Modine Manufacturing Company

Good morning, ladies and gentlemen, and welcome to Modine's third quarter fiscal 2026 earnings conference call. At this time, all participants are in 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 then zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Cathy Powers, Vice President, Treasurer, and Investor Relations.

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 Luccarelli, 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 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 will turn the call over to Neil.

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 technology 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 businesses and making strategic divestitures. This past summer, we launched a process to divest our remaining automotive business and instead identified an opportunity to accelerate our transformation by spinning off the performance technology segment and combining it with Genthen, a leading player in thermal management and pneumatic comfort technologies. Modine will receive approximately $210 million in cash, and Modine shareholders will receive stock in the new business in a tax-free distribution equaling 40% of the combined ownership. The combined business will provide renewed focus on investment and growth for performance technologies business and create cross-selling opportunities for GenTherm across new attractive markets. This values the performance technologies business at $1 billion. or 6.8 times the 12-month trailing EBITDA. This recognizes and reflects the hard work we've put into improving margins in the business and allows current Modine shareholders to participate in future synergies and the strong earnings conversion we expect from the business once market volumes improve. The transaction presented an exceptional opportunity to find an ideal home for our PT business while maximizing value for our shareholders and further accelerating our transformation. The remaining business will consist of our current climate solution segment plus corporate support functions. This is the business where we've been focusing on our investments for growth, including six acquisitions over the past three years, and a significant CapEx for expanding capacity for our data center's product. The transaction will allow us to further concentrate on these high-margin, high-growth businesses, allowing us to become a pure-play, highly-focused, diversified climate solutions company. This is the right transaction for Modine and for the shareholders at the right time, allowing us to further our vision of always evolving our portfolio of products in pursuit of highly engineered, mission-critical thermal solutions. Now turning to our quarterly results and the strategic updates. Please turn to slide five. Our end markets in the performance technology segment continue to be challenged, and volumes remain down this quarter. However, commercial execution, and cost recoveries resulted in revenues increasing 1% from the prior year. The segment's adjusted EBITDA margin increased by 400 basis points to 14.8%, reflecting the hard work done over the past year to reduce costs and reallocate resources to the climate solution segment. Now that we've reached an agreement with Jen Thurm, the next several quarters will be spent preparing the business to be spun off in anticipation of the combination. We will also be working on getting the necessary regulatory approvals for the transaction, which we expect to close in the fourth quarter of this calendar year. The Performance Technologies team has worked very hard to improve the business over the past several years and deserves the opportunity to grow. I'm confident that GenTherm will provide a great home for this business, and the structure of this transaction will allow Modine shareholders to continue to participate in their success. We are at a major turning point for Modine. We are making unprecedented investments in the future of our company, while simultaneously accelerating the transformation of our portfolio by merging our performance technology segment with Gentherm. Please turn to slide six. Our climate solutions segment delivered another quarter of outstanding growth, with a 51% increase in revenues, including the contributions from acquisitions. Organic revenue growth from the segment was 36%, driven by a 78% increase in data center sales. Our capacity expansion remains on schedule, supporting the sequential margin improvement we saw this quarter. We commissioned four new chiller lines this quarter, including the first two lines in Jefferson City, Missouri. We have four lines scheduled to come online in the fourth quarter, the final two lines in Grenada, Mississippi, and the first two lines in Dallas. We have also launched an initial production in Franklin, Wisconsin, providing additional capacity for the products currently produced in Calgary. including air handling units and modular data centers. We are often asked if we are concerned about ending up with too much capacity. And the simple answer is no, not at all. Our current projections fully support the capacity we're putting in place based on known demand with existing customers. In fact, we had record order intake this past quarter, further solidifying our confidence and our strategy in financial projections. Looking forward, If there's change in the mix of the products that we need to produce, we'll easily be able to pivot to other data center products on the same lines we are building today. A chiller line can be converted to produce modular data centers or large air handling units. This gives us flexibility to manage future demand and meet customer requirements in what continues to be a dynamic environment. We've also received many questions regarding the recent comments on the ability of next generation chips to operate at higher temperatures. and the potential impact to the future of data center cooling. First off, none of this was a surprise to us. We are constantly working with our customers to ensure that we are designing the data center cooling solutions they need today and into the future. Having a higher ambient temperature for water running through the liquid cooling loop is a positive development, as it potentially reduces the energy required to run mechanical cooling processes by leveraging a hybrid technology utilizing free cooling options currently available on our chillers. In fact, we recently announced the launch of a new three megawatt turbo chilled chiller platform that is specifically designed to provide advanced free cooling heat rejection for high density next generation GPU power data centers. Power remains a focus for data center operations. So increasing PUE by reducing energy consumption in the cooling process is a major advantage and why we continue to gain market share. It is also important to realize that there are many different approaches to data center cooling, and our goal is to provide a full range of solutions that are customizable at scale. We see our market opportunities continue to grow as we continue to invest in both capacity and product development to cement our position as a technology leader in the market. We previously shared our target of delivering over $1 billion in data center sales this year, and we remain on track to deliver on that goal. We have also shared that our current capacity expansion will allow us to reach $2 billion in data center sales by fiscal 2028. And I'm happy to report that we remain confident in this target as well, further supported by our record order intake last quarter. We've recently updated our data center revenue projections and currently expect to deliver 50% to 70% annual growth in data center revenue over the next two years, which would put us comfortably ahead of this target. Our confidence in this target comes from understanding our customers' long-term strategic roadmaps. The industry is moving towards long-term supply agreements that lock up supplier capacity in advance. Our team is actively engaged in these discussions, which we expect to lead to multi-year orders. Our recent success and growth stems from our 80-20 focus and market-leading technology. The feedback from our customer is clear. Our products are the most efficient on the market, resulting in substantial savings from lower energy costs. This allows us to be a key partner in developing next-generation cooling products, cementing our role as a key strategic supplier. As we scale our production capacity, we are in prime position to continue capturing market share. I'm very proud of all the hard work put in by the Climate Solutions teams this year. We've completed three strategic acquisitions and embarked on the largest capacity expansion in the history of the company, all squarely in line with our strategic goal of investing in high-growth, high-margin businesses. With that, I'll turn the call over to Nick.