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; transaction expected to close by end of 2026, subject to approvals.

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

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

• Record order intake and robust demand in data centers underpin confidence in long-term growth targets.

• A $116.1 million non-cash pension termination charge led to a net loss of $46.8 million for the quarter.

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 by 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, down $149.6 million year-over-year, mainly due to higher working capital and capital expenditures.

Outlook and guidance

• Fiscal 2026 net sales expected to grow 20%–25% to $3.10 billion–$3.23 billion.

• Climate Solutions full-year sales outlook raised to 40%–45% growth, 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.

• Adjusted EBITDA guidance raised to $455 million–$475 million for fiscal 2026.

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