Skip to content
    MOD
    Earnings call· Mar 2026(Q4 FY26)

    MODINE MANUFACTURING Q4 FY26 earnings call MOD

    May 27, 2026 Source

    Executive summary

    Modine Q4 FY26 — Record Revenue & EBITDA, Landmark Data Center LTA

    Modine delivered a strong quarter, capping a fourth consecutive year of record revenue and adjusted EBITDA, driven by exceptional growth in its Climate Solutions segment, particularly data centers. The company secured a significant long-term capacity agreement for data center cooling, validating its strategic investments and market position. Despite short-term production and supply chain headwinds, management remains confident in its full-year outlook and continued earnings growth, while progressing with the spin-off of its Performance Technologies segment.

    Highlights

    5

    • Achieved fourth consecutive year of record-breaking revenue and adjusted EBITDA, with Q4 adjusted EBITDA up 40%.

    • Climate Solutions segment revenue grew 87% in Q4, driven by 158% growth in data centers.

    • Secured a landmark long-term capacity locking agreement (LTA) for over $4 billion of data center cooling products for calendar years 2027-2029.

    • Data center sales increased 73% to $1.1 billion for the full fiscal year, with Q4 sales over $400 million.

    • Adjusted EPS increased 53% to $1.71 in Q4 FY26.

    Concerns

    5

    • Experienced production delays due to severe weather, losing 20 shifts in data centers and 35 shifts in other businesses, impacting gross margin by 50-100 bps.

    • Encountered component shortages late in Q4, expected to temporarily impact Q1 FY27 production schedules.

    • Performance Technologies segment saw lower Q4 EBITDA margins due to higher material costs and tariffs, though expected to improve in FY27.

    • HVAC Technologies is experiencing negative mix impact and higher costs due to acquisition integration, though temporary.

    • New 232 aluminum tariffs are expected to impact the business, with a typical 3-6 month lag for price adjustments to take effect.

    Guidance & targets

    7
    CategoryTargetConfidence
    Total company sales growth
    20% to 35%
    high materiality
    Medium
    Data center segment sales growth
    60% to 80%
    high materiality
    High
    Commercial HVAC sales growth
    5% to 10%
    medium materiality
    Medium
    Performance Technologies sales
    flat to up 5%
    medium materiality
    Medium
    Adjusted EBITDA
    $650 million to $680 million
    high materiality
    High
    Free cash flow as percentage of sales
    4% and 6%
    medium materiality
    Medium
    Data center multi-year CAGR
    50% to 70%
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Climate Solutions
    Delivered a strong quarter with sales up 87% over the prior year. Adjusted EBITDA grew 63%, driven by strong data center earnings growth. Adjusted EBITDA margin was down versus prior year but improved sequentially. All three product groups generated strong year-over-year earnings growth.
    		—87%—63% adjusted EBITDA growth
    Climate Solutions - Data Centers
    Main driver of Climate Solutions growth, with sales up $246 million or 158%. Saw another sequential margin gain in Q4, despite negative impacts from weather and critical parts shortages. Full fiscal year sales increased 73% to $1.1 billion.
    Chiller production in North America increased fivefold
    		$400M+158%—near doubling in earnings
    Climate Solutions - HVAC Technologies
    Sales increased $33 million or 51%, driven by recent acquisitions, partially offset by slightly lower sales of heating and indoor air quality products. Currently experiencing negative mix impact and higher costs due to acquisition integration, but margins are expected to improve.
    		—51%——
    Climate Solutions - Heat Transfer Solutions (HTS)
    Sales grew 19% or $26 million, primarily driven by coils, with higher sales to commercial HVAC and data center customers. Saw nice sequential margin improvement.
    		—19%——
    Performance Technologies
    Revenue remained relatively flat from the prior year, with lower sales offset by a $12 million positive FX impact. EBITDA margin was down versus prior year due to lower sales volume, higher material and tariff costs. Full fiscal year EBITDA margin improved 30 basis points to 13.8% due to cost savings initiatives. Expected to further improve margins in FY27.
    FX positive impact: $12MHeavy-duty equipment sales: down 5%On-highway sales: up 4%Full fiscal year EBITDA margin: 13.8% (up 30 bps)
    		—flat—15% adjusted EBITDA decline

    Operational metrics

    12
    Adjusted EBITDA
    40% improvementYoY
    Q4 FY26

    Total company adjusted EBITDA improvement.

    Adjusted EBITDA margin
    40 bps increaseQoQ
    Q4 FY26

    Total company adjusted EBITDA margin increase from Q3 FY26.

    Adjusted EPS
    $1.7153% increase YoY
    Q4 FY26

    Total company adjusted earnings per share.

    Net debt
    $363 million$84 million higher YoY
    Q4 FY26

    Net debt at the end of the fiscal year, higher than prior year-end due to acquisitions and CapEx.

    Leverage ratio
    0.8x
    Q4 FY26

    Balance sheet leverage ratio, expected to decline further in FY27.

    Capital expenditures
    $143 million
    FY26

    Total CapEx for fiscal year 2026.

    SG&A as percentage of sales
    10.7%fell by 190 bps
    Q4 FY26

    SG&A expenses as a percentage of sales, showing efficiency gains.

    Disposition costs
    $12.5 million
    Q4 FY26

    Costs related to the pending spin-off of Performance Technologies, included in reported SG&A but added back for adjusted EBITDA.

    Organic sales growth
    32%YoY
    FY26

    Organic sales growth for the Climate Solutions segment for the full fiscal year.

    Production shifts lost
    20 shifts
    Q4 FY26

    Production shifts lost in data centers due to severe weather in the South.

    Production shifts lost
    35 shifts
    Q4 FY26

    Production shifts lost in other parts of the business due to weather-related shutdowns.

    Tariff surcharges recovery lag
    3- to 6-month
    ongoing

    Typical lag before price adjustments take effect to recover tariffs and mitigate increasing metals prices.

    Industry KPIs

    8
    MetricValueDetails
    Price cost—
    Order backlog$4 billionUSD
    Regional exposure—
    Vertical revenue breadth—
    Data center hvac exposure$1.1 billionUSD
    Residential vs commercial split—
    Orders bookings growth by verticalrecord
    Manufacturing footprint domestic share—

    Orderbook & backlog

    2
    Data center cooling products LTA$4 billion2026-05-27

    Guaranteed capacity for calendar years 2027 through 2029; no more than $2 billion in any one year; revenue recognition starts in Q4 FY27.

    Data center order intakerecordQ4 FY26

    second consecutive quarter of record order intake

    Product announcements

    1
    ProductTypeDetails
    3-megawatt chillerlaunch

    Deals & partnerships

    5
    Absolute Airacquisition

    Added key products to the portfolio and opened new end markets and channel partners for HVAC businesses.

    L.B. Whiteacquisition

    Added key products to the portfolio and opened new end markets and channel partners for HVAC businesses.

    Climate by Designacquisition

    Added key products to the portfolio and opened new end markets and channel partners for HVAC businesses.

    Genthermspin-off and merger

    Spinning off Performance Technologies segment and combining it with Gentherm, allowing Modine to focus on high-growth businesses. Requires Gentherm's S-4 submission, shareholder approval, and IRS determination letter.

    key strategic data center customercustomer contract$4 billioncalendar years 2027 through 2029

    Landmark long-term capacity locking agreement (LTA) for data center cooling products, specifically chillers. The upfront payment was recorded as a contract liability and will be reduced over the life of the contract based on future volumes.

    Capital programs

    1
    Data center capacity expansionunderway$100 million
    Start: Q2 FY26

    Benefit: critical capacity close to North American customers

    Incremental investment to expand capacity for data center products in the U.S., more than 6 months into the work and on schedule. Some capital investments will carry over into the next fiscal year.

    Risks & headwinds

    5
    Production delays due to severe weatherQ4 FY26

    20 shifts lost in data centers, 35 shifts lost in other businesses; 50-100 bps negative impact on Climate Solutions gross margin

    Mitigation: Team worked overtime to make up for lost production; confident in ability to manage through short-term challenges.

    Component shortageslate Q4 FY26, Q1 FY27

    Affecting production schedules and efficiency; temporarily impact Q1 FY27 production plan

    Mitigation: Implementing corrective actions, including qualifying new vendors to ensure stable supply; dedicated team actively working on solutions; no anticipated impact on full year outlook.

    Higher material costs and tariffsQ4 FY26 and ongoing into FY27

    Lower Q4 FY26 EBITDA margins in Performance Technologies; new 232 aluminum tariffs announced

    Mitigation: Expect to improve in FY27 as costs are passed through and recovered; typical 3-6 month lag for price adjustments; factored a range of expected costs into guidance; proactive mitigation efforts.

    Negative mix impact and higher costs in HVAC TechnologiesQ4 FY26, temporary

    Impacted margins in Q4 FY26

    Mitigation: Factors are temporary; margins expected to continue to improve as acquisitions are integrated.

    Uncertainty in markets and global economyFY27

    Current level of uncertainty around input costs, tariffs, and overall supply chain

    Mitigation: Guidance ranges reflect this uncertainty; team continually assessing impact and believes majority of tariff impacts can be recovered with pricing and surcharges.

    Q&A highlights

    8

    What are the profitability expectations for the PT business factored into the FY27 guide, to help model a climate-only RemainCo entity?

    PT's top line is expected to be flat to up 5% in FY27. Margins are projected to be between 14% to 15% early in the year, up 25 to 100 basis points, providing a good basis to estimate Modine without PT, with minimal material difference in remaining SG&A.

    “From a margin we see it early this year being between probably like a 14% to 15%, that'd be up maybe 25 to 100 basis points. So that will give you a good idea of impact of PT or how to back that out.”

    asked by Matt Summerville · answered by Michael Lucareli

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Transformation & Acquisitions

    Modine is accelerating its portfolio evolution towards higher-margin, higher-growth businesses. The company completed three strategic acquisitions earlier in the year: Absolute Air, L.B. White, and Climate by Design, which collectively added $119 million in incremental revenue in fiscal 2026. These acquisitions expanded product offerings and opened new end markets and channel partners for the HVAC businesses, contributing to the strong performance of the Climate Solutions segment.

    02

    Data Center Capacity Expansion & LTA

    The company is six months into an incremental $100 million investment to expand U.S. data center product capacity, progressing on schedule. This initiative aims to provide critical capacity close to North American customers. Modine also announced a landmark long-term capacity locking agreement (LTA) to supply over $4 billion of data center cooling products from 2027 through 2029, highlighting customer confidence and validating the capacity investment. This LTA is with an existing customer and specifically covers chillers.

    03

    Performance Technologies Spin-off

    Modine is on track to spin off its Performance Technologies segment and merge it with Gentherm, expected to close before the end of the calendar year. This transaction will allow Modine to focus on its high-growth businesses. The segment is making excellent progress on separation work streams, including IT systems, and is awaiting Gentherm's S-4 submission and IRS determination letter. The Performance Technologies segment is expected to deliver improved margins in fiscal 2027.

    04

    Supply Chain Challenges & Mitigation

    Despite strong demand, Modine faced production delays due to severe weather, losing 20 data center shifts and 35 other shifts, which negatively impacted gross margins. The company also experienced component shortages late in Q4, which will temporarily affect Q1 FY27 production. Modine is actively addressing these challenges by qualifying new vendors and engaging strategically with existing suppliers to ensure a stable supply chain and maintain its growth trajectory, with no anticipated impact on the full-year outlook.

    05

    Product Innovation for Data Centers

    Modine is co-developing innovative products with strategic customers to meet future cooling needs. A key innovation is the groundbreaking 3-megawatt chiller, which offers a 50% increase in cooling capacity with only a 9% increase in footprint. This modular design is crucial for handling higher heat loads as chip densities increase, positioning it as a game-changer for data center cooling solutions. This innovation provides greater visibility into future demand and supports key growth initiatives.

    06

    Fiscal 2027 Outlook & Segment Realignment

    For fiscal 2027, Modine expects total company sales growth of 20% to 35% and adjusted EBITDA of $650 million to $680 million, representing over 40% growth. The data center segment is projected to grow 60% to 80%, exceeding previous multi-year estimates. Starting in fiscal 2027, the Climate Solutions segment will be split into two new segments: Data Centers and Commercial HVAC, with recast fiscal 2026 results to be provided for modeling purposes.

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