Modine Manufacturing Company Q3 FY2026 earnings call

• Performance Technologies divestiture: Modine is spinning off the Performance Technologies segment to Gentherm, receiving ~$210M cash, with the business valued at $1B or 6.8x 12-month trailing EBITDA. - Climate Solutions growth: Data center sales up 78%, capacity expansion on schedule with record order intake, and updated revenue projections for data center growth. - Financial results: Q3 sales up 31%, gross profit up 24%, adjusted EBITDA up 37%, EPS up 29% excluding noncash settlement loss from pension plan termination.

Performance Technologies: Revenue increased 1% from prior year, adjusted EBITDA margin was 14.8% with a 400 basis point increase. Climate Solutions: Delivered 51% revenue growth, driven by 78% growth in data center sales, 48% growth in HVAC Technologies, and 14% growth in Heat Transfer Solutions. Adjusted EBITDA improved 29% with a sequential margin improvement to 17.9% in Q3.

• Fiscal '26 sales growth expected to be in the range of 20% to 25%. - Climate Solutions sales growth raised to 40% to 45% from 35% to 40%, with data center sales expected to grow over 70% this year. - Performance Technologies sales outlook flat to down 7%. - Adjusted EBITDA outlook for fiscal '26 is $455M to $475M. - Expect Q4 adjusted EBITDA margin improvement and free cash flow to rebound next year.

• End markets remaining depressed. - Material cost pressures including spikes in aluminum, copper, steel. - Timing of tariff recovery and inventory cleanup write-offs.

Q: Talk about puts and takes in margin outlook for Climate and PT in Q4.

A: Climate Solutions on track for 200+ basis point sequential margin improvement in Q4; PT expected to have a Q4 margin dip due to temporary factors like material pass-through and inventory cleanup.

Q: Color on data center order intake profile.

A: Roughly 50-50 in products, majority from existing customer base with strong relationships, and potential upside with hyperscalers.

Q: Free cash flow and working capital.

A: Working capital trending at 19%-20% to sales, with inventory and CapEx spikes this year expected to trend back to normal next year.

Q: Capacity utilization and data center growth.

A: Expect capacity in place by end of fiscal '27 though not full utilization yet, with record order intake and visibility out to 5 years.

Q: M&A pipeline in Climate Solutions.

A: Active funnel of potential targets in HVAC space, paused some due to Gentherm transaction but still working on active funnel.