Sign in
MM

MODINE MANUFACTURING CO (MOD)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 revenue rose 10% year over year to $616.8M, gross margin expanded 160 bps to 24.3%, and adjusted EBITDA grew 18% to $87.3M; GAAP EPS was $0.76 and adjusted EPS was $0.92, driven by strong data center sales and the Scott Springfield acquisition, partially offset by vehicular end-market weakness .
  • Climate Solutions delivered 42% sales growth to $360.8M and 21.0% adjusted EBITDA margin, while Performance Technologies declined 16% to $262.2M amid soft auto/CV/off-highway demand; $8.3M restructuring largely targeted PT cost reductions .
  • FY25 guidance maintained: net sales $2.55B–$2.67B (+6% to +11%), adjusted EBITDA $375M–$395M (+19% to +26%), adjusted EPS $3.65–$3.95; management raised the internal data center outlook within Climate Solutions, while trimming HVAC&R and heat transfer expectations .
  • Catalysts: accelerating North American data center share gains, CDU commercialization in mid-FY26, and PT cost actions targeting ~$15M annual savings; tariff exposure seen as manageable via pass-throughs/surcharges and regionalized operations .

What Went Well and What Went Wrong

What Went Well

  • “Data Center revenues increased by 176% this quarter,” propelled by strong organic demand and the Scott Springfield acquisition; Modine is “receiving many requests for quotes” for its liquid-cooling CDU, with optimizer software a differentiator .
  • Climate Solutions posted 42% sales growth to $360.8M and lifted adjusted EBITDA to $75.7M with margin up 200 bps to 21.0%, supported by favorable mix (data center, IAQ) and SSM outperformance .
  • Management reiterated confidence in data center demand despite AI model efficiency debates, noting hyperscalers have not changed build schedules and Modine continues to gain share with new capacity and products across regions .

What Went Wrong

  • Performance Technologies revenue fell 16% to $262.2M and adjusted EBITDA decreased 22% to $28.4M on broad weakness in auto, commercial vehicle, and off-highway markets, and prior divestitures; adjusted EBITDA margin slipped 90 bps to 10.8% .
  • Heat Transfer Products declined 13% on European heat pump demand softness, customer insourcing, and lower replacement coil sales; PT experienced extended seasonal shutdowns, pressuring fixed-cost absorption .
  • $8.3M restructuring (severance and equipment transfers) weighed on GAAP operating income, with increased SG&A from SSM integration and amortization expenses; net earnings fell 9% YoY to $41.2M .

Financial Results

MetricQ3 FY24Q1 FY25Q2 FY25Q3 FY25
Revenue ($USD Millions)$561.4 $661.5 $658.0 $616.8
Gross Margin %22.7% 24.6% 25.2% 24.3%
Adjusted EBITDA ($USD Millions)$73.9 $100.9 $99.8 $87.3
Adjusted EBITDA Margin %13.2% 15.3% 15.2% 14.2%
GAAP Diluted EPS ($)$0.83 $0.88 $0.86 $0.76
Adjusted EPS ($)$0.74 $1.04 $0.97 $0.92

Segment breakdown (trend):

SegmentQ1 FY25Q2 FY25Q3 FY25
Climate Solutions Net Sales ($M)$357.3 $366.4 $360.8
Climate Solutions Adjusted EBITDA ($M)$71.9 $78.8 $75.7
Climate Solutions Adjusted EBITDA Margin %20.1% 21.5% 21.0%
Performance Technologies Net Sales ($M)$309.0 $297.5 $262.2
Performance Technologies Adjusted EBITDA ($M)$43.7 $41.0 $28.4
Performance Technologies Adjusted EBITDA Margin %14.1% 13.8% 10.8%

KPIs:

KPIQ3 FY25
Data Center Sales YoY Growth+176% and +$106M
Net Debt ($M)$287.0
Free Cash Flow ($M)$44.7 (quarter); $102.2 YTD
Leverage Ratio0.8x
Capex ($M)$56 YTD

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($B)FY25$2.55–$2.67 (Q1 FY25) $2.55–$2.67 Maintained
Adjusted EBITDA ($M)FY25$375–$395 (Q1 FY25) $375–$395 Maintained
Adjusted EPS ($)FY25$3.65–$3.95 (Q1 FY25) $3.65–$3.95 Maintained
Climate Solutions – Data CentersFY25+110%–120% (range introduced by Q3 deck) +110%–120% Raised vs prior internal outlook; maintained overall guidance
Climate Solutions – HVAC&RFY25+10%–20% (deck) +10%–20% Adjusted down within mix vs prior internal view
Climate Solutions – Heat Transfer ProductsFY25(20%)–(10%) (20%)–(10%) Lowered outlook vs earlier expectations
Performance Technologies – Advanced SolutionsFY25+5%–10% +5%–10% Maintained
Performance Technologies – Liquid-Cooled ApplicationsFY25(20%)–(15%) (20%)–(15%) Maintained
Performance Technologies – Air-Cooled ApplicationsFY25(15%)–(10%) (15%)–(10%) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
AI/Data center growthQ1: Strong start; raised FY25 outlook on data centers; added capacity and portfolio diversification . Q2: Data center growth continues with SSM impact; gaining share with colocation/hyperscalers .Data center +176% YoY; share gains in North America; expanded facilities across US, Canada, UK, Spain; India expansion; CDU RFQs with optimizer software .Strengthening; above-market growth sustained.
Supply chainQ2: PT benefited from improved operating efficiencies; noted divestitures impact .PT eVantage sales impacted by temporary supply chain issues at NA bus customers .Mixed; localized bottlenecks.
Tariffs/macroQ1/Q2: Macro uncertainties cited in forward-looking statements .Management outlines tariff mitigation: regional sourcing/manufacture, pass-throughs/surcharges; <10% of spend subject to proposed tariffs .Manageable with pass-throughs.
Product performanceQ1/Q2: Climate Solutions margins up; heat transfer soft; PT margins improved YoY in Q1/Q2 .Climate Solutions margin +200 bps to 21.0%; heat transfer −13%; PT margins down on lower volume .Climate strong; PT pressured.
Regional trendsQ2: European heat pump market softness noted implicitly via mix .Euro heat pump demand soft; insourcing by a large HVAC customer; India plant to serve APAC data center/power .Europe soft; APAC expansion.
R&D/CDU executionQ1: Portfolio expansion supports margin mix .CDU development with customers; mid-FY26 revenue timing; optimizer integration for efficiency .Active development; revenue in mid-FY26.

Management Commentary

  • “Our Climate Solutions segment had another outstanding quarter… Data Center revenues increased by 176% this quarter, propelled by strong organic growth and the inorganic benefit of the Scott Springfield acquisition” – Neil Brinker .
  • “We are receiving many requests for quotes… for our coolant distribution unit (CDU)… able to operate at a higher efficiency level through the use of our optimizer software and monitoring system” – Neil Brinker .
  • “Third quarter sales increased 10%… Our gross margin improved 160 basis points to 24.3%… This quarter now represents the 12th consecutive quarter of year-over-year margin improvement” – Mick Lucareli .
  • “We are reaffirming our previously announced guidance for Fiscal 2025, which would result in our third consecutive year of record results” – Neil Brinker .

Q&A Highlights

  • Hyperscaler build schedules unchanged post AI-efficiency headlines; Modine confident demand persists and cites recent hyperscaler CapEx commitments supporting outlook .
  • CDU pipeline: competitive bids combined with bespoke development; differentiation via features and optimizer integration; initial CDU revenue targeted for mid-FY26 after validation/testing .
  • Share gains: majority in North America across chillers, CRAC/CRAH, CDUs, and optimizer software; capacity footprint expanded from ~1.5 to ~10 facilities enabling >$1B data center revenue potential .
  • PT outlook: auto improving in Europe post slow December; medium/heavy truck soft through 2025; ag/construction potential pickup in 2H25; actions taken to reduce fixed costs with ~$15M targeted annual savings .
  • Service moat: UK model being replicated in US with concentrated service teams in key regions to support install, maintenance, uptime optimization .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 FY25 EPS and revenue was unavailable during this session due to a data access limit; therefore, explicit beat/miss vs consensus cannot be provided at this time. Values would be retrieved from S&P Global if available.*

Where estimates may need to adjust:

  • Climate Solutions strength and raised internal data center outlook suggest upward revisions to data center-related revenue/margins, while persistent PT softness and FX headwinds point to conservative assumptions in vehicular end-markets .

Key Takeaways for Investors

  • Data center momentum is accelerating with 176% YoY growth and clear North American share gains; expanded global capacity supports >$1B revenue potential in the segment .
  • Climate Solutions continues to drive company margins (21.0% adj. EBITDA), offsetting PT cyclicality; mix shift remains a core earnings lever .
  • FY25 guidance maintained despite PT headwinds and FX, implying confidence in data center pipeline, SSM integration, and execution on 80/20 initiatives .
  • PT near-term pressures persist; cost actions and portfolio optimization (including ~$15M annual savings) provide margin support through the cycle .
  • CDU commercialization mid-FY26 and service expansion in the US are incremental growth vectors and potential multiple-expansion narratives .
  • Tariff risk appears manageable via pass-throughs and regional manufacturing; <10% of spend subject to proposed tariffs .
  • Cash generation remains strong (Q3 FCF $44.7M; YTD $102.2M) and leverage is low (0.8x), enabling capacity expansion and strategic investments .