Modine Manufacturing Company (MOD) Q3 2026 earnings summary

Executive summary

• Announced the spin-off of the Performance Technologies segment via a Reverse Morris Trust transaction to be combined with Gentherm, valuing the business at $1 billion, providing $210 million in cash and a 40% stake in the new entity for shareholders; transaction expected to close by end of 2026, subject to approvals.

• Transformation accelerates focus on high-margin, high-growth Climate Solutions, positioning as a pure-play climate solutions company.

• Achieved 31% year-over-year sales growth in Q3 FY26, driven by strong demand in data centers and HVAC Technologies, including recent acquisitions.

• Record order intake and robust demand in data center cooling drive strong results and future confidence.

• Acquired AbsolutAire, L.B. White, and Climate by Design for $186.2 million, expanding the Climate Solutions segment's product portfolio and customer base.

Financial highlights

• Q3 FY26 net sales rose 31% year-over-year to $805.0 million, driven by Climate Solutions segment growth and acquisitions.

• Adjusted EBITDA increased 37% to $119.6 million, with margin up 70 basis points to 14.9%.

• Adjusted EPS grew 29% to $1.19, excluding a $116.1 million non-cash pension settlement loss.

• Gross profit increased by $36.5 million to $186.1 million, but gross margin declined 120 basis points to 23.1% due to temporary expansion costs.

• Free cash flow for the nine months ended December 31, 2025, was negative $47.4 million, mainly due to higher working capital and capital expenditures.

Outlook and guidance

• Fiscal 2026 net sales growth outlook raised to 20%-25%, with guidance of $3.10B–$3.23B.

• Climate Solutions full-year sales growth outlook increased to 40%-45%, with data center sales expected to grow over 70% and exceed $2 billion by FY28.

• Performance Technologies sales expected to be flat to down 7% as end markets remain depressed.

• Fiscal 2026 Adjusted EBITDA outlook raised to $455 million–$475 million.

• Management expects to remain in compliance with debt covenants and believes liquidity is sufficient for short- and long-term needs.