Madison Air Solutions Corporation Class A

Good morning and welcome to the Madison Air first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's call is being recorded. I will now turn the call over to Steve Lotufo, Senior Vice President, Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Madison Air's first earnings call as a public company. We're thrilled to speak with you today about Madison Air and our first quarter of 2026 earnings performance. Joining me today, Jill Lyon, President and Chief Executive Officer, and J.J. Foley, Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements on this call are overlooking in nature and are subject to risks and uncertainties that could cause actual results of different materials. For information concerning these risks, please see Madison Air's recent SEC filing. We undertake no obligation to update these statements as a result of new information or future events. In addition, in today's remarks, when comparing 1Q2026 results to 1Q2025, we're referring to our 2025 performance. Such information is presented on a combined basis for Madison Air and April Air, calculated as if April Air had been owned since January 1, 2025. We will also refer to certain other non-GAAP financial measures. You can find calculations and a reconciliation of these measures in the most closely comparable gap measure in our earnings release, presentation accompanying this call, and in the supplemental information as applicable, which can be found in the investor relations section of our website at madisonair.com. With that, I'll turn the call over to Jill.

Thank you, Steve. Good morning, everyone, and thank you for joining us for our first quarter earnings call. This call marks an historic milestone for the Madison Air team. present our earnings for the first time as a public company following our successful IPO. I'll begin by providing an overview of our business and our value creation model. I'll then hand the call over to JJ to discuss our first quarter 2026 financial results and guidance for full year 2026. And then I'll wrap things up with key takeaways before we open the call for Q&A. Before we dive in a bit of context, as you get to know Madison Ayer and our team, I joined the company as president and CEO in 2021. after serving several leadership roles with Ecolab, most recently as president, global regions, and global life sciences and healthcare. My career has spanned advanced manufacturing, operational execution on a global scale, and large-scale growth transformation, and the sum of my experiences shapes how we're building this company, and it's what gives me confidence in the opportunity ahead of us. With that, please turn to slide five. At Addison Air, we see air differently. Our mission is to make the world safer, healthier, and more productive through the power of better air. We build and scale superior air quality businesses that operate in high-value niches adjacent to traditional HVAC across commercial and residential markets. Our portfolio of leading brands, which includes Addison, Aprilaire, Big Ass Fans, Brough New Tone, Nortec Air Solutions, Nortec Data Center Cooling, and Retner, has delivered durable compounding growth and, in fact, outpaced the U.S. GDP growth rate in 16 of the last 18 years on a historical basis through 2025. Our recent IPO was a significant milestone, enabling us to advance our strategy to deliver scalable, profitable long-term growth, and we believe we have a sustainable performance trajectory for 2026 and beyond. Our three core strengths deliver better air, stronger customer outcomes, and superior returns for our investors. Medicine Air's first core strength is what we call return on air, the tangible value created when air becomes a strategic asset. It's the tangible impact our solutions have on customer outcomes in high-value environments where air affects uptime, efficiency, compliance, productivity, and health. From reducing costly downtime in data centers, which can cost our customers up to $9,000 per minute, to contributing to improved consistency and yield in semiconductor clean rooms by reducing contamination incidents, or reducing harmful volatile organic compound concentrations in homes, Madison Air delivers return on air in mission-critical environments where air quality is vital to customer success. Our second core strength is leadership in growth markets. In our commercial segment, we serve 15 structurally attractive high-growth end markets where performance matters and customers are willing to invest in highly engineered air quality solutions because of their capacity to deliver tangible results. In residential, we train contractors to identify indoor air quality opportunities and communicate the value of our complete healthy air system. And the company's third core strength is a disciplined value creation model that seeks to convert that demand into consistent profitability and strong cash flow, with a leadership team focused on strategically deploying capital to drive durable returns. Our decentralized organization structure allows us to invest closest to the point of impact, that is to say, close to the customer. And our entrepreneurial culture drives dedicated teams to wake up every day focused on the markets and customers they serve. We estimate that we've more than tripled our total addressable market since 2021 by sharpening our focus on high growth sectors with more complex process requirements and are well positioned to create durable vectors for long-term value. This model has allowed us to scale efficiently, sustain performance through cycles, and compound enterprise value over time. Being locally agile at enterprise scale is a competitive advantage for us. The powerful combination of outcome-driven solutions, focus on growth markets, a scalable operating model, and consistent execution underpins both our near-term opportunities and long-term potential. Please turn to slide six. At a high level, as of 2025, Madison Air is a $3.5 billion revenue business with strong underlying profitability and cash generation, delivering 26.6% EBITDA margins and $440 million in free cash flow last year. We've intentionally built a balanced portfolio across commercial and residential segments with meaningful exposure to replacement and upgrade activity, which helps drive resilience across cycles. We're also seeing an increasing share of demand from the aftermarket, which adds stability and more recurring revenue characteristics. Our aftermarket sales are approximately 10% of total revenue today, and the services opportunity is growing at a double-digit tagger. The available growth in services and potential lifecycle value is very attractive. We estimate this is around three times for Nortec and up to nine times for Aprilaire. We're accelerating that growth through initiatives like Nortec Care Plus, expanding our services and parts capabilities, and by building momentum at businesses like Big Ass Fans where we're growing installation and preventive maintenance. Geographically, the business is predominantly North America focused where we have strong market positions and established customer relationships. As of March 31st, 2026, we had over 8,800 employees with about 600 of those focused on R&D to drive innovation. Altogether, we believe our margin profile, strong cash conversion, and end market mix gives us a durable and balanced model for revenue growth and earnings. Please turn to slide seven. We believe Madison Air's portfolio brings together broad product and service capabilities with significant opportunity as we apply our return on air approach to high-value performance-driven end markets spanning both commercial and residential segments. We operate within an estimated $40 billion North American addressable market supported by powerful secular tailwinds, including the reshoring of advanced manufacturing, growing demand for energy efficiency, aging buildings and housing stock, increased focus on human health and wellness, and, of course, the rapid growth of AI and computers. On the commercial side, we focus on mission-critical environments like data centers, hospitals, and advanced manufacturing facilities where performance, reliability, and energy efficiency directly impact customer outcomes. Our capabilities span the full range from thermal management and air handling, humidity control, and beyond, allowing us to deliver integrated solutions rather than standalone products. In residential, we play a leading role in advancing healthy air solutions for single and multifamily homes. As homes become more airtight to improve energy efficiency, the need for indoor air quality solutions, including purification, ventilation, humidification, dehumidification, and sensors and digital controls, becomes even more important. Through our channel partners, we have about 40 million annual in-home touch points with potential customers through HVAC replacement and service opportunities, creating a powerful route to drive adoption of these solutions. Across both segments, the common thread is our focus on solving complex error challenges in ways that are tangible, differentiated, and essential to our customers. Please turn to slide eight. Our new business pipeline remains strong with continued growth across key end markets, combined company orders through 29%, including Aprilaire orders prior to the Aprilaire acquisition, and reached a 1.4 times book-to-bill ratio in the first quarter. While our orders can naturally fluctuate quarter to quarter based on project timing and customer schedules, our first quarter results reflect solid underlying demand despite a dynamic macro backdrop. We exited the first quarter with record backlog of $2.5 billion, up 116% year-over-year on a combined company basis, providing good visibility into near-term revenue. And our pro forma net sales growth of 13% reinforces the growth momentum we are driving across the portfolio. At the same time, we are closely monitoring the potential impact of the Middle East conflict on our supply chain, where we have been building resilience since the post-COVID dynamics of 2021. We're also watching the pace of customer decision-making while staying focused on execution and on controlling what we can control operationally. As of today, we are not seeing a material impact. Additionally, as a reminder, orders face tougher comps in the second half, particularly in the fourth quarter of 2025, where the commercial segment printed a book-to-bill of 2.2 times last year. On the right, this example with big-ass fans illustrates how our innovation can translate directly into customer value to deliver tangible productivity, gains, safety, improvements, and cost savings, which is central to our customers and to our ability to sustain both growth and value pricing. This example demonstrates what return on air means for our customers. Our Velocity trailer comfort solution, which is mounted on the side of a manufacturing dock door, enables a big-ass Vans customer to gain up to five additional trailer loads per dock per day and delivers cooling performance in approximately half of the time of our closest competitor. It's also a great example of how our innovation is often born through the deep customer insights we gain over the course of long-standing relationships, which in this case was through our direct sales channel. Slide 9 ties together how we translate our return on air value proposition into consistent value creation. At the core, we transform air from a commodity into a strategic asset that drives tangible business outcomes. For customers, this means higher productivity, lower energy costs, health, comfort, and home preservation, and protection of mission-critical operations. We strive to leverage this to expand our presence in advantaged, higher growth end markets where we believe there's meaningful runway for continued growth. We actively drive both organic growth and disciplined capital allocation into adjacencies, supported by a focused 80-20 operating model and a strong ownership mindset across our culture. The results of business designs deliver sustainable, profitable growth and strong cash generation over time. One essential element of our unique value creation model is our team, the 8,800 plus people who power Madison Air. We invest in our team and our culture to create consistency and alignment and to ensure the value creation model is embedded across the organization and shows up in how we execute every day. Over the past few weeks alone, we've put more than 60 leaders from across Madison Air through rigorous sales and 80-20 training courses, sharpening our focus on the highest impact levers that drive growth across our businesses. We've hosted immersive sessions, equipping our team to use AI as a growth enabler and to build capability throughout the organization so we can move faster and deliver stronger outcomes. We also held an enterprise-wide innovation summit, which I host at least twice every year. These summits convene a diverse cross-section of leaders from engineers and R&D to sales and marketing to solve our customers' thorniest challenges through innovation, all while sharing ideas, servicing opportunities, and scaling best practices across the company. This is collaboration with impact, grounded in solving real customer problems and delivering return on error. When our people are aligned, equipped, and moving with speed and with clarity, it shows up in how we perform, and the result is a business designed to deliver sustainable, profitable growth and strong cash generation over time. And with that, I'll turn it over to JJ to walk through our first quarter financial performance and the outlook.