoted MBX program will considerably speed up our efforts and drive exponential enhancements throughout all our processes. Led by a newly appointed group, this system will deal with technique deployment, operational excellence, business excellence and expertise administration. This can embrace worth stream mapping, lean each day administration and productiveness Kaizen occasions led by MBX lean engineers in all sides of our enterprise.
As demonstrated on Slide 9, every quarter, the MBX group will lead a particular occasion often called the President’s Kaizen. These occasions will embrace members of the manager group to additional illustrate company-wide dedication to our lean journey. In September, we held our first President’s Kaizen in Mayville. Whereas focusing on a selected position centered course of, the group utilized a number of lean instruments to considerably enhance throughput, cut back labor hours, cut back stock, improve security and drive significant value reductions. We’re happy with the outcomes of our preliminary occasions and launch of MBX and look ahead to the group growing in 2023 and past.
I additionally need to present an replace on the state of affairs with our former health buyer. Regardless of our greatest efforts, the corporate was unable to succeed in an amicable decision with its former health buyer and subsequently, filed a breach of contract lawsuit within the Supreme Court docket of the State of New York in August.
The corporate stays assured within the safety supported by the contract provisions. The full quantity of damages claimed is substantial, however the quantity and the timing of the last word recoveries is unsure. In consequence, any restoration from this litigation or settlement of those claims is a contingent acquire and can be acknowledged if and when realized or realizable.
At this level, there is not far more we are able to say on this topic, besides that we’ll present updates as and once we can going ahead. Our Hazel Park, Michigan facility is a vital a part of our future, and I’m proud to report that we commenced manufacturing as deliberate throughout the quarter.
The ramp-up in manufacturing will proceed within the coming quarters. The group has achieved a outstanding job of launching on-time and consistent with our plans, offering us with the capability and the state-of-the-art operations in a market with stable labor availability.
In conclusion, I need to thank all of our group members for embracing the change and serving to to channel concepts into our up to date technique for worthwhile development. It has been an vital quarter for the corporate wherein we started a essential journey to construct on our proud historical past, implement new initiatives and broaden our horizons to make sure we acquire our full potential within the years forward.
Now I’ll flip the decision over to Todd for a evaluate of our monetary outcomes.
Todd Butz
Thanks, Jag. I am going to start with a have a look at our third quarter, which is summarized on Slide 10. We recorded third quarter web gross sales of $136.3 million, which is a 25% enhance year-over-year. The rise was primarily pushed by improved volumes as a result of general strengthening of the enterprise, business pricing will increase and contractual uncooked materials value pass-through to our buyer.
Manufacturing margins have been $15.5 million for the quarter as in comparison with $10.9 million within the prior 12 months interval. The rise was pushed by enhancing demand, improved absorption of producing prices and business pricing will increase. These enhancements have been partially offset by a downward shift in scrap revenue, Hazel Park launch value, continued buyer provide chain points throughout the quarter. Manufacturing margin percentages have been 11.3%, which is a 130 foundation level enchancment over the ten% recorded within the prior 12 months interval, regardless of a number of the challenges beforehand talked about.
SG&A bills have been $6.5 million as in comparison with $5.3 million for a similar prior 12 months interval as a result of increased consulting {and professional} charges, CEO transition prices, in addition to continued inflationary pressures on wages and advantages.
For the third quarter, revenue tax expense of $1.5 million on pretax revenue of roughly $8.1 million. Our federal web working loss carryforward was roughly $18.5 million as of quarter finish, which was pushed by pretax losses incurred in prior years. The NOL doesn’t expire and can be used to offset future pretax earnings. We proceed to anticipate our long-term efficient tax price to be roughly 27% primarily based on present tax laws.
Adjusted EBITDA elevated to $16.1 million versus $10 million for a similar quarter final 12 months. Adjusted EBIT margin % elevated by 260 foundation factors to 11.8%, representing an incremental margin of twenty-two.5%, which is according to our historic common. If we take away the impression of buyer provide chain points, uncooked materials value pass-through, our incremental margin would have been 25.6%, which is above our historic common.
Fundamental earnings per share have been $0.32, a $0.31 enhance over final 12 months, because the enhancements I’ve already talked about dropped by to the underside line, in addition to the one-time constructive impression of up to date steerage that totaled $0.11 per share, which incorporates inventory forfeitures from our former CEO’s third quarter retirement.
Now let me handle our capital expenditures, steadiness sheet liquidity. Yr-to-date, capital expenditures have been consistent with our expectations at roughly $38.8 million as in comparison with $26.6 million for a similar prior 12 months interval. The rise pertains to the deliberate ongoing build-out and repurposing of our Hazel Park, Michigan facility and our continued investments in expertise and automation.
As proven on Slide 11, our whole excellent debt was $74.1 million at September 30, 2022, as in comparison with $56.9 million on the identical level final 12 months. The rise in debt pertains to capital spending, however our steadiness sheet stays robust with a leverage ratio of 1.3 occasions on the finish of the quarter.
We proceed to see a stable pipeline of M&A alternatives and are targeted on new markets, new supplies equivalent to aluminum, plastics and different light-weight supplies and new prospects to proceed to diversify our enterprise. Strategic match and rational valuation stay our prime issues as we refocus our M&A efforts.
Now I would like to debate 2022 steerage, which is proven on Slide 12. We’re refining the monetary outlook we first offered in February and have adjusted our expectations as follows: Web gross sales of between $480 million and $530 million has been up to date to between $520 million and $540 million.
Adjusted EBITDA between $58 million to $70 million has been up to date to between $58 million and $65 million. Because it stands right now, our revenues are anticipated to be on the excessive finish of our authentic vary as a result of uncooked materials value pass-through. Nevertheless, as a result of falling scrap revenue costs, elevated authorized prices and continued near-term inefficiencies associated to buyer provide chain points, we count on EBITDA outcomes to be between the midpoint and the low finish of the vary.
This forecast additionally assumes no main provide chain disruptions with our prospects or different uncommon occasions in our finish markets in addition to any restoration related to the previous health buyer.
We proceed to count on our capital spending to be between $55 million and $65 million for the total 12 months of 2022. The first focus is on funding in expertise and automation, the addition of kit constructing to new applications with present prospects and prices related to manufacturing at our Hazel Park facility. We’re nearing the tip of the unusually excessive CapEx cycle and count on 2023 return to extra normalized spending degree of roughly $20 million to $25 million per 12 months.
In abstract, our third quarter outcomes proceed to mirror steadily enhancing quantity developments, which, along with business pricing will increase, has helped ship improved outcomes. Whereas the availability chain disruptions affecting our prospects, inflationary pressures persist, near-term finish market demand stays usually stable.
That concludes my feedback, and I am going to now flip the decision again over to Jag.
Jag Reddy
Our latest efficiency and present outlook of the enterprise stays constructive. As we handle the demand developments, we’re seeing throughout our finish markets. Nevertheless, we’re monitoring market modifications, staying in fixed communication with our prospects and can be able to adapt as wanted. We’re sustaining and increasing the relationships we now have with a number of the greatest blue chip corporations on the earth and are pursuing quite a few alternatives with potential new prospects and new finish markets.
We’re targeted on worthwhile development into new platforms, margin enlargement with lean initiatives and innovation to drive competitiveness. We’re off to an ideal begin, and I am very enthusiastic about the way forward for MEC.
With that, operator, we wish to open the decision for questions now. Thanks.
Query-and-Reply Session
Operator
Thanks. [Operator Instructions] The primary query comes from Vlad Bystricky from Citigroup. Please proceed.
Vlad Bystricky
Good morning, guys. Thanks for taking the decision. So good quarter finish outcomes and thanks for a number of the strategic outlook or replace, I ought to say, round a number of the long-term priorities and what you are doing with MBX. I assume simply serious about MBX, are you able to possibly give us extra colour on how you are going about implementing MBX, whether or not you might have the expertise and ability it is advisable to form of drive this extra targeted strategy and wider strategy it appears to lean and simply the way you’re serious about the runway for MBX pushed enhancements to manifest?
Jag Reddy
Sure, positive. I am going to take that. I am going to begin with my feedback Vlad, after which I am going to cross it on to Ryan to broaden on our implementation. MBX is essential and very important for our worthwhile development future. Although, as I discussed in my ready remarks, MEC has traditionally used lean instruments. MBX program, with this devoted group throughout our community, will deliver sustainable implementation of our applications. We will speed up the variety of Kaizens. We’ve devoted groups within the plans proper now which can be going to drive these Kaizens and we’re using not solely inner but in addition some exterior assets to offset short-term power for the MBX group.
I will cross on to Ryan to broaden on implementation.
Ryan Raber
Sure, Vlad, thanks for the query. Once more, many of those instruments we have been utilizing for fairly a while, however it’s the acceleration that Jag talked about. And so with that acceleration, we have devoted a group totally dedicated to MBX. So we now have a group of lead engineers led by our Vice President, focusing ensuring we’re driving as throughout all features of the corporate. So it is simply an acceleration and I am going to say hyper-focused upon what we’re doing prior to now. And so we do have these ability units, and we now have these capabilities. So we really feel very assured in regards to the impression that that is going to have throughout the group.
Vlad Bystricky
Okay, that’s useful. After which possibly only a follow-up for me. I do know you are not guiding to ’23 but. However as we take into consideration the outlook into ’23 right here, if I simply have a look at form of the tip market trade outlook, clearly, some combine developments there and clearly considerations in regards to the macro. So, I assume, are you able to simply speak about given your work on new wins and reshoring alternatives, et cetera, the way you’re serious about the potential or the probability of with the ability to drive development if we’re going into form of a broader macroeconomic slowdown right here in ’23?
Jag Reddy
Certain. Let me take that, after which have Todd chime in as effectively. Typically, it has been proper. We take into consideration the enterprise in two methods, proper. One is the bottom enterprise we at present have, proper. That is in 2022. After which the brand new development alternatives we now have received that can even begin up in 2023.
Earlier than I truly try this, let me say that we’re not offering any steerage for 2023 but. We’ll clearly present that steerage on the applicable time. However given the unsure occasions we now have, I feel it is useful for us to assume by this fashion. So the bottom enterprise, proper, each — nearly all of our prospects right now are indicating the amount development subsequent 12 months, proper. However we’re additionally — a lot of these prospects are publicly traded corporations that a lot of you observe. And we’re seeing the identical info that’s publicly out there right now. In order that signifies that there’s some development subsequent 12 months from the bottom enterprise.
However on the identical time, proper, we’re making an allowance for all exterior elements. And if we assume even a small pullback on the demand within the base enterprise, we really feel that we now have sufficient new enterprise that is coming into 2023, that might offset that potential softness within the base enterprise. So except markets flip considerably and a deeper downturn, then that is a distinct dialogue that we are able to have at that time. However sitting right here nearly in This autumn, we really feel fairly good about subsequent 12 months and we’re serious about it when it comes to base enterprise versus our new enterprise.
Todd Butz
What I might add is actually that we’re not offering steerage at this level, proper. We’ll when the time’s applicable. However to Jag’s level, because it stands right now, volumes in markets usually look stable for subsequent 12 months. And with that, with the MBX launching, the pricing carryover, and actions that occurred in 2022, hopefully, provide chain type of balancing and getting corrected at our prospects will result in a better web revenue. Our expectation for subsequent 12 months can be bettering revenue, higher EBITDA. And together with that, considerably enhancing the free money stream.
When Jag spoke earlier, $20 million to $25 million in normalized CapEx, stock ranges as a result of the availability chain points are a bit of excessive proper now, so we might count on turns to get higher as we transfer into 2023. And because the metal pricing has come down. So in a normal sense, we really feel very constructive about subsequent 12 months. We’re actually not prepared to offer steerage presently.
Vlad Bystricky
That’s understable. So, actually useful colourful. Thanks guys. I get again in queue.
Operator
Subsequent query comes from Mig Dobre of Baird. Please proceed.
Mig Dobre
Thanks for taking the query. Good morning, everybody. Sticking with this final remark possibly as we’re taking a look at margins and Todd, I recognize that you simply count on enchancment right here. But when we’re wanting on the fourth quarter, are you able to remark in any respect as to the way you see the manufacturing margin, your gross revenue advanced sequentially?
And as I am serious about 2023, if we’re in an setting wherein volumes are not less than secure and it appears like a number of the value pressures are not less than beginning to average, if not outright reverse in some instances. Is it truthful to count on the manufacturing margin to recuperate to extra normalized ranges, one thing like, name it, 2019 kind ranges?
Todd Butz
I count on that to be above 2019 ranges, fairly frankly. We’re already present — our low finish of our steerage is a document compared to 2019. So even with, let’s name it comparable or barely much less quantity this 12 months due to materials value pass-throughs in comparison with 2019, we’re delivering document EBITDA. And it is why we over carried out in 2019 by greater than 10%. So my expectation is at this level that our margin profile will proceed to look higher than 2019.
Now once we take into consideration This autumn and why we type of narrowed our steerage, we do have rising rates of interest, we now have continued anticipated provide chain points with our prospects and there is potential for some authorized prices within the This autumn. Outdoors of that, we now have holidays, actually. We count on possibly prospects could take a day or two on the schedule due to the availability chain points on their finish. However as we get into ’23 and these items alleviate, all of us really feel very assured that we are able to ship, once more, improved outcomes, however not solely that, however hit our 15% adjusted EBITDA purpose.
Mig Dobre
Understood. After which this trade outlook slide you offered may be very informative. I’m form of seeking to make clear one thing, and I apologize if I missed this, however as you are framing the 2023 market outlook, that is — what you might have on this slide is your interpretation as to how these finish markets will progress when it comes to both acceleration or deceleration? You are probably not seeing but any declines in manufacturing ranges out of your prospects in areas like powersports and development tools, is that right? Do I’ve that interpretation right?
Jag Reddy
Sure. That is precisely proper, Mig. That is completely, the 2023 outlook right here is our interpretation of the way it may end up. However as I mentioned earlier, most of our prospects will not be indicating any declines. They’re all being moderately secure or bullish of their outlook up to now. However we’re being lifelike and that we’re internally saying that, hey, the market softens, that is in our base enterprise. That is how it might appear to be and the place are the areas that could be gentle. That is what we’re attempting to speak right here.
However having mentioned that, additionally once I add that even in powersports, we now have new enterprise that we will be producing subsequent 12 months, new prospects and new applications. So even in an trade that could be softening, we really feel like we now have new enterprise to offset the potential softness. And I will ask Ryan to chime in.
Ryan Raber
Sure. I feel, Jag, usually, proper now, we nonetheless see a macro development of nearly all of the industries having comparatively low stock in comparison with retail demand. And positively, within the short-term, there’s some refilling of the pipeline that should happen.
As we glance out into ’23, actually, the rising rates of interest have had an impression on residential development and different issues affecting the development and entry tools, and likewise see issues like robust rental CapEx and good alerts from our prospects about aged fleets which can be in rental fleets and different issues that I would wish to assume may present some potential tailwinds, however nonetheless too early to name that into ’23.
Powersports, like Jag mentioned, actually new enterprise coming on-line. We usually really feel like we’ll be enjoying the powersports extra within the high-end premium product, which has some independence from rates of interest when you concentrate on the rates of interest affecting that discretionary revenue, these patrons may need.
In order we glance to subsequent 12 months’s rates of interest, we consider, will have an effect. It is onerous to quantify that stock and the necessity to restock. However going again to the preliminary remark, prospects are usually sending robust demand alerts that year-over-year, we consider, can be flat to up. We’ll proceed to watch that as we go into ’23, and we stay very in our means to transform new enterprise and present some incremental development as we go into subsequent 12 months.
Mig Dobre
Understood. That is smart. Final query, possibly one on M&A and capital deployment. You talked about some new applied sciences right here which can be of curiosity to you, plastics and aluminum. And I am type of curious when you can broaden on that. I imply, are you seeking to get into issues like injection molding and the like?
And I assume I am curious additionally when it comes to what you understand to be form of the aggressive edge or core competency of Mayville. I, for one, have at all times considered it as steel fabrication. However Jag, it appears to me such as you’re pondering extra broadly than that, which clearly has strategic location for the corporate.
Jag Reddy
Sure, thanks Mig. After I first got here in, proper, and the primary time as we checked out, what will we do effectively. We assist our prospects produce the perfect merchandise at a really aggressive value, and we now have the footprint and the availability chain functionality to help quick lead occasions to those prospects. So when you take that premise after which say, what else can we assist our prospects with and what are the issues or pinch factors that prospects are going through proper now?
We’re now going to be product designers. However we do a number of design partnerships with our prospects as they have been attempting to go from a design section into manufacturing section. Design for manufacturing, all of these companies are an vital piece of our providing. We do not do rather a lot or positively, we do not commercially value these actions right now. And that is an space the place prospects, as I speak to them, many have indicated that they are battling engineering expertise. They’re battling lead occasions to market. So all of those areas will assist our prospects to hurry up their design to manufacturing, pace to market. So even companies, prototyping companies are vital factor the place we are able to actually assist our prospects.
Equally, as we take into consideration vitality transition and prospects going to EV platforms, the lightweighting on the whole, even for ICE engines, lightweighting is de facto vital. We’re usually a metal fabricator. Many purchasers are asking us for different areas the place we may assist them given our efficiency and given our long-term partnerships with these prospects. A number of the prospects requested us about aluminum, proper, hey, guys, are you able to do aluminum fabrication?
Nicely, that is not an space right now we targeted on. We’ve some choices, however not rather a lot. In order that’s one other space we expect that’s actually helpful for us to enter into explicit aluminum fabrication in the long term after which we are able to help our prospects.
After which past that, we now have gone into — so, that is one thing that I realized. I didn’t know on day one, however actually, as I used to be going by a number of our plans, I realized, we do a number of subassemblies. We do cable assemblies. We truly put collectively steel parts with plastic parts. In order I checked out all of that, we mentioned, look, we are able to get into extra value-added companies equivalent to subassemblies and assemblies, and maybe as an alternative of shopping for a few of these plastic parts from a third-party provider and one thing in-house, we are able to additionally get into that.
In order that’s how we’re serious about, proper, how will we broaden our choices? How we additional help our prospects’ development? And that is the explanation why we really feel like we now have the fitting to play in these adjoining markets, and that is the place we’re refocusing our efforts into M&A.
Mig Dobre
Very attention-grabbing. Thanks for that.
Operator
There are at present no extra questions registered presently [Operator Instructions].
Jag Reddy
Okay. Nicely, thanks, everybody, in your time right now and your continued curiosity in MEC. We look ahead to talking with a few of you on the upcoming Baird and Sidoti conferences.