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MODINE MANUFACTURING CO (MOD)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered solid results and a guidance raise: revenue $0.683B (+3% YoY), diluted EPS $0.95 and adjusted EPS $1.06; strength in Climate Solutions (data centers, HVAC) offset weakness in Performance Technologies .
  • Results beat Street: revenue $651.0M* est vs $682.8M actual; EPS $0.92* est vs $1.06 actual; EBITDA $93.9M* est vs $98.2M actual, driven by stronger data center demand and acquisitions; the company raised FY26 net sales growth to +10–15% and adjusted EBITDA to $440–$470M .
  • Management announced a $100M North American capacity expansion for data center cooling and reiterated a path to approach $2B data center revenues by FY28—key narrative catalyst for the stock .
  • Near-term headwinds persist in vehicular end markets and material/tariff costs in Performance Technologies, but cost actions and tariff pass-throughs support second-half margin improvement .

What Went Well and What Went Wrong

What Went Well

  • Climate Solutions revenue up 11% to $397.4M; adjusted EBITDA up 10% to $79.4M; acquisitions added ~$10M; data center sales and HVAC demand were strong .
  • Guidance raised: FY26 net sales +10–15% and adjusted EBITDA $440–$470M; data center sales outlook increased to >45% growth this year; “We believe that this capacity expansion, coupled with strong demand, provides a clear path to approach $2 billion in data center revenues by fiscal 2028.” — CEO Neil Brinker .
  • Strategic capacity expansion: $100M to add U.S. manufacturing and testing capacity (Dallas, TX, Grenada, MS, and repurposing Franklin, WI and Jefferson City, MO) to meet hyperscaler demand .

What Went Wrong

  • Performance Technologies revenue down 8% to $285.5M; gross margin fell 240 bps to 18.2% on lower volumes and higher material costs; adjusted EBITDA down 14% to $37.5M .
  • Gross margin compressed 40 bps to 24.2% at the company level due to PT mix/materials; free cash flow dropped to $0.2M on data center inventory build .
  • Genset dual-sourcing and customer conversion delays weighed on expectations; tariff/material cost recoveries occur with lags and vary by customer agreements (metals ~6 months) .

Financial Results

Consolidated performance vs prior quarters

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Billions)$0.617 $0.647 $0.683
Diluted EPS ($USD)$0.76 $0.92 $0.95
Adjusted EPS ($USD)$0.92 $1.12 $1.06
Gross Margin %24.3% 25.7% 24.2%
Adjusted EBITDA ($USD Millions)$87.3 $104.1 $101.4
Adjusted EBITDA Margin %14.2% 16.1% 14.9%

Q1 FY26 actuals vs S&P Global consensus estimates

MetricQ1 2026 EstimateQ1 2026 ActualSurprise
Revenue ($USD Millions)651.0*682.8 +31.8
Primary EPS ($USD)0.923*1.06 +0.137
EBITDA ($USD Millions)93.9*98.2*+4.3

Values with asterisks retrieved from S&P Global.

Segment breakdown

Segment MetricQ3 2025Q4 2025Q1 2026
Climate Solutions Net Sales ($USD Millions)$360.8 $356.3 $397.4
Climate Solutions Gross Margin %28.6% 29.7% 28.4%
Climate Solutions Operating Income ($USD Millions)$62.4 $61.5 $66.9
Climate Solutions Adjusted EBITDA ($USD Millions)$75.7 $76.3 $79.4
Performance Technologies Net Sales ($USD Millions)$262.2 $294.8 $285.5
Performance Technologies Gross Margin %17.8% 20.4% 18.2%
Performance Technologies Operating Income ($USD Millions)$15.8 $29.9 $26.5
Performance Technologies Adjusted EBITDA ($USD Millions)$28.4 $44.1 $37.5

KPIs and cash metrics

KPIQ3 2025Q4 2025Q1 2026
Cash from Operations ($USD Millions)$60.7 $54.8 $27.7
Free Cash Flow ($USD Millions)$44.7 $27.1 $0.2
Net Debt ($USD Millions)$287.0 $279.2 $402.6
Cash & Equivalents ($USD Millions)$83.8 $71.6 $124.5
Capital Expenditures ($USD Millions)$16.0 $27.7 $27.5
Leverage Ratio (x)0.8x 0.7x 1.0x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY26+2% to +10% +10% to +15% Raised
Adjusted EBITDAFY26$420M to $450M $440M to $470M Raised
Climate Solutions Sales GrowthFY26+12% to +20% +25% to +35% Raised
Performance Technologies Sales GrowthFY26(2%) to (12%) (2%) to (12%) Maintained
Free Cash Flow (% of Sales)FY26~6%–7% ~3% (capacity expansion) Lowered
Interest ExpenseFY26$18M–$20M $28M–$30M Raised
Depreciation & AmortizationFY26$75M–$79M $89M–$93M Raised
Provision for Income TaxesFY26$84M–$92M $78M–$86M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY25)Current Period (Q1 FY26)Trend
Data center growth and capacitySSM acquisition drove 176% DC growth in Q3; expansion in VA/MS; modular DC launch; strong colocation demand $100M U.S. expansion; >45% DC sales growth outlook; path to ~$2B DC revenue by FY28; second-half ramp >80% in DC Accelerating
Modular data center platformAnnounced modular DC solution in NA Collaborating with a key customer; “data center in a box” for speed; Calgary build; U.S. expansion planned Scaling
Tariffs/material cost recoveryFocused 80/20 and pricing actions; mitigation plans in Canada/Mexico/China; no major lag anticipated Passing through tariffs/materials; metals recovery ~6 months; varying customer agreements Execution with lag
Performance Technologies restructuringCost actions; portfolio rationalization; SG&A reductions; genset strength in Q4 PT revenues down 8%; $5M SG&A reduction; genset dual-sourcing delays; evaluating site transitions to DC capacity Mixed, repositioning
M&A and IAQ expansionSSM accretive; IAQ growth initiatives CDI acquired (desiccant dehumidification); L.B. White/AbsolutAire added; pause further M&A to digest deals Broadening IAQ portfolio
Regional/data center footprintIndia facility planned India 100,000 ft² facility launched for APAC DC cooling Global build-out

Management Commentary

  • “We are making important investments…advancing our competitive position in key markets…strong performance by Climate Solutions…look forward to a significant ramp in volumes in the second half of the year.” — CEO Neil Brinker .
  • “With our current funnel of opportunities, we believe that we can approach $2 billion of data center revenues in fiscal 2028.” — CEO Neil Brinker .
  • “We’re once again raising our fiscal 2026 outlook for data center revenue growth to 45%…expect EBITDA margin to increase as capacity comes online, especially in fiscal 2027.” — CFO Mick Lucareli .
  • “Metals recovery on a lagged basis averaging about six months…tariff recovery will vary with each customer and agreement.” — CFO Mick Lucareli .
  • “Interest expense should be $28 to $30 million…we’ve extended the maturity and upsized our credit facilities.” — CFO Mick Lucareli .

Q&A Highlights

  • Capacity and ROI: Management cited “well north of 40–50%” ROIC on data center capacity investments; near-term incremental capacity EBITDA conversion ~15% as lines ramp, with long-term margins at or above segment averages .
  • Backlog/visibility: Highest data center backlog ever; visibility extends beyond a year, sometimes to three; raised guide on accelerated customer schedules and share gains .
  • Modular DC details: “Data center in a box” to address speed and labor constraints; Calgary site active; U.S. expansion planned; bespoke versions for hyperscalers with exclusivity on certain solutions .
  • PT cadence: Genset customer dual-sourcing and design conversions taking longer; PT margin uplift expected in 2H on cost-outs, tariff/material recovery, FX .
  • M&A contribution: LB White and AbsolutAire add ~$100M partial-year revenue combined with CDI below segment margin initially; pause new M&A for a couple quarters to digest .

Estimates Context

  • Q1 FY26 beats: revenue +$31.8M vs consensus ($651.0M* est), EPS +$0.137 vs consensus ($0.923* est), EBITDA +$4.3M vs consensus ($93.9M* est). Street underappreciated the near-term data center demand and acquisition impact .
  • FY26 Street vs guide: revenue consensus $3,039.5M* vs guide $2,840–$2,970M; adjusted EBITDA consensus $454.5M* vs guide $440–$470M—management midpoint aligns with Street on EBITDA but implies a slightly lower revenue midpoint than consensus given back-half ramp risks/FX/tariff uncertainties .

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Climate Solutions momentum and raised data center outlook are the core bull drivers; near-term investments temper margins, but volume ramp and utilization should enhance EBITDA in FY27 .
  • Performance Technologies remains a drag on mix, but structural cost actions and tariff/material pass-throughs support second-half margin improvement without relying on volume recovery .
  • The $100M capacity expansion and modular DC platform are tangible execution steps toward the ~$2B FY28 data center revenue goal—watch for capacity activation and second-half delivery schedules as catalysts .
  • Liquidity strengthened (upsized/extended facilities), but net debt up on acquisitions; expect free cash flow compression (~3% of sales in FY26) as growth capex is deployed before normalizing in FY27 .
  • Estimate revisions likely bias upward for DC-exposed metrics and Climate Solutions, with potential Street adjustments to PT margin cadence and corporate interest/D&A given updated guidance .
  • Near-term trading: favor positive sentiment into 2H ramp and guidance raise; monitor tariff headlines, metals cost trajectory, and PT conversion timelines as risk variables .
  • Medium-term thesis: 80/20-driven mix shift, IAQ portfolio build-out (CDI), and global DC footprint (U.S./India) position MOD to deliver above-market growth with expanding EBITDA once capacity matures .