Record Revenue and Adjusted EBITDA
Fourth consecutive year of record-breaking revenue and adjusted EBITDA; consolidated adjusted EBITDA improved 40% year-over-year and adjusted EPS increased 53% to $1.71.
Modine
· MOD
May 26th, 2026
Summary
- Earnings Call Date:
- 2026-05-26
- Change Since:
- -13.48%
- Next Earnings Date:
- 2026-08-05
Earnings Call Sentiment
PositiveThe call presented a strongly positive narrative: exceptional top-line growth (especially in data centers and Climate Solutions), record adjusted EBITDA and EPS gains, a landmark $4 billion LTA that validates demand, sizable acquisitions adding revenue, robust free cash flow and planned capacity expansion. Short-term challenges include supply chain component shortages, weather-related lost production, tariff and material cost pressure, and near-term margin compression in parts of the business. Management communicated clear mitigation plans, confidence in demand, and ambitious FY27 guidance. Overall, the positives (record results, large LTA, strong guidance, and cash generation) materially outweigh the temporary operational headwinds.
Company Guidance
Modine guided fiscal 2027 to total company sales growth of 20%–35%, with data center sales accelerating 60%–80% (up from prior multiyear 50%–70%), commercial HVAC up 5%–10%, coils mid‑single digits, and Performance Technologies flat to +5%; management expects each quarter to show >50% year‑over‑year sales growth and sequential increases in Q2–Q4. Full‑year adjusted EBITDA is forecast at $650M–$680M (greater than 40% growth, implying ~100–200 bps of margin expansion), free cash flow of roughly 4%–6% of sales, and a declining leverage ratio from FY26’s 0.8x; Q1 production may be temporarily constrained by part shortages but is not expected to affect the full‑year outlook. The outlook is supported by the $4B+ LTA for 2027–2029, FY26 data center revenue of $1.1B (Q4 >$400M), FY26 CapEx of $143M, Q4 FCF of $153M and a $165M upfront LTA payment recorded as a contract liability.
Data Center Momentum and Long-Term Agreement (LTA)
Data center revenue grew 73% for the full fiscal year to $1.1 billion, with Q4 data center revenue over $400 million (chiller production in North America increased 5x year-over-year). Signed an LTA guaranteeing supply of more than $4 billion of data center cooling products for calendar years 2027–2029; received a $165 million upfront payment to support capacity expansion.
Climate Solutions Segment Outperformance
Climate Solutions reported a 43% increase in full-year revenues (32% organic) and an exceptional Q4 with sales up 87% year-over-year; Q4 Climate Solutions adjusted EBITDA grew 63% driven by strong data center earnings.
Acquisitions and Portfolio Transformation
Completed three strategic acquisitions (Absolute Air, L. B. White, Climate By Design) adding $119 million of incremental revenue during the year, expanding product offerings and channels in HVAC and heating markets.
Aggressive Fiscal 2027 Guidance
Company expects total company sales growth of 20%–35% for FY27; data center sales guidance raised to 60%–80% growth for FY27 (up from prior multi-year estimate of 50%–70%); FY27 adjusted EBITDA guidance $650–$680 million (>40% growth) with 100–200 bps margin improvement expected.
Strong Cash Flow and Financial Position
Positive free cash flow of $153 million in Q4; upfront $165 million customer payment recorded as contract liability; net debt $363 million (leverage ratio 0.8x) and management expects leverage to decline in FY27.
Capacity Investment and Operational Scaling
Announced an incremental $100 million investment to expand U.S. data center capacity (on schedule); doubling of chiller capacity planned by end of fiscal year (about half of current capacity already running).
Strategic Corporate Actions
Announced planned spin-off of Performance Technologies and merger with Gentherm (expected to close before year-end), and a segment reporting recast (Data Centers and Commercial HVAC) to align with strategic focus.
Operator
Greetings, and welcome to Modine's Fourth Quarter Fiscal 26 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kathy Powers. Thank you. You may begin.
Kathleen T. Powers
Hello, and good morning. Welcome to our conference call to discuss Modine's Fourth Quarter Fiscal 26 Results. I am joined by Neil D. Brinker, our President and Chief Executive Officer and Mick Lucarelli, our Executive Vice President and Chief Financial Officer. The slides that we will be using with today's presentation are available on the Investor Relations section of our website, modine.com. On Slide 3 of that deck is our notice regarding forward looking statements. This call will contain forward looking statements as outlined in our earnings release as well as in our company's filings with the Securities and Exchange Commission. With that, I will turn the call over to Neil.
Neil D. Brinker
Thank you, Kathy, and good morning, everyone. I am pleased to report another strong quarter capping off our fourth consecutive year of record breaking revenue and adjusted EBITDA. This is a testament to the hard work and dedication of the entire team. Even more importantly, we have built strong business momentum and significantly advanced our strategic transformation accelerating the evolution of our portfolio to become more focused on higher margin and higher growth businesses. Earl...
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