Modine reports 28% revenue growth to $874M in Q1 FY2027, reaffirms full-year guidance

Modine disclosed its first quarter fiscal 2026 financial results for the period ended June 30, 2026. The 8-K itself does not contain specific financial metrics; those appear in the attached press release (Exhibit 99.1) and earnings presentation (Exhibit 99.2).

The company scheduled an earnings conference call for July 30, 2026 at 11:00 a.m. Eastern Time. CEO Neil D. Brinker and CFO Michael B. Lucareli will discuss the Q1 results with investors and analysts.

Modine reported first quarter fiscal 2027 results for the period ended June 30, 2026. Net sales grew 28% to $874.1 million driven by Data Centers (up 90%) and Commercial HVAC (up 22%), partially offset by Performance Technologies (down 3%). Net earnings rose 44% to $74.3 million, translating to diluted EPS of $1.37 (up from $0.95). Adjusted EBITDA increased 5% to $106.5 million, while adjusted EPS rose 44% to $1.53. Gross margin compressed 340 basis points to 20.8% due to supply chain constraints in Data Centers, production inefficiencies, and higher material costs.

The Data Centers segment experienced supply chain constraints that limited production and compressed gross margin by 960 basis points to 20.2% (from 29.8% prior year). Management is addressing the bottlenecks by locking in supplier volume commitments and qualifying additional suppliers. The company reports sequential improvements in volume and margins as the quarter progressed and expects to resolve these constraints while meeting customer commitments.

Modine reaffirmed its full-year fiscal 2027 guidance for net sales growth of 20% to 35% and adjusted EBITDA of $650 to $680 million. The guidance includes the Performance Technologies segment for the entire fiscal year. Management will update the outlook after the planned spin-off and merger with Gentherm closes in the fourth quarter of calendar 2026.

The company's planned Reverse Morris Trust transaction to spin off and merge the Performance Technologies segment with Gentherm remains on schedule for closing in the fourth quarter of calendar 2026. The transaction has cleared several major milestones during the first quarter. The company expects to incur approximately $25 to $35 million of additional transaction costs during the remainder of fiscal 2027.

Free cash flow was negative $5.0 million in the quarter, down $5.2 million from the prior year, driven by higher capital expenditures ($46.4 million vs. $27.5 million) to expand Data Centers production capacity. Net debt increased $70.1 million to $432.9 million, primarily due to $64.6 million in treasury stock purchases related to employee tax withholding on vested equity awards. Operating cash flow was $41.4 million, up $13.7 million year-over-year.

Modine reported first quarter fiscal 2027 net sales of $874.1 million, up 28% from $682.8 million in the prior year quarter. Adjusted EBITDA increased 5% to $106.5 million, though the margin declined from 14.9% to 12.2%. Adjusted EPS rose 44% to $1.53 from $1.06. Gross margin compressed from 24.2% to 20.8% due to lower margins across all three business segments.

Data Centers revenue more than doubled to $348.6 million from $183.7 million, driven by strong growth across hyperscale customers. However, adjusted EBITDA margin fell sharply from 22.1% to 14.8%. Management attributed approximately 450-550 basis points of the margin decline to excess labor and unfavorable overhead absorption caused by production ramp challenges and supply chain shortages of key components. The company is working with suppliers to expand capacity and has activated contingency plans including resequencing capacity rollouts.

Commercial HVAC revenue increased 22% to $261.6 million, with acquisitions contributing $20 million and higher demand for coils from data center customers. Adjusted EBITDA margin declined 220 basis points from 18.1% to 15.9%, primarily due to negative business mix including the impact from acquisitions and a higher revenue mix of relatively lower margin coils products. The company is consolidating manufacturing footprint at the CDI location in Owatonna, Minnesota and has completed consolidation of North American coil production in Grenada, Mississippi and Juarez, Mexico.

Modine reaffirmed its fiscal 2027 guidance for revenue growth of 20% to 35%, representing $3.82 billion to $4.29 billion in net sales, and adjusted EBITDA of $650 million to $680 million, up 38% to 44%. The company expects Data Centers sales to grow 60-80%, Commercial HVAC sales to grow 5-10%, and Performance Technologies sales to be flat to up 5%. The guidance includes the Performance Technologies business for the full fiscal year and will be updated once the pending Reverse Morris Trust transaction with Gentherm closes.

Modine reported progress on the pending Reverse Morris Trust transaction to spin off its Performance Technologies segment and merge it with Gentherm. Gentherm has completed S-4 submissions to the SEC and will request shareholder approval, while Modine has completed the filing required for an IRS determination letter. The company expects to close the transaction in calendar Q4 2026 and anticipates incurring approximately $25 to $35 million of additional costs during the remainder of fiscal 2027, primarily for transaction advisory, legal, accounting, tax and other professional services.