Modine Manufacturing Company

Good morning, ladies and gentlemen, and welcome to Modine's fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are on a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Ms. Kathy Powers, Vice President, Treasurer and Investor Relations. Thank you. You may begin.

Good morning and welcome to our conference call to discuss Modine's fourth quarter and full year fiscal 2025 results. I'm joined by Neil Brinker, our President and Chief Executive Officer, and Mick Liccarelli, 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, modeen.com. On slide three 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'll turn the call over to Neal.

Thank you, Kathy, and good morning, everyone. We closed out the year with a strong fourth quarter performance. This was another record year for Modena, with the highest reported sales and profitability in our history for the third year in a row. For the past three years, our strategy has been to shift our business mix to drive top-line growth and expand EBITDA margins. We've made significant investments in order to spur this growth, and for the first time in our history, the climate solutions segment reported higher revenues than performance technologies. The rate of earnings growth has far outpaced revenue growth, driven by 80-20 and the favorable business mix shift. This year, our adjusted EBITDA was up 25% on a 7% sales increase. Mick will cover our fourth quarter financials results and provide our outlook for fiscal 26. But first, I'd like to reflect on some of our accomplishments over the past year. Please turn to slide five. Summit Solutions delivered another outstanding year. the segment reported a 30% increase in revenues, including the benefit of the Scott Springfield acquisition, and a 45% increase in adjusted EBITDA. This resulted in a 220 basis point improvement in adjusted EBITDA margins to 21%. Sales growth in the segment was driven by data centers, which were up 119% to $644 million. Scott Springfield's data center sales were $197 million in fiscal 2025, meaning that about half of the increase came from organic data center growth. Most of the organic growth was in North America, and demand for our chillers continues to be extremely strong. The past quarter, we announced an exciting business with a new cloud customer who is building out AI infrastructure for a new hyperscaler. This is an important win for us, as this is planned to be a multi-phase, multi-location project. Because of this and other orders for chillers in North America, We are increasing production capacity, both at our Rockbridge, Virginia facility and in Grenada, Mississippi. In Grenada, we are adding new production lines for the chillers and end-of-line testing capabilities. This is primarily in response to orders in hand and will also support growth for opportunities in our pipeline. We are also excited to launch a new modular data center cooling solution and are preparing to take our first order in North America. The powerful combination of Airedale by Modine data center cooling solutions incorporated into a modular approach allows us to address the market's need for high density compute infrastructure that's flexible, scalable, cost effective, energy efficient, and can be deployed rapidly to meet the evolving demands of our customers. And finally, we're making progress on our India expansion and are on track to launch production in Q2. We're actively quoting from multiple customers as we plan to service Southeast Asia, and the Middle East from this location. Data centers have been a focus of our investment for some time, but we're also working to grow our commercial indoor air quality and heating businesses. We recently completed the acquisition of Absolute Air, a heating products company, with a complimentary product line and distribution channel to our own. Our business development team is also working on other opportunities for bolt-on acquisitions to grow these product groups. There's a great deal of activity in the climate solution segment, and the key to our success will be executing on all the growth initiatives in front of us. Please turn to page six. The performance technology segment delivered a strong fourth quarter performance despite challenging market conditions. The segment reported a 15% adjusted EBITDA margin in the fourth quarter, resulting in 13.5% adjusted EBITDA margin for the fiscal year, a 200 basis point year-over-year improvement. Our vehicular markets have been in an extended downturn that is currently projected to last several more quarters. In addition, we are experiencing delays in the launch and ramp of electric vehicle programs using our EP Systems products with further uncertainty ahead. This is causing us to lower our expectations for near-term growth for the Advanced Solutions product group. In response, we are making several changes to our business. First, we had previously announced a change to our product groups in the segment and are moving forward with that. are now pivoting to two groups rather than three. Heavy-duty equipment will include off-highway and stationary power products, and on-highway applications will include automotive, commercial vehicle, and specialty vehicle products for both ICE and EV powertrain. Next, we are taking a renewed, critical look at the business processes to streamline operations and lower costs. This involves further cost reductions throughout PT with redeployment of key resources to open positions and climate solutions wherever possible. These actions, along with a simplified org structure, will provide better focus on our customers and end markets while reducing operating costs, allowing us to continue improving margins during this downturn, leading to even greater conversion once the markets recover. It is challenging to improve margins on flat or lower revenue, but that's exactly what we've been doing in the PT segment. Since we started on this journey three years ago, we've improved adjusted EBITDA margins by 800 basis points on flat revenues. We are making great progress towards the EBITDA margin targets introduced at our investor day last September, and we're not backing away from those targets despite these challenging and uncertain market conditions. During this period of heightened global uncertainty and trade concerns, we're focusing on controlling what we can and taking decisive actions where necessary. It is difficult to predict the impact of tariffs on our supply chain as well as on our customers in the broader economic environment. Our market position is strengthened by our global manufacturing footprint and local for local approach. In addition, our supply chain team has navigated these hurdles in the past and will continue to refine their sourcing strategies to keep us cost competitive. It is clear that the execution of our strategic plans and the investments to grow in key markets have resulted in our third consecutive year of record performance. while equally setting the stage for better things to come. With that, I'll turn the call over to Mick.