Has the A Quad customer started executing orders against the LTA, and how is the LTA cadencing for '27, '28, '29? Also, what is the confidence in securing supply for FY27, and are longer-term supply LTAs being considered?

Neil Brinker confirmed orders are being placed against the LTA, in line with expectations, with a 4-6 month lead time. The LTA cadences are 20-25% in '27 and 35-40% in '28 and '29. The company is actively discussing longer-term supply LTAs with critical suppliers for FY28/FY29 and exploring vertical integration to mitigate risks. “Yes, we are seeing that. We've taken a couple of orders already. We anticipate more orders as early next week. And that is right in line with what we expect for orders -- for order intake at Q4. So typically, we would suggest it'd be anywhere between a 4- to 6-month lead time in order to prepare that and we're right in line with what our expectations were. In regards to the rollout in '27, '28 and '29, it's 20% to 25% in '27, and then Kathy its 40%? Kathy Powers: 35% to 40% in '28 and '29.”

What is the backlog coverage relative to sales expectations for the year, and is there a risk that supply chain issues could lead customers to competitors?

Mick Lucareli stated that 70-80% of the year's revenue is typically in firm orders at the start of the year, with Q4 orders coming in later. Neil Brinker emphasized that Modine's value-added product differentiates it from commodities, and by prioritizing large customers and providing visibility to smaller ones, they maintain orders and relationships despite longer lead times. “When we start the year we have probably 70%, 80% of it in firm orders or for us being a March year-end, we'll typically talk about really -- and also Neil said typical POs being, call it, 6 months or so, really, really firm 6-months out, 2 quarters.”

How did the supply chain issues and Data Center margins progress through Q1 (June/July), and how did management's actions show through sequentially?

Neil Brinker explained that critical suppliers initially caused hard stops, but Modine negotiated to secure supply and get facilities running. They strategically reallocated available parts to most efficient lines, carrying overhead and labor for short-term issues. Mick Lucareli added that June saw a significant uptick in Data Center margins, returning to the expected 19-20% range, indicating that the third month of the quarter was much more in line with expectations. “When we went through the quarter, we really saw the impact of that supply chain and having the plants waiting for parts. But I was really happy to see when we started the lines up again we finished the quarter, I think what I was saying, I'd say it was up much more in range with where we'd expect to be. So yes, you heard it right. I didn't comment on July, but frankly, that's just because I'm not tracking. I'll get profitability reports here as we come to the end of the month next week. But did want to say that June was a big uptick, and that's a really positive signal.”

MOD

Modine (MOD) Q1 FY27 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q1 FY27)· Industrials· Jul 30, 2026

Source: earnings call transcript

Executive summary

Modine Q1 FY27 — Data Center Growth Surges Amidst Supply Chain Headwinds

Modine reported strong top-line growth in Q1 FY27, particularly in its Data Center segment, which saw a 90% revenue increase and record order intake despite temporary supply chain disruptions impacting margins. The company is actively managing these challenges, expecting sequential margin improvement throughout the year, and remains on track for its full-year record sales and adjusted EBITDA targets. The spin-off of Performance Technologies is progressing as planned, allowing for increased focus on the high-growth HVAC and Data Center businesses.

Highlights

Data Center segment revenue increased 90% year-over-year.
Commercial HVAC segment revenue grew 22%, driven by acquisitions and coil sales.
Adjusted EPS was $1.53, up 44% from the prior year.
Record order intake for the Data Center segment for the third consecutive quarter, driving significant backlog increase.
Full-year adjusted EBITDA guidance of $650M-$680M implies over 40% growth and 100-200 bps margin improvement.

Concerns

Data Center segment margins negatively impacted by 450-550 basis points due to supply chain shortages and lower capacity utilization in Q1.
Commercial HVAC adjusted EBITDA margin was down 220 basis points year-over-year due to temporary business mix and integration inefficiencies.
Gross margin declined 340 basis points to 20.8% across all three segments.
Free cash flow was slightly negative in Q1, lower by $5 million year-over-year due to higher capital expenditures and other cash flow items.
Performance Technologies segment sales decreased 5% in On-Highway applications due to lower end-market demand.

Guidance & targets

Category	Target	Timeline	Confidence
Total Company Sales Growth	20% to 35% high materiality	FY27	High
Data Center Segment Sales Growth	60% to 80% high materiality	FY27	High
Commercial HVAC Segment Sales Growth	5% to 10% medium materiality	FY27	High
Performance Technologies Segment Sales Growth	flat to up 5% medium materiality	FY27	Medium
Adjusted EBITDA	$650 million to $680 million high materiality	FY27	High
Adjusted EBITDA Margin Improvement	100 to 200 basis points high materiality	FY27	High
Free Cash Flow as Percentage of Sales	between 4% and 6% medium materiality	FY27	High
Data Center Segment Earnings Growth	in excess of 85% high materiality	FY27	High
Commercial HVAC Segment Earnings Growth	double-digit medium materiality	FY27	High
Data Center Adjusted EBITDA Margin	improve in Q2 and continue that trend in the second half high materiality	Q2 · FY27	High
Data Center Adjusted EBITDA Margin	above 20% high materiality	H2 FY27	High
Commercial HVAC Adjusted EBITDA Margin	incremental improvements each quarter medium materiality	FY27	High
Performance Technologies Spin-off/Merger Close	before the end of the calendar year high materiality	CY26	High
Hyperscaler LTA Cadence	20% to 25% high materiality	FY27	High
Hyperscaler LTA Cadence	35% to 40% high materiality	FY28	High
Hyperscaler LTA Cadence	35% to 40% high materiality	FY29	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Data Centers Revenue was down sequentially from Q4 as expected due to significant impact from supply chain shortages, a customer program delay, and delayed shipments. Margins impacted by 150 bps warranty variance (vs prior year), 450-550 bps from labor inefficiency/unfavorable overhead absorption due to supply chain, and unfavorable product mix/higher material costs. SG&A down nearly 400 bps as % of sales. Americas sales grew 112%EMEA sales increased 18%Adjusted EBITDA grew 27%	—	90%	—	14.8% adjusted EBITDA margin
Commercial HVAC Margin decline due to temporary business mix (recent acquisitions lower mix impact), integration inefficiencies, and unfavorable revenue mix (higher lower-margin Coil business, lower higher-margin Heating and Coolers businesses). HVAC Technologies sales increased $24 million or 45%Acquisitions contributing $20 million of revenueHeat Transfer Solutions sales improved 7% or $11 millionAdjusted EBITDA increased 7%	—	22%	—	Adjusted EBITDA margin down 220 basis points
Performance Technologies Sales impacted by challenging end market demand. Heavy-Duty Equipment sales driven by GenSet products, offset by lower Off-Highway agricultural equipment sales. On-Highway sales due to lower automotive and commercial vehicle demand. Margin decline due to lower sales volume and lag effect of recovering higher commodity metals and tariffs. Cost savings initiatives resulted in $2 million reduction in SG&A. Heavy-Duty Equipment sales higher by 1% or $1 millionOn-Highway application sales decreased 5% or $9 millionAdjusted EBITDA declined 3%	—	—	—	13% adjusted EBITDA margin

Orderbook & backlog

Data Center Order Intake third consecutive quarter of record order intake Q1 FY27

Driving another significant increase in backlog.

Data Center Backlog significant increase Q1 FY27

From record order intake.

Hyperscaler LTA Cadence 20% to 25% Q1 FY27

Portion of the long-term agreement with a large hyperscaler for FY27.

Hyperscaler LTA Cadence 35% to 40% Q1 FY27

Portion of the long-term agreement with a large hyperscaler for FY28.

Hyperscaler LTA Cadence 35% to 40% Q1 FY27

Portion of the long-term agreement with a large hyperscaler for FY29.

Deals & partnerships

Gentherm Spin-off of Performance Technologies segment and merger with Gentherm.

Gentherm completed its S-4 submission to the SEC. Filing required for an IRS determination letter on the tax treatment of the Reverse Morris Trust Transaction has been completed, with a favorable ruling expected prior to close. Internal IT separation and legal entity reorganization are underway.

Risks & headwinds

Supply Chain Shortages (Data Centers) Q1 FY27, expected to be short-term

450-550 basis point negative impact on Data Center margins in Q1

Mitigation:Actively securing supply, negotiating long-term commitments, expanding supplier capacity, dynamically re-sequencing capacity rollouts, considering vertical integration.

Customer Program Delay (Data Centers) Q1 FY27

Impacted Q1 revenue

Mitigation:Based on new product launch design iterations with a specific hyperscaler; management works closely with customers.

Unfavorable Product Mix and Higher Material Costs (Data Centers) Q1 FY27

Contributed to margin decline in Q1

Mitigation:To be addressed through commercial agreements, expected to contribute to sequential margin improvement.

Integration Inefficiencies (Commercial HVAC) Q1 FY27

Contributed to 220 basis point margin decline in Q1

Mitigation:Consolidating manufacturing footprint, implementing 80/20 initiatives.

Challenging End Market Demand (Performance Technologies) Q1 FY27, expected to be flat with opportunity for improvement in H2

On-Highway application sales decreased 5% or $9 million

Mitigation:Cost savings initiatives ($2 million reduction in SG&A), pricing mechanisms in customer contracts for higher materials.

Lag Effect of Commodity Metals and Tariffs (Performance Technologies) Q1 FY27, expected to become more favorable in future quarters

Contributed to 10 basis point margin decline in Q1

Mitigation:Pricing mechanisms in customer contracts.

What to watch in Q2 FY27

Data Center Segment Margin Recovery

Q2 FY27

Current 14.8% adjusted EBITDA margin in Q1 FY27

Target 19-20% adjusted EBITDA margin

Why it matters

Indicates successful resolution of supply chain issues and improved operating efficiency, crucial for full-year earnings targets.

When we look at going into Q2, we would expect right now a lift to be back between 19% and 20%. And really driven by a significant lift in the volume recovering.

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Q&A highlights

How will Data Center margins improve sequentially to reach the full-year target, and what is the confidence level in resolving supply chain issues for improved deliveries?

Mick Lucareli expects Q2 Data Center margins to return to 19-20% due to a significant volume recovery ($100M incremental revenue), capitalizing on fixed costs. H2 margins are expected to step up further, exceeding 20% as capacity comes online. Neil Brinker noted that the backlog includes stable manufacturing products, and capacity planning accounts for material availability.

“When we look at going into Q2, we would expect right now a lift to be back between 19% and 20%. And really driven by a significant lift in the volume recovering. We expect to see about $100 million of incremental revenue, which would put us back ahead of our Q4 level.”

asked by Noah Kaye · answered by Michael Lucareli

2 min read 5 chapters

Detailed narrative

Data Center Segment Performance and Supply Chain

The Data Center segment experienced 90% revenue growth but faced significant supply chain shortages of key components, leading to temporary downtime and lower capacity utilization. This resulted in a 450-550 basis point negative impact on Q1 margins due to labor inefficiencies and unfavorable overhead absorption.

Management views these as transitional issues, not structural, and is actively securing supply, including exploring vertical integration, to meet long-term capacity commitments and capitalize on unprecedented demand.

Commercial HVAC Segment Growth and Optimization

The Commercial HVAC segment delivered strong 22% revenue growth, primarily from acquisitions and increased coil sales to data center customers. However, adjusted EBITDA margin declined 220 basis points due to a lower-margin mix from recent acquisitions and integration inefficiencies. The company is implementing 80/20 initiatives, optimizing its manufacturing footprint, and consolidating production to improve cost structure and drive margin expansion.

Performance Technologies Spin-off Progress

The planned spin-off and merger of Performance Technologies with Gentherm is on track for completion before the end of the calendar year, pending necessary approvals. Significant milestones, including Gentherm's S-4 submission and IRS determination letter filing for tax treatment, have been achieved. This separation will allow Modine to focus on its core HVAC and Data Center businesses.

Q1 Financial Highlights and Margin Outlook

Total company sales increased 28%, but gross margin declined 340 basis points to 20.8% due to margin pressures across all segments. Adjusted EBITDA grew 5%, with adjusted EBITDA margin down 270 basis points to 12.2%. Management anticipates sequential margin improvement throughout FY27, driven by Data Center recovery, Commercial HVAC initiatives, and material cost recovery in PT, expecting to deliver full-year targets.

Leadership Transition and Strategic Focus

Neil Brinker, CEO, will temporarily lead the Global Data Center business following Art Laszlo's resignation, focusing on capacity expansion and execution for strategic customers. Michael Mahan has joined as President of Commercial HVAC to drive margin improvement and integration. These leadership changes underscore the company's commitment to its strategic growth priorities in the Data Center and Commercial HVAC segments.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.