Q3 2024 Mayville Engineering Company Inc Earnings Call
[music].
Good morning.
Bridget: 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. All lines will be muted during the presentation portion of the call, with an opportunity to go questions and answers at the end.
I will now like to pass the conference over to our host, Stefan Neely, or Zalam at Barges. Thank you Stefan, you may proceed.
Stefan Neely: Thank you, operator. On behalf of our entire team, I'd like to welcome you to our third quarter, 2024 results conference call. Meeting the call today is Max President and CEO Jagadeesh and Todd Butz, Chief Financial Officer.
Stefan Neely: 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 risk described in our periodic reports, filed with the Securities and Exchange Commission.
Stefan Neely: Accept is required by law. We undertake no obligation to update our forward-looking statements.
Stefan Neely: Further, this call will include the discussion of certain non-gap financial measures. Reconciliation of these measures to the closest gap financial measure is included in our quarterly earnings press release, which is available at MacEunk.com.
Stefan Neely: Following our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Jack.
Jack: and good morning everyone. Thank you for joining us today. During the third quarter, we continue to advance our strategic priorities despite a mark.
Jack: Neoturn, DSA in customer order activity. This demand-sauce materialized at the beginning of August, as customers took these talking actions to manage their high levels of dealer inventory.
Jack: 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 base, it's 12% reduction in our labor force, the decisions to permanently close our water-to-mathesality in the fourth quarter and other cost reduction actions.
Jack: 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.
Jack: In combination, these constructions positioned us to deliver a 50 basis point increase in adjusted EBITDA margins as compared to last year.
Jack: 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 percent versus the prior year period.
Jack: 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 in the second half of the year, particularly in the commercial vehicle market.
Jack: However, the pace of demand weakness in our power sports, agriculture and construction and markets were greater than expected.
Jack: Many customers cut production in response to lower ordering take and to be stocked channel inventories.
Jack: Given the current demand environment, we have opted to reduce our full year 2024 net sales, adjusted EBITDA and PAPX guidance.
Jack: Code revised the items accounts for reduced order activity during the second half of 2024, partially offset by recent constructions, operational excellence initiatives and commercial winds.
Jack: Additionally, our revised guidance excludes any impact from our recent legal settlement with our former fitness customers.
Jack: As customer equipment financing rates decline for the coming quarters, we anticipate a corresponding normalization in customer-order activity and broader end-market demand, beginning in the first half of 2025.
Jack: As you will recall, we expect to deliver between 750 and 850 million in revenues.
Jack: Expand, adjusted EBITDA margin to between 14% and 16% and generate free cash flow of between 65% and 75 million by the end of 2026.
Jack: With a main confidence in our ability to achieve these targets.
Jack: Even as Neely 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.
Jack: 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.
Jack: In 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.
Jack: As of the end of the third quarter, the company has booked approximately 80 million in new project wins this year. Inclusive our replacement products for end-of-life programs with launches occurring over the next two years.
Jack: Turning now to a more detailed review of market conditions across our primary and markets.
Jack: Let's begin with our commercial vehicle market, which represents approximately 38% of our trailing 12-month revenues.
Jack: During the quarter, commercial vehicle revenues decreased by 9.9% on a year-old rare basis.
Jack: This decrease was driven by 11.1% ERO-Rair decrease in North American class 8 truck demand, partially offset by the ongoing new project launches and strategic pricing initiatives, which drove continued and market out performance.
Jack: Currently ACD research forecast the class aid vehicle production to decrease 7.1% It over year in 2024 to approximately 316,000 units.
Jack: ACD expects that OE builds will modestly increase each quarter to 2025 as demand crops ahead of a recovery in 26 June industry emission standard changes.
Jack: The current ACT forecast projects 2025 folia demand to decline by 10.6% relative to 2024, while 2026 production increases by 23.4%.
Speaker Change: Next is the construction and access market, which represented approximately 15 percent of our trailing 12-month revenues.
Jack: construction and access revenues decreased 23.5 percent.
Jack: on a year-over-year basis in the third quarter.
Jack: This reflects softening demand across both non-residential and public infrastructure markets, partially offset by ongoing new customer wins.
Jack: 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
Jack: and the interest rate environment continues to improve, supporting additional residential construction.
Jack: The power sports 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.
Jack: The performance during the quarter was driven by customer inventory de-stocking 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.
Jack: 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.
Jack: Additionally, as interest rates continue to fall, we expect consumer discretionary spending to gradually increase, resulting in increased end-customer demand.
Jack: Our agricultural market represented approximately 8% of trailing 12-month revenues and decreased by 31.1% on a year-on-year basis.
Jack: Our results for this end market reflect softening demand across both our large and small ag markets.
Jack: The outlook for ag has been increasingly uncertain given the impact of higher interest rates, inventory destocking, and lower crop prices.
Jack: As we look forward, we expect that new program wins will primarily offset the demand softness in this end market in 2025.
Jack: Turning now to an overview of substantial new business wins during the third quarter.
Jack: 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.
Jack: During the third quarter, we continue to expand share with one of our key InGen customers.
Jack: We secured additional content related to heavy-duty engines, but also expanded content related to power generation, supporting the rapid expansion of data centers.
Jack: In the quarter, we secured a new multi-year 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.
Jack: 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.
Jack: We expect to continue to grow share over the next two years with the amount of change that will occur in this industry.
Jack: Lastly, as we continue to pursue diversification of our end markets,
Jack: 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.
Jack: While our operations team was focused on responding to changes in customer demand during the quarter, the execution of our MBX framework on the culture of continuous improvement remains a fixture for MEC.
Jack: 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.
Jack: Our MBX initiatives continue to drive strategic pricing improvements and overall cost discipline.
Jack: This execution will maximize our operating leverage through the cycle, position us for rateable long-term improvements in our financial profile, and drive sustainable shareholder value.
Jack: 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.
Jack: under our existing $25 million authorization.
Jack: 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.
Jack: Additionally, as previously announced, we settled an ongoing legal dispute with the former fitness customer.
Jack: This resulted in MEC receiving a gross cash settlement of $25.5 million in the fourth quarter of this year.
Jack: 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.
Jack: We will utilize some of the proceeds to pay down debt and use a portion of the proceeds for shared repurchases.
Jack: We will remain highly disciplined in our capital allocation approach, continuing to prioritize debt repayment, opportunistic share repurchases, and accretive strategic acquisitions.
Jack: In summary, I am very proud of our team's strategic execution, particularly in response to the near-term softness in end-market demand.
Jack: 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.
Jack: The response of our team reflects the successful strategic adoption of our MBX framework, which continues to be the bedrock of our strategy.
Todd Butz: 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. With that, I will now turn the call over to Todd to review our financial results.
Todd Butz: 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.
Todd Butz: Total sales for the third quarter decreased 14.4% on a year-over-year basis to $135.4 million.
Todd Butz: 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.
Todd Butz: 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.
Todd Butz: Our manufacturing margin rate was 12.6% for the third quarter of 2024 as compared to 12%
Todd Butz: for the prior year period, or an increase of 60 basis points. 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.
Jack: Other selling, general, and administrative expenses were $7.6 million for the third quarter of 2024.
Jack: 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 non-reoccurring costs incurred in the prior year period associated with the MSAA acquisition.
Jack: Interest expense was $2.7 million for the third quarter of 2024, as compared to $3.9 million in a prior year period due to a reduction in borrowings and lower interest rates relative to the third quarter of last year.
Jack: 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.
Jack: Adjusted EBITDA for the third quarter with $17.1 million versus $19.2 million for the same prior year period.
Jack: adjusted even a margin percent increase by 50 basis points to 12.6% in the current quarter as compared to 12.1% for the same prior year period.
Jack: and represents a decremental rate of under 10%, which is well below our historical average of 17%.
Jack: The increase in our adjusted EBITDA margin was primarily due to the ongoing MBX and pricing initiatives.
Jack: 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.
Speaker Change: For more information, visit www.fema.gov
Jack: Turning now to our statement of cash flows and balance sheets.
Jack: Free cash flow during the third quarter of 2024 was $15.1 million, as compared to $16.1 million in the prior year period.
Jack: The decrease of 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.
Jack: 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.
Jack: 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 30th.
Speaker Change: As Jag 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.
Jack: 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.
Jack: Keep in mind this excludes any impact from a recent lawsuit settlement.
Jack: For 2024, we now expect the following, net sales of between $580 million and $590 million.
Jack: Adjusted EBITDA of between $63 million and $66 million, and capital expenditures of between $13 million and $15 million.
Jack: This revised guidance reflects the near-term impact of our recent customer production changes due to lower demand and inventory destocking activities.
Jack: We expect the fourth quarter to be the low point in the cycle, as sales are expected to decrease sequentially by 4 to 11 percent.
Jack: 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.
Jack: Our expected fourth quarter adjusted EBITDA returns are in the range of $8 to $11 million.
Jack: Again, we expect this to be a short-term issue as we continue to win new work and execute our strategy and remain competent in achieving our previously stated 2026 goals.
Jack: 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.
Jack: With that, Operator, that concludes our prepared remarks. Please open the line for questions as we begin our question and answer session.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session.
Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad.
Speaker Change: If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1.
Speaker Change: As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question.
Speaker Change: We will pause here briefly as questions are registered.
Speaker Change: Thank you.
Speaker Change: The first question comes from a line of Nick Dobre with Baird.
Speaker Change: Meg, your line is now open.
Nick Dobre: Thank you, and good morning, everyone. My first question...
Speaker Change: 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?
Speaker Change: Yeah, so Mayor, as you think about the fourth quarter...
Speaker Change: to be down slightly again as compared to Q3.
Speaker Change: You know, SG&A, we did make some changes within SG&A, and that was part of our other cost reduction activities.
Speaker Change: So we will see a favorable impact on that as we look into Q4, and then you can see that, you know, the expected EBITDA margin.
Speaker Change: Profile, you know, isn't that, you know, seven and a half, eight percent to maybe, you know, nine to ten percent 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 market's rebound to really take advantage and scale up.
Speaker Change: You know, I think more importantly is as we enter 2025, I think we've cost positioned the business well, that when we come out of a quarter, you know, we can see incremental margin rates that are in that, you know, low to mid 20% range. So I think, again, this is a low point, and we'll come out of it very quickly.
Speaker Change: Yeah, just to add to that, we have made the decision to extend shutdowns during Thanksgiving week, Christmas holidays, pretty much every single one of our plans.
Speaker Change: and we have informed our customers that we'll be shutting down for extended periods and gave them, you know, almost 60-day notice.
Speaker Change: and also resize our
Speaker Change: SGNA and other elements offer a fixed cost as well. So, as to...
Speaker Change: 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.
Speaker Change: For more information visit www.fema.gov
Speaker Change: But just to put a finer point here, in looking at my model here, I'm...
Speaker Change: I'm guessing that manufacturing margin is going to be somewhere around 8%, 8, 8.5%. Is that a fair way to think about it?
Speaker Change: Yes, I would say that's a fair way to characterize it, yes.
Speaker Change: So when you look at the revenue for the fourth quarter, I think the midpoint implies something like $125 million.
Speaker Change: Is that in line with the orders that you're getting from the customers, meaning, you know, are you, you're booked a bill in terms of that revenue? Is it one? Is it less than that? Are you still burning through some backlog of business? Or how should we think about that?
Speaker Change: For more information visit www.fema.gov
Speaker Change: 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 that Jag mentioned earlier. And we really stand in good position as we look to 2025.
Speaker Change: Yeah, let me reinforce that.
Speaker Change: We have not had
Speaker Change: Any material market share losses?
Speaker Change: 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
Speaker Change: you know, run rate for the last couple of years has been 80 to 90 million of new business on an annual basis, ending Q3 at 80 million of new business you know, really is a
Speaker Change: very good book of business for, you know, we're booking and more importantly preserving our share and and in many cases expanding our share within our customer base.
Speaker Change: 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, as you think about 2025, and I recognize we'll get to specific guidance later on, but as you think about 2025,
Speaker Change: At least to me, it's not evident that the fourth quarter marks the trough or that you're going to see significant improvements sequentially, at least in the first half of the year, because virtually every vertical you have here, commercial vehicles, so it's got production issues, agriculture.
Speaker Change: 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.
Speaker Change: Construction and Access.
Speaker Change: You know, Oshkosh is...
Speaker Change: Cutting Production in Area 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 2025.
Speaker Change: 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.
Speaker Change: Yeah.
Speaker Change: 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, you know, few months.
Speaker Change: So, we have appropriately adjusted our cost structure and our capacities to reflect that.
Speaker Change: Going forward, our expectation, Meg, is that PowerSports would be the first end market to recover as interest rate cuts take hold.
Speaker Change: Right after PowerSport, we expect PowerSport to record sometime in the first half, call it in a late Q1, early Q2, or sometime in Q2.
Speaker Change: 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.
Speaker Change: CVMarket. The data is well known and well published, as we mentioned, based on ACT research.
Speaker Change: Second half, we'll start to see a pickup, even though sequentially, quarter over quarter next year, CV will continue to step up.
Speaker Change: And then, Ag, I think, is in a longer cycle of a downturn, and we don't expect Ag to recover in 2025.
Speaker Change: Having said that, Ag is only 8% of our total revenues.
Speaker Change: and Stefan Neely. Thank you.
Speaker Change: Okay, good luck.
Speaker Change: Thank you.
Speaker Change: Meg?
Speaker Change: The next question comes from the line of Ted Jackson with Northland Securities.
Ted Jackson: Thanks very much.
Ted Jackson: So a couple questions. So let's just start like most of it's pretty easy.
Ted Jackson: 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 it just be in inside of your SG&A expenses?
Speaker Change: No, it'll be above and it will be called out separately. Certainly, as we mentioned in the fourth quarter, we will be shutting that facility down.
Ted Jackson: 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, you know, clearly defined in our, you know, case.
Speaker Change: Okay, and then on the 1 to 3 million dollars in annual savings, is that something that we should expect to see beginning in, I don't know, the first quarter of 25, or 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'll be kind of a one-time shot?
Speaker Change: No, I think you'll see that right away coming into, you know, Q1 of next year, but let's call it mid-quarter Because again, our expectation is to have that facility completely closed
Speaker Change: and Positioned for Sale, and hopefully, you know, we've seen good interest, and so hopefully we can, you know, 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.
Speaker Change: 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?
Speaker Change: Yeah, it'll 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.
Speaker Change: 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
Speaker Change: You know, you know, kind of the investing side of things will show where we'll 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 production?
Ted Jackson: Thank you.
Speaker Change: 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 that overnight.
Speaker Change: 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.
Speaker Change: to stock repurchase.
Speaker Change: 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 10K, 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.
Speaker Change: Thank you. Thank you.
Speaker Change: But you're saying that'll show up within operating activities? I would be a little surprised by that, but. Yeah. Okay. Yeah. Yeah. From the free cashflow. Yeah.
Speaker Change: Thank you.
Speaker Change: Okay, and then
Speaker Change: 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, you know, the, you know, given the fact that you're going to have a relatively weak
Speaker Change: second half of 24 that
Speaker Change: you know, the way you're laying it out that, you know, just because of the comps that we should see growth return in the second half, just because you know, you see I'm saying just as we roll through
Speaker Change: Your guidance said, starting with probably the third quarter and then with the fourth quarter that we should see revenue growth from the prior year. And then, you know, it sounds like you're viewing it.
Speaker Change: Yes, I'd say that's a very fair depiction of what we would expect.
Speaker Change: Okay, that's it for me. Thanks.
Speaker Change: Thank you.
Speaker Change: Thank you, Ted.
Speaker Change: The next question comes from the line of Natalia Bach, Wood City.
Speaker Change: Natalia, your line is now open.
Speaker Change: Hi, good morning. This is Natalia Bach from Citigroup on behalf of Andy Kapolits.
Speaker Change: Good morning.
Speaker Change: Morning. I guess my first question, you know, you revised your 24 guidance setting softens 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 reconcile why that is?
Speaker Change: That is without...
Speaker Change: So we kind of separated the two meaning
Speaker Change: Organic growth, that is new wins and opportunities we've done, and we try to separate that slightly from
Speaker Change: When you look at, you know, the market and destocking, right, and the impact that that has had, so we still feel like we're, we're on pace to, you know, continue to have, you know, year-over-year, it will be kind of, you know, 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.
Speaker Change: 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 software macro outlook, what initiatives are you implementing or taking actions to gain this market share?
Speaker Change: Yeah, Natalia, we talked about bringing on a brand new customer in the power sports market at the beginning of the year.
Speaker Change: That customer program went into production earlier this year.
Speaker Change: That is what mostly we're talking about, a new customer win and a market share gain.
Speaker Change: 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.
Speaker Change: 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 maintain 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?
Speaker Change: Producing our inventories, collecting our, you know, outstanding
Speaker Change: and we pulled all of those flowers.
Speaker Change: Since 2022, we ended 2022 at 6.2 turns of inventory. We ended Q3 around 9 turns of inventory.
Speaker Change: So you can see that level of improvement in how we're managing our business and how we're managing our working capital, how all of that is reading out in our free cash flow generation.
Speaker Change: Hi, helpful. That's all my questions. Thank you.
Speaker Change: Thank you.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Thank you, Natalia.
Speaker Change: For more information visit www.fema.gov
Speaker Change: There are currently no questions registered, so as a reminder, it is SCAR 1 to ask a question.
Speaker Change: and Tanya. Thank you. Thank you. Thank you. Thank you.
Speaker Change: There are no additional questions.
Speaker Change: No additional questions waiting at this time. I would like to pass the conference over to our management team for closing remarks.
Speaker Change: Once again, thank you for joining our call. We appreciate your continued support of MET, and we look forward to updating you on our progress next quarter.
Speaker Change: Should you have any questions, please contact Noel Ryan or Stefan Neely at Valum, our Investors Relations Council. This concludes our call today. You may now disconnect.
Speaker Change: That concludes the Mayville Engineering Company third quarter 2024 earnings conference call. Thank you for your participation and enjoy the rest of your day.
Speaker Change: Thank you. Thank you.