Modine Manufacturing Company Q3 FY2026 Earnings Call

· Earnings call transcript and AI-powered summary

Strategic Update

  • Modine announced the planned spin‑off of its Performance Technologies (PT) segment, which will merge with Gentherm. • Modine will receive approximately $210 million in cash. • Shareholders will receive stock equal to 40% ownership of the combined entity. • The PT business is valued at $1 billion (6.8x trailing 12‑month EBITDA).
  • Following the transaction, Modine will become a pure‑play diversified climate solutions company focused on high‑margin, high‑growth markets.
  • The deal is expected to close in 4Q26 (calendar year).

3Q26 Consolidated Results

  • Total sales increased 31% year-over-year, driven by strong performance in Climate Solutions.
  • Adjusted EBITDA increased 37% year-over-year, with margins improving 70 bps to 14.9%.
  • Adjusted EPS rose 29% to $1.19 (excludes $116M non‑cash pension termination charge).
  • Free cash flow was negative $17M due to inventory builds, data center capacity investments, and $24M of pension/restructuring payments.
  • Net debt increased to $517M, driven by acquisitions and capital expansion; leverage remains low at 1.2x.

Performance Technologies (PT) Segment

  • Revenue grew 1% YoY despite weak end markets. • Heavy-duty equipment: down 3%. • On‑highway: up 6%.

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Operator: Good morning, ladies and gentlemen, and welcome to Modine's Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Kathy Powers, Vice President, Treasurer and Investor Relations. Kathy Powers: Hello, and good morning. Welcome to our conference call to discuss Modine's third quarter fiscal 2026 results. I'm joined by Neil Brinker, our President and Chief Executive Officer; and Mick Lucareli, our Executive Vice President and Chief Financial Officer. The slides that we will be using for 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 Brinker: Thank you, Kathy, and good morning, everyone. Before launching into our quarterly results, I'd like to take a moment to review some of the details from last week's announcement regarding the future of our Performance Technologies segment. Since launching our transformation at our first Investor Day, we have made significant progress evolving our portfolio of businesses by investing in high-margin, high-growth businesses while improving our lower-margin busin

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