Madison Air (MAIR) Q2 FY26 earnings call: guidance and Q&A

Can you elaborate on the verticals driving the 50% growth in commercial orders excluding data centers and its sustainability?

Growth was broad-based across advanced manufacturing, clean energy, healthcare, and institutional segments, driven by air movement and custom handling platforms. The diversified portfolio, decentralized model, and 60% replacement/upgrade/aftermarket demand make this growth sustainable.

“We have a diversified portfolio, very focused teams that create a more resilient growth profile. So we see it -- to answer your question, is sustainable, our decentralized model has also been a very meaningful advantage to this kind of balanced growth.”

asked by Andrew Obin · answered by Jill Wyant

Given faster-than-expected deleveraging, is there an opportunity for incremental M&A, and what does the pipeline look like?

The company is delighted with deleveraging progress (2.8x net leverage) and views M&A as an accelerator. They seek acquisitions that strengthen technology platforms, channel presence, expand capabilities in attractive markets, and increase services/aftermarket potential. The M&A funnel is active, with a track record of proprietary sourcing and successful integration like April Air.

“we look at acquisitions that can strengthen our technology platforms, how do we beef up our ability to deliver tangible return on air. So we love great technology. Second of all, we look for businesses that strengthen our channel presence, things like a direct channel, a direct path to the customer, for example. And lastly, acquisitions that really expand our capabilities in attractive end markets. And increasingly, we love M&A deals that increase our exposure to services and aftermarket potential.”

asked by Timothy Wojs · answered by Jill Wyant

Please unpack the margin pressure in commercial, specifically the contribution of mix, production ramp, and tariff costs, and the margin ramp in the CBU business.

Commercial margin pressure was primarily due to mix (rapid growth in data center business), incremental tariffs, and ramp costs, in that order. Ramp costs are expected to improve in H2, and tariff recovery actions will take hold. The data center business is early in its margin scaling journey, but management is confident in its margin playbook.

“I would kind of bucket it into mix, the incremental tariffs and then the ramp costs in that order. The mix-driven piece of this as we really grow that data center business, I think Jill highlighted that as a strong business, early innings as it relates to the margin side of things.”

asked by Jeff Sprague · answered by JJ Foley

What is driving the broad-based strength in air handling, is it new builds or upgrades, and how do price and margin look within the backlog?

The strong backlog is driven by pipeline building, innovation, and focused teams. It's balanced between new build and existing construction, aligning with the 60% replacement/upgrade/services and 40% new construction portfolio. Backlog margins are good and support the expected H2 EBITDA step-up, reflecting bookings, productivity, and incremental pricing.

“I would say the margins in backlog, we feel good about as well as supporting the second half step-up on EBITDA rate for the total company that we outlined in the implied guide midpoint.”

asked by Nigel Coe · answered by JJ Foley

Can you break down the composition of data center wins (liquid vs. air cooling) and discuss supply chain capacity to deliver on backlog?

Data center wins have a balanced mix between hyperscalers and co-locators, and between air and liquid cooling solutions, with liquid growing rapidly. The company has a wide range of CDU products. While electrical components supply chain is strained, proactive work with suppliers and customers, and sufficient existing capacity, mitigate constraints for the near to medium term.

“We -- there's just a lot of thermal energy in a data center that needs to be rejected. So we see a future for both air and liquid cooling, but we like the mix. Our mix of air and liquid cooling solutions is moving where the market is moving.”

asked by Joseph Ritchie · answered by Jill Wyant

Given current growth rates, where would Madison Air need to add capacity, and what is the overall CapEx plan to support this growth?

The company has the necessary footprint and capacity within its asset-light model (low single-digit CapEx as a percentage of sales). They have done brownfield expansions in data centers, parts for commercial aftermarket, and air purification capacity in April Air, all matched to firm demand. They feel ready for the next several years across the enterprise.

“Look, broadly across the company, Deane, I would say we have the footprint we need -- we have the footprint we need and we have accommodated that within our asset-light model. So this is where our 80/20 approach where we focus on what are the best customers and the best products that we want to have the ability to deliver short, medium and long term.”

asked by Deane Dray · answered by Jill Wyant

Do you expect backlog to also be down in Q4, given the anticipated decline in orders, and will scaling become less of a headwind sequentially?

While Q4 orders will be down due to tough comps, book-to-bill will remain healthy, implying backlog could still grow or stay flat. Scaling headwinds are expected to become less significant sequentially in H2, contributing to margin expansion as the team executes productivity initiatives and material cost reduction programs.

“No, I think it becomes less of a headwind as we move in, right? I think as we look at the, call it, 26.8% I think as you look at what we see in the third and the fourth quarter, the rate is probably between 27% and 28% kind of at the midpoint of the guide.”

asked by Scott Davis · answered by JJ Foley

Can you provide more color on the residential segment, specifically the modest organic volume declines and the acceleration of April Air penetration?

Residential sales grew 2% despite a soft housing market, driven by strong healthy air systems growth, contractor conversion, and price execution. April Air continues strong performance, leveraging white space penetration. The residential segment focuses on improving air quality, avoiding traditional HVAC stocking/destocking dynamics, leading to more consistent and durable performance.

“We don't heat and cool the air. We make it better. We improve the quality of air. And so -- and at the end of the day, 92% of U.S. homes have nothing.”

asked by Andrew Kaplowitz · answered by Jill Wyant

Please unpack the Q2 residential margin improvement, including April Air synergies and the impact of tariff refunds, and what to expect in H2.

Residential margin expansion (423 bps) was 1/3 from mix (more April Air) and 2/3 from stronger price and productivity, including net tariffs. Tariff refunds provided a modest benefit, but margins were strong even without them. Residential margins are expected to be slightly down sequentially in Q3 from Q2's strong performance, then contribute to overall H2 margin expansion.

“Resi, up 425 basis points in the quarter, about 1/3 of that was mix, meaning more April Air. The remaining 2/3 was stronger price and productivity, and that does include net tariffs as you kind of think about the overall path to travel on margins, sequentially, I would expect the residential margin to be down a bit from the second quarter.”

asked by Zachary Schechtman · answered by JJ Foley