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    MOD
    Earnings call· Jun 2026(Q1 FY27)

    MODINE MANUFACTURING Q1 FY27 earnings call MOD

    Jul 30, 2026 Source

    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

    5

    • 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

    5

    • 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

    16
    CategoryTargetConfidence
    Total Company Sales Growth
    20% to 35%
    high materiality
    High
    Data Center Segment Sales Growth
    60% to 80%
    high materiality
    High
    Commercial HVAC Segment Sales Growth
    5% to 10%
    medium materiality
    High
    Performance Technologies Segment Sales Growth
    flat to up 5%
    medium materiality
    Medium
    Adjusted EBITDA
    $650 million to $680 million
    high materiality
    High
    Adjusted EBITDA Margin Improvement
    100 to 200 basis points
    high materiality
    High
    Free Cash Flow as Percentage of Sales
    between 4% and 6%
    medium materiality
    High
    Data Center Segment Earnings Growth
    in excess of 85%
    high materiality
    High
    Commercial HVAC Segment Earnings Growth
    double-digit
    medium materiality
    High
    Data Center Adjusted EBITDA Margin
    improve in Q2 and continue that trend in the second half
    high materiality
    High
    Data Center Adjusted EBITDA Margin
    above 20%
    high materiality
    High
    Commercial HVAC Adjusted EBITDA Margin
    incremental improvements each quarter
    medium materiality
    High
    Performance Technologies Spin-off/Merger Close
    before the end of the calendar year
    high materiality
    High
    Hyperscaler LTA Cadence
    20% to 25%
    high materiality
    High
    Hyperscaler LTA Cadence
    35% to 40%
    high materiality
    High
    Hyperscaler LTA Cadence
    35% to 40%
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    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

    Operational metrics

    22
    Total Company Sales Growth
    28%YoY
    Q1 FY27

    Driven by revenue growth in Data Centers and Commercial HVAC.

    Total Company Gross Margin
    20.8%down 340 bps YoY
    Q1 FY27

    Driven by lower margins across all three segments.

    Total Company SG&A as Percentage of Sales
    11.8%down 60 bps YoY
    Q1 FY27

    As revenue continues to accelerate at a faster pace than SG&A.

    Total Company Adjusted EBITDA Growth
    5%YoY
    Q1 FY27

    Resulting in a $5.1 million year-over-year increase.

    Total Company Adjusted EBITDA Margin
    12.2%down 270 bps YoY
    Q1 FY27

    Due to specific items reviewed in each segment, including supply chain shortages, negative mix impact, and rising costs/tariffs.

    Adjusted EPS
    $1.5344% higher than prior year
    Q1 FY27

    Includes a favorable income tax benefit related to shares issued for stock-based incentive compensation awards.

    Capital Expenditures
    higherversus prior year
    Q1 FY27

    Contributed to lower free cash flow.

    Cash Payments (Restructuring and Disposition)
    $14.9 million
    Q1 FY27

    Included in first quarter free cash flow.

    Net Debt
    $433 million$70 million higher than prior fiscal year-end
    Q1 FY27

    Driven mostly by the repurchase of treasury stock in connection with Modine's share-based compensation program.

    Leverage Ratio
    0.9x
    Q1 FY27

    Balance sheet remains strong; anticipated to decrease further by year-end.

    Data Center SG&A as Percentage of Sales
    down nearly 400 bps
    Q1 FY27

    As the rate of revenue growth is far exceeding the increase in SG&A spending.

    Performance Technologies SG&A Reduction
    $2 million
    Q1 FY27

    Resulted from cost savings initiatives, helping to partially offset market impacts.

    Data Center Margin Impact - Warranty Variance
    150 bpsYoY
    Q1 FY27

    Due to a large warranty settlement in the prior year.

    Data Center Margin Impact - Supply Chain & Efficiency
    450 basis points to 550 basis points
    Q1 FY27

    Impact on margins due to excess labor and unfavorable overhead absorption on lower volumes caused by supply chain shortages.

    Commercial HVAC Adjusted EBITDA Growth
    7%YoY
    Q1 FY27

    Despite margin decline.

    Commercial HVAC Adjusted EBITDA Margin Improvement
    150 bps
    Q2 FY27

    Expected uptick in Q2.

    Commercial HVAC Adjusted EBITDA Margin Target
    18% and 20%
    FY27

    Expected to end the year in this range.

    Performance Technologies Adjusted EBITDA Decline
    3%YoY
    Q1 FY27

    From the prior year.

    Performance Technologies Adjusted EBITDA Margin Decline
    10 bpsYoY
    Q1 FY27

    Mostly driven by lower sales volume and the lag effect of recovering higher commodity metals and tariffs.

    Data Center Incremental Revenue
    $100 million
    Q2 FY27

    Expected in Q2, which would put the segment back ahead of its Q4 level.

    Total Company Margin Lift
    200 basis points, 250 basis points
    Q2 FY27

    Expected step up in Q2 for the total company.

    Corporate SG&A Expenses (PT Spin-off)
    $7.1 million
    Q1 FY27

    Primarily for professional services to prepare for the transaction.

    Industry KPIs

    5
    MetricValueDetails
    Price costdecisive pricing actions
    Order backlogsignificant increase
    Data center hvac exposureunprecedented
    Order lead times placement horizon4- to 6-month lead time
    Orders bookings growth by verticalthird consecutive quarter of record order intake

    Orderbook & backlog

    5
    Data Center Order Intakethird consecutive quarter of record order intakeQ1 FY27

    Driving another significant increase in backlog.

    Data Center Backlogsignificant increaseQ1 FY27

    From record order intake.

    Hyperscaler LTA Cadence20% to 25%Q1 FY27

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

    Hyperscaler LTA Cadence35% to 40%Q1 FY27

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

    Hyperscaler LTA Cadence35% to 40%Q1 FY27

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

    Deals & partnerships

    1
    GenthermSpin-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

    6
    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

    5

    Data Center Segment Margin Recovery

    Q2 FY27
    Current14.8% adjusted EBITDA margin in Q1 FY27
    Target19-20% 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.

    Q&A highlights

    5

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

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