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    MAIR
    Earnings call· Mar 2026(Q1 FY26)

    Madison Air Solutions Q1 FY26 earnings call MAIR

    May 12, 2026 Source

    Executive summary

    Madison Air Q1 FY26 — Strong Commercial Orders and Data Center Growth Drive Solid Start as Public Company

    Madison Air reported robust Q1 FY26 results, marking its first earnings call as a public company, with strong pro forma net sales and adjusted EBITDA growth driven by commercial segment momentum, particularly in data centers, and resilient residential demand. The company is focused on leveraging its 'Return on Air' strategy in high-value niches, while actively deleveraging its balance sheet and pursuing disciplined M&A to sustain long-term profitable growth.

    Highlights

    5

    • Pro forma net sales grew 13% year-over-year to $924 million, driven by strong volume and price realization.

    • Adjusted EBITDA grew 16% with margins expanding 70 basis points to 25.3%.

    • Commercial segment orders increased 41% year-over-year, leading to a record backlog of $2.5 billion, up 116%.

    • Residential segment net sales increased 4% on a combined company basis, driven by strong demand for AprilAire's healthy air systems.

    • Generated $50 million of reported free cash flow, representing 117% conversion, and reduced net leverage to 3x trailing after IPO proceeds.

    Concerns

    3

    • Gross tariff costs are expected to be $100 million for FY26, representing a $50 million increase from 2025, posing a near-term margin headwind.

    • Commercial air handling sales were down in Q1 due to customer hesitancy on new projects, though orders have since picked up.

    • Orders face tougher comps in H2 2025, particularly Q4 2025, where the Commercial segment had a book-to-bill of 2.2x.

    Guidance & targets

    13
    CategoryTargetConfidence
    Full Year 2026 Net Sales
    $3,750 million to $3,850 million
    high materiality
    High
    Full Year 2026 Adjusted EBITDA
    $1,020 million to $1,065 million
    high materiality
    High
    Full Year 2026 Adjusted EBITDA Margin
    27%
    high materiality
    High
    Full Year 2026 Free Cash Flow Conversion
    greater than 100% of net income
    medium materiality
    High
    Full Year 2026 Capital Expenditures
    less than 2% of sales
    medium materiality
    High
    Full Year 2026 Interest Expense
    approximately $250 million
    medium materiality
    High
    Full Year 2026 Adjusted Effective Tax Rate
    29%
    medium materiality
    High
    Full Year 2026 Diluted Share Count
    approximately 510 million
    medium materiality
    High
    Full Year 2026 Central Expenses
    approximately $40 million
    low materiality
    High
    Full Year 2026 Gross Tariff Costs
    $100 million
    medium materiality
    High
    Net Leverage Target
    less than 2.5x net debt to EBITDA
    high materiality
    High
    Q2 Net Sales Growth
    mid-single-digit plus
    medium materiality
    Medium
    Q2 Margins
    step up sequentially
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Commercial
    Reported net sales grew 24% YoY, or 18% on a combined company basis, driven by volume, pricing, and favorable mix, particularly in higher-value applications. Adjusted EBITDA grew 25%, outpacing revenue growth, reflecting operating leverage, productivity, expense management, and pricing discipline. Benefits from exposure to mission-critical end markets including data centers, clean energy, and healthcare.
    Orders up 41% year-over-year on a combined company basisBacklog increased 124% on a combined company basis
    		$610 million18%—$161 million
    Residential
    Reported net sales grew 60% YoY, or 4% on a combined company basis, supported by pricing, while overall volume was roughly flat. Adjusted EBITDA grew 84%, with margin expansion driven by cost actions, productivity, and favorable mix. Demonstrates resilience and differentiation despite softness in housing starts and remodeling activity, benefiting from strong demand for AprilAire's healthy air systems.
    Orders growth in the low single digits
    		$316 million4%—$79 million

    Operational metrics

    31
    Revenue
    $3.5 billion
    FY25

    as of 2025, Madison Air is a $3.5 billion revenue business

    Adjusted EBITDA margin
    26.6%
    FY25

    delivering 26.6% EBITDA margins

    Aftermarket sales as % of total revenue
    10%
    Current

    Our aftermarket sales are approximately 10% of total revenue today

    Services opportunity CAGR
    double-digit
    Current

    and the services opportunity is growing at a double-digit CAGR.

    Potential life cycle value
    3x
    Current

    We estimate this is around 3x for Nortek

    Potential life cycle value
    9x
    Current

    and up to 9x for AprilAire.

    North American addressable market
    $40 billion
    Current

    We operate within an estimated $40 billion North American addressable market

    Total employees
    8,800
    March 31, 2026

    As of March 31, 2026, we had over 8,800 employees

    R&D employees
    600
    March 31, 2026

    with about 600 of those focused on R&D to drive innovation.

    Net sales growth (volume)
    9 points
    Q1 FY26

    volume was about 9 points

    Net sales growth (price)
    4 points
    Q1 FY26

    price was about 4.

    Net debt
    $5.5 billion
    March 31, 2026

    As of March 31, net debt was approximately $5.5 billion

    Net leverage
    5.7x
    March 31, 2026

    with net leverage of 5.7x.

    IPO net proceeds
    $2.6 billion
    Q1 FY26

    approximately $2.6 billion in net proceeds from the IPO

    Initial term loan retired
    $2.4 billion
    Q1 FY26

    This includes our full $2.4 billion initial term loan

    Incremental term loan retired
    $200 million
    Q1 FY26

    and an incremental additional $200 million on the incremental term loan

    Net leverage (pro forma)
    3x
    Q1 FY26

    If we include the proceeds from the IPO and the concurrent private placement, our net leverage would be 3x trailing.

    Total liquidity
    $563 million
    March 31, 2026

    we maintained solid liquidity of roughly $563 million

    Cash on hand
    $229 million
    March 31, 2026

    including $229 million of cash on hand

    Available revolver capacity
    $334 million
    March 31, 2026

    and $334 million of available capacity on our revolver

    Revolver upsizing
    $1.3 billion
    Q2 FY26

    Additionally, we completed an upsizing of our revolver of $1.3 billion, which will become active in the second quarter.

    Long-term revenue growth ambition
    mid-single-digit
    Long-term

    This 2026 growth outlook is above our longer-term mid-single-digit growth ambition

    Long-term adjusted EBITDA growth ambition
    high single-digit
    Long-term

    This is also an increase from our longer-term high single-digit growth ambition

    Pro forma net sales
    $868 million
    Q2 FY25

    That's using $868 million as a second quarter 2025 pro forma jumping off point.

    Tariff cost increase
    $50 millionincrease
    FY26 vs FY25

    it's approximately a $50 million increase in 2026. So $50 million was in the run rate last year, $50 million incremental to $100 million total given the latest tariff announcements.

    US homes with no IAQ solutions
    92%
    Current

    92% of U.S. homes have nothing that we offer in terms of the healthier solution.

    Annual HVAC contractor in-home touch points
    40 million
    Annual

    Through our channel partners, we have about 40 million annual in-home touch points with potential customers

    HVAC contractor penetration (AprilAire)
    15-20%
    Current

    I think there are more than 70,000 HVAC contractors, if my facts are correct, in the U.S., and we are maybe 15%, 18%, 20% penetrated.

    AprilAire CAGR
    high single-digit
    Since 2007

    the AprilAire business has grown high single-digit CAGR since 2007.

    US basements
    40 million
    Current

    there are 40 million basements in this country

    US crawl spaces
    20 million
    Current

    20 million crawl spaces in this country.

    Industry KPIs

    8
    MetricValueDetails
    Price cost4 pointspoints
    Order backlog$2.5 billionUSD
    Book to bill ratio1.4x
    Data center hvac exposureprimary growth driver
    Organic operating leverage70 bpsbps
    Service aftermarket attach10%%
    Order lead times placement horizonextended
    Orders bookings growth by vertical29%%

    Orderbook & backlog

    1
    Total backlog$2.5 billionQ1 FY26

    up 116% year-over-year

    provides good visibility into near-term revenue; 2/3 of company is backlog driven; typically 1-3 quarters duration, but 4-5 quarters for data centers

    Product announcements

    1
    ProductTypeDetails
    WiFi-enabled humidificationlaunch

    Deals & partnerships

    1
    AprilAire (Research Products)Acquisition of a healthy air system provider.

    Acquired in May 2025. Delighted with the acquisition, which has a phenomenally mission-driven team and strong demand for healthier solutions.

    Risks & headwinds

    4
    Middle East Conflict Impactnear-term

    not seeing a material impact

    Mitigation: Proactively building supply chain resilience since 2021.

    Pace of Customer Decision-Makingcurrent

    watching the pace of customer decision-making

    Mitigation: Focused on execution and controlling operational aspects.

    Tough Orders Comps in H2second half

    Commercial segment printed a book-to-bill of 2.2x in Q4 2025

    Mitigation: Not explicitly stated, but implied by focus on execution and diversified portfolio.

    Tariff Costsnear-term

    $100 million for FY26, a $50 million increase from 2025

    Mitigation: Expect to offset over time through pricing and operational activities; expect to recover on a dollar basis in the year and a rate basis exiting the year.

    What to watch in Q2 FY26

    5

    Net Leverage Reduction

    Next 12 months
    Current3x trailing (pro forma post-IPO)
    TargetLess than 2.5x

    Why it matters

    Achieving this target is a key capital allocation priority and commitment to investors, impacting financial flexibility and future M&A capacity.

    We believe we have clear line of sight to achieve our long-term targeted range of less than 2.5x net debt to EBITDA in the next 12 months.

    Q&A highlights

    10

    Seeking additional color on data center orders, the split between liquid and traditional air conditioning, and the hyperscale customer mix.

    Jill Wyant confirmed data centers were a primary growth driver but emphasized broad-based growth across 15 end markets. She noted a balanced trend between liquid and air cooling, with liquid cooling taking a larger share. The company is diversifying across hyperscalers and colocators.

    “Data centers remain strong. I would say -- the second part of your question, air versus liquid, I would say very balanced. Liquid is a larger share of the pie, if you will, than it was last year.”

    asked by Deane Dray · answered by Jill Wyant

    2 min read5 chapters

    Detailed Narrative

    01

    IPO and Strategic Vision

    Madison Air's first public earnings call highlights its strategy to build and scale superior air quality businesses in high-value niches, aiming for durable compounding growth. The company emphasizes its 'Return on Air' approach, focusing on tangible value creation in mission-critical environments like data centers and advanced manufacturing, and advancing healthier solutions in residential settings. This model has historically outpaced U.S. GDP growth in 16 of the last 18 years through 2025.

    02

    Market Opportunity and Secular Tailwinds

    The company operates within an estimated $40 billion North American addressable market, supported by powerful secular tailwinds such as the reshoring of advanced manufacturing, growing demand for energy efficiency, aging buildings and housing stock, increased focus on human health and wellness, and the rapid growth of AI and compute. These factors position Madison Air for continued expansion across its commercial and residential segments, having more than tripled its total addressable market since 2021.

    03

    Operational Strengths and Innovation

    Madison Air's disciplined value creation model, decentralized structure, and entrepreneurial culture drive consistent profitability and strong cash flow. Innovation, exemplified by the Velocity Trailer Comfort solution which enables up to 5 additional trailer loads per dock per day, translates directly into customer value, enabling productivity gains and cost savings. This innovation is fostered through regular innovation summits and deep customer insights, with 600 employees dedicated to R&D.

    04

    Aftermarket and Services Growth

    Aftermarket sales currently represent approximately 10% of total revenue and are growing at a double-digit CAGR, with significant potential life cycle value (estimated 3x for Nortek, up to 9x for AprilAire). The company is accelerating this growth through initiatives like Nortek Care+, expanding service capabilities, and building installer networks for businesses like Big Ass Fans, demonstrating strong growth in Q1.

    05

    AprilAire Penetration Opportunity

    The AprilAire business, a key part of the Residential segment, continues to see strong demand for healthy air systems. With 92% of U.S. homes lacking indoor air quality solutions and 40 million annual in-home touch points with HVAC contractors, the company sees significant whitespace penetration opportunity and a durable growth runway. This is further supported by new innovations like WiFi-enabled humidification, which opens new market channels like basement and crawl space pest elimination.

    AI-generated summary of the company’s earnings call. Not investment advice.