MODINE MANUFACTURING CO Q3 FY2025 earnings call

Climate Solutions: Leveraging data center growth with 176% y/y data center revenue growth from Scott Springfield acquisition, investing in liquid cooling CDU, expanding global data center service capabilities, and opening a new production facility in India. Performance Technologies: Addressing cyclical market declines via 80/20 processes, cost controls, divestitures of German automotive businesses, focusing on higher-margin growth businesses like eMobility and genset modules, and expecting Q4 ramp and fiscal 2026 growth.

Climate Solutions: Achieved 42% sales increase, 57% adjusted EBITDA improvement with 21% adjusted EBITDA margin. Data center revenues grew 176% y/y, driven by Scott Springfield acquisition ($74M revenue) and North American colocation sales. HVAC and R sales up 15% ($14M), Heat transfer sales down 13% ($13M) due to European heat pump market and customer insourcing. Performance Technologies: Faced revenue headwinds from seasonal trends and vehicular market weakness. Advanced solutions down 7% ($2M), liquid-cooled applications down 19% ($21M), air-cooled applications down 17% ($28M), but GenSet sales up 16%.

Maintained fiscal 2025 outlook but adjusted data center revenue forecast upward. Performance Technologies outlook soft but expecting Q4 sequential revenue and earnings ramp. Free cash flow at $102M YTD, on track with full-year outlook. Net debt reduced to $287M, balance sheet strong with leverage ratio 0.8.

Potential tariffs on US imports from Canada, Mexico, and China, which could create market chaos, but Modine plans to mitigate risk through sourcing/manufacturing within regions, tariff surcharges, and supply chain strategies.

Q: Chris Moore asked about data center build schedules and CDU quotes.

A: Neil Brinker stated customers haven't changed build schedules for next 2 years, CDU has competitive bidding with customization.

Q: Canyon Hayes inquired about Performance Technologies outlook.

A: Mick Lucareli said auto showing slight rebound, medium/heavy truck soft in 2025, ag/construction expected to pick up in second half.

Q: Noah Kaye asked about confidence in data center targets.

A: Neil Brinker said confidence remains due to capacity building, product development, and strong customer relationships.

Q: Brian Drab asked about data center share gains and India projects.

A: Neil Brinker said gaining share in North America with product portfolio, and India facility supports customer expansion.

Q: Jeff van Sinderen asked about hyperscalers and service strategy.

A: Neil Brinker said working with all hyperscalers, CDU revenue expected mid-next fiscal year, and service strategy focuses on replicating UK model in US.