Modine Manufacturing Company

good morning ladies and gentlemen and welcome to modine's third quarter fiscal 2024 earnings conference call at this time all participants are in a listen-only mode later we will conduct a question and answer session and instructions will follow at that time if anyone should require assistance during the conference please press star 0 on your telephone keypad as a reminder this conference is being recorded i would now like to turn the conference over to your host Ms. Kathy Powers, Vice President, Treasurer, and Investor Relations.

Good morning, and thank you for joining our conference call to discuss Modine's third quarter fiscal 2024 results. I'm joined on this call by Neil Brinker, our President and Chief Executive Officer, and Mick Luccarelli, our Executive Vice President and Chief Financial Officer. We'll be using slides from today's presentation, which can be accessed either through the webcast link or by accessing the PDF file posted on the investor relations section of our website, modine.com. On slide three 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, it's my pleasure to turn the call over to Neal.

Thank you, Kathy, and good morning, everyone. I'm pleased to report another successful quarter highlighted by very strong margin expansion and earnings growth. Our results this quarter further demonstrate our ability to improve our earnings profile as we shift towards faster growing and higher margin businesses. Despite all of our early success, I continue to believe that we are in the early stages of our transformation and are just beginning to realize the opportunities we've identified in each of our core market verticals. In many cases, we are recommitting our focus on operational excellence adding additional resources for lean manufacturing and supply chain to improve productivity, quality, and cost realization. Coupled with the success of our commercial team, this approach, enhanced by 8020, will help to support our ongoing progress towards our goals. Overall, on the M&A front, we feel very good about the pipeline of opportunities available to us. We are not focusing on large transformational deals, but instead are looking for bolt-on acquisitions that bring complementary products and technologies to our key growth verticals. Our recent acquisitions of NAPCS technology and the IP and select assets of TMG Core are perfect examples of this approach. We benefit from a very strong balance sheet, which will help support our inorganic growth targets as we remain vigilant in our search for attractive opportunities that fit our focus areas. Mick will go over our third quarter financial results and provide an update to our full year outlook. But first, I'd like to provide some high level updates on each segment. Please turn to slide five. Starting with our climate solutions segment, we observed many of the same trends we saw in the second quarter. Our data center business remains very strong, with revenue up 34% compared to the prior year. Meanwhile, certain markets for our heat transfer products remain soft, and our revenues continue to be strategically impacted by the exit of low-margin businesses in connection with the 80-20 initiatives. Earlier this month, we shared some very exciting news about the purchase of the IP and select assets of TMG Corp, a specialist in single and two-phase liquid immersion cooling technology. This expands our global data center product offering, allowing us to support the future requirements of our customers as they manage the demands of high-density computing. Our investment in immersion cooling technology, along with the internal development of a cooling distribution unit, or CDU, allows us to expand our product portfolio to address technology gaps while accelerating our ability to be prepared for the technology needs of the future. Further, this new technology will complement our existing high-performance products that maintain the temperature in the hall and add additional opportunities for the development and integration of a complete hybrid data center cooling system. We believe that the best strategy is to have multiple solutions with a complete suite of products that can be customized and optimized to the customer's needs. I'm very excited for the data center team to begin working on commercializing this technology in support of our co-location and hyperscaler data center customers. In further recognition of the expected growth in our data center business, we are transitioning our existing Grenada, Mississippi manufacturing plant to be a data center facility, similar to what we did in Europe at our Spain and UK facilities. Overall, I'm extremely pleased with the performance of the climate solutions segment. We are making the right investments to ensure that our data center business continues to grow and are delivering strong year-over-year earnings improvements despite challenging markets for the heat transfer and heating products. Please turn to slide six. Turning to our PT segment, while our advanced solutions business continues to perform well, we have seen some leveling of the volumes in our air and liquid cooled businesses, which is in line with our expectations. Despite flat revenues, our margins continue to benefit from 80-20 initiatives focused on commercial improvements and productivity enhancements. In addition, our PT segment also made some important announcements this quarter. First off, our EV systems business announced an important partnership for our eVantage thermal management systems with Bosch Rexroth, a recognized leader in drive and controls technologies. Given Bosch Rexroth's strong market position, we are very excited about this opportunity to partner on electrified solutions for the off-highway market. This partnership is still in development phase, but is expected to provide additional growth opportunities in the future. At this point, the team has booked 31 program wins, including four additional wins since the end of last quarter, equating to a projected annual revenue run rate of over $160 million of program maturity. And in addition, the team was also recently recognized by Frost & Sullivan with its 2023 North American Product Innovation Award. This award recognizes our commitment to quality, reliability, and customer service, while also helping our customers achieve their sustainability goals by accelerating decarbonization. I'm so proud of what this team has been able to accomplish, and with the previously announced capacity expansions in the U.S. and Europe, we have ensured that we have the capacity to meet our commitments and future goals. Now, I'd like to pivot to another growth area in the PT segment, our Genset business. Stationary power is a market ripe for growth, with ever-expanding needs for energy security for critical applications such as data centers and healthcare facilities. As we recognize the growth potential of this market, we established a dedicated team devoted to understanding the market and building this business. We are very encouraged by our early progress and expect this to be a key growth area for Modine in the future. Last quarter, we announced that we had completed the divestitures of our German operations that supported the European light vehicle market. We have been transparent about our intentions to exit certain product lines that don't meet our margin targets, and these actions were in line with that strategy. We also mentioned that we would need to reduce certain overhead costs that have historically supported these markets, and we're taking action to address these requirements by consolidating our technical services capabilities. These actions are in line with our broader initiative of focusing resources on opportunities that carry higher growth profiles and more attractive returns through both divestitures and acquisitions. I'm very pleased with our progress and our performance this quarter. Our team is operating at a very high level, and we are not only executing on our strategies, but are putting in the plans in place to reach our next set of goals. With that, I'll turn the call over to Mick.