Modine Manufacturing pany(MOD) - 2026 Q1 - Quarterly Results

Modine Q1 Fiscal 2026 Earnings Release Financial Highlights and Outlook Modine's Q1 net sales rose 3% to $682.8 million, driven by Climate Solutions, leading to raised FY2026 guidance for 10-15% net sales growth and $440-$470 million Adjusted EBITDA Q1 Fiscal 2026 Key Performance Indicators | Metric | Q1 FY2026 | Change vs. Q1 FY2025 | | :--- | :--- | :--- | | Net Sales | $682.8 million | +3% | | Net Earnings | $51.7 million | +8% | | Adjusted EBITDA | $101.4 million | +0.5% | | Diluted EPS | $0.95 | +8% | | Adjusted EPS | $1.06 | +2% | Revised Fiscal 2026 Full-Year Outlook | Metric | Current Outlook | | :--- | :--- | | Net Sales Growth | 10% to 15% | | Adjusted EBITDA | $440 million to $470 million | - The company is raising its fiscal year outlook due to the impact of recent acquisitions in Climate Solutions and increased demand from data center customers[1][11] - A planned North American manufacturing capacity expansion for data center products is expected to positively impact H2 FY2026 and provides a path to approach $2 billion in data center revenues by fiscal 2028[11] Consolidated Financial Performance Q1 FY2026 net sales grew 3% to $682.8 million, with gross profit up 2% to $165.4 million, while gross margin contracted 40 bps to 24.2% due to Performance Technologies Consolidated Income Statement Highlights (Q1 FY2026 vs Q1 FY2025) | Metric (in millions) | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $682.8 | $661.5 | +3% | | Gross Profit | $165.4 | $162.6 | +2% | | Gross Margin | 24.2% | 24.6% | -40 bps | | SG&A Expenses | $84.9 | $82.8 | +2.5% | | Operating Income | $75.7 | $74.4 | +2% | | Net Earnings | $51.7 | $47.8 | +8% | - Sales growth was driven by the Climate Solutions segment, which was partially offset by lower sales in the Performance Technologies segment due to vehicular market weakness and product line exits[3] - The increase in SG&A was primarily due to higher spending to support growth and acquisitions in Climate Solutions[4] - The company recorded $4.8 million in restructuring expenses, mainly for severance related to headcount reductions in the Performance Technologies segment[5] Segment Performance Segment performance diverged, with Climate Solutions sales up 11% to $397.4 million, while Performance Technologies sales decreased 8% to $285.5 million due to market weakness Climate Solutions Climate Solutions sales grew 11% to $397.4 million, driven by data center and HVAC products, with gross margin improving to 28.4% and operating income rising 12% to $66.9 million Climate Solutions Performance (Q1 FY2026 vs Q1 FY2025) | Metric (in millions) | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Sales | $397.4 | $357.3 | +11% | | Gross Margin | 28.4% | 28.2% | +20 bps | | Operating Income | $66.9 | $59.8 | +12% | | Adjusted EBITDA | $79.4 | $71.9 | +10% | - Organic sales growth for the segment was 7%[32] - Sales increase was driven by data center and HVAC technologies products, with $10 million in incremental sales from acquired businesses[13] Performance Technologies Performance Technologies sales declined 8% to $285.5 million due to market weakness and product exits, leading to a 240 bps gross margin contraction to 18.2% and a 16% drop in operating income Performance Technologies Performance (Q1 FY2026 vs Q1 FY2025) | Metric (in millions) | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Sales | $285.5 | $309.0 | -8% | | Gross Margin | 18.2% | 20.6% | -240 bps | | Operating Income | $26.5 | $31.5 | -16% | | Adjusted EBITDA | $37.5 | $43.7 | -14% | - The sales decrease was primarily due to market-related declines in heavy-duty equipment and on-highway applications, as well as strategic product line exits[13] - Gross margin decline was driven by lower sales volume and higher material costs, which were partially offset by improved operating efficiencies[13] Balance Sheet and Liquidity Net debt increased to $402.6 million as of June 30, 2025, driven by acquisitions, while net cash from operating activities and free cash flow decreased due to increased working capital Debt and Liquidity Summary | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Debt | $527.1 | $350.8 | | Cash and Cash Equivalents | $124.5 | $71.6 | | Net Debt | $402.6 | $279.2 | Cash Flow Summary (Three months ended June 30) | Metric (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $27.7 | $40.5 | | Free Cash Flow | $0.2 | $13.7 | - The increase in net debt resulted from borrowings to fund acquisitions[10] - The decrease in free cash flow was primarily due to an increase in working capital, related to higher inventory balances in Climate Solutions[9] Non-GAAP Financial Disclosures The report utilizes non-GAAP measures such as Adjusted EBITDA, Adjusted EPS, Net Debt, Free Cash Flow, and Organic Sales Growth to evaluate financial performance and liquidity, with detailed definitions and reconciliations provided - Key non-GAAP measures used by management for performance evaluation include: - Adjusted EBITDA: Net earnings excluding interest, taxes, D&A, restructuring, acquisition costs, and other charges - Adjusted EPS: Diluted EPS excluding restructuring, acquisition costs, and certain other charges - Net Debt: Total debt less cash and cash equivalents - Free Cash Flow: Net cash from operating activities less capital expenditures - Organic Sales: Net sales excluding the impact of acquisitions and foreign currency fluctuations[16][18][19][20][21][22] Financial Statements This section presents detailed, unaudited financial statements for Q1 FY2026, including Consolidated Statements of Operations, Balance Sheets, Cash Flows, and reconciliations of GAAP to non-GAAP measures Consolidated Statements of Operations The Consolidated Statements of Operations show a 3% increase in net sales to $682.8 million and an 8% increase in net earnings to $51.2 million for Q1 FY2026 Consolidated statements of operations (unaudited) (In millions, except per share amounts) | | Three months ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | | Net sales | $682.8 | $661.5 | | Cost of sales | $517.4 | $498.9 | | Gross profit | $165.4 | $162.6 | | Selling, general & administrative expenses | $84.9 | $82.8 | | Restructuring expenses | $4.8 | $5.4 | | Operating income | $75.7 | $74.4 | | Interest expense | ($5.8) | ($7.5) | | Other expense – net | ($4.2) | ($0.3) | | Earnings before income taxes | $65.7 | $66.6 | | Provision for income taxes | ($14.0) | ($18.8) | | Net earnings | $51.7 | $47.8 | | Net earnings attributable to Modine | $51.2 | $47.3 | | Net earnings per share – diluted | $0.95 | $0.88 | Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows total assets of $2,228.5 million, an increase driven by inventories, intangible assets, and goodwill, largely financed by increased long-term debt Condensed consolidated balance sheets (unaudited) (In millions) | | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total current assets | $1,155.4 | $961.2 | | Property, plant and equipment – net | $425.9 | $390.5 | | Intangible assets – net | $198.8 | $146.7 | | Goodwill | $268.2 | $233.9 | | Total assets | $2,228.5 | $1,917.6 | | Total current liabilities | $561.9 | $541.0 | | Long-term debt | $482.1 | $296.7 | | Total liabilities | $1,209.8 | $999.4 | | Total equity | $1,018.7 | $918.2 | | Total liabilities & equity | $2,228.5 | $1,917.6 | Condensed Consolidated Statements of Cash Flows For Q1 FY2026, net cash from operating activities was $27.7 million, with $144.0 million used in investing activities and $166.9 million generated from financing, resulting in a $52.8 million net cash increase Condensed consolidated statements of cash flows (unaudited) (In millions) | Three months ended June 30, | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $27.7 | $40.5 | | Net cash used for investing activities | ($144.0) | ($26.5) | | Net cash provided by financing activities | $166.9 | $0.0 | | Net increase in cash | $52.8 | $12.9 | Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations for non-GAAP measures, showing how Q1 FY2026 Net Earnings of $51.7 million reconcile to Adjusted EBITDA of $101.4 million, and diluted EPS of $0.95 to Adjusted EPS of $1.06 Reconciliation of Net Earnings to Adjusted EBITDA (in millions) | Three months ended June 30, | 2025 | 2024 | | :--- | :--- | :--- | | Net earnings | $51.7 | $47.8 | | Interest expense | $5.8 | $7.5 | | Provision for income taxes | $14.0 | $18.8 | | Depreciation and amortization | $19.0 | $19.1 | | Other expense – net | $4.2 | $0.3 | | Restructuring expenses | $4.8 | $5.4 | | Acquisition and integration costs | $1.9 | $1.9 | | Adjusted EBITDA | $101.4 | $100.9 | Reconciliation of Diluted EPS to Adjusted EPS | Three months ended June 30, | 2025 | 2024 | | :--- | :--- | :--- | | Net earnings per share – diluted | $0.95 | $0.88 | | Restructuring expenses | $0.08 | $0.09 | | Acquisition and integration costs | $0.03 | $0.07 | | Adjusted earnings per share | $1.06 | $1.04 |