Modine Manufacturing Company

Greetings and welcome to Modine's fourth quarter fiscal 2026 results conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kathy Powers. Thank you. You may begin.

Hello and good morning. Welcome to our conference call to discuss Modine's fourth 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 with 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. I'm pleased to report another strong quarter, capping off our fourth consecutive year of record-breaking revenue and adjusted EBITDA. This is a testament to the hard work and dedication of the entire team. Even more importantly, we've built strong business momentum and significantly advanced our strategic transformation, accelerating the evolution of our portfolio to become more focused on higher margin and higher growth businesses. Earlier in the year, we announced three strategic acquisitions, Absolute Air, LB White, and Climate by Design, which collectively added $119 million in incremental revenue this year. These acquisitions added key products to our portfolio and opened new end markets and channel partners for our HVAC businesses. In the second quarter, we announced an incremental 100 million investment to expand capacity for our data center products in the U.S. We are more than six months into this work and I'm happy to report that we are firmly on schedule with this crucial initiative. When completed, our investment to expand our operations footprint in the U.S. will provide critical capacity close to our North American customers, allowing us to further advance our market positions in this hyper growth market. In January, we announced that we will further accelerate our transformation by spinning off our performance technology segment and combining it with GenTherm. This transaction will allow us to focus on our high growth businesses while providing an ideal home for our performance technology team. And finally, to close out this remarkable year, I'm proud to announce a landmark long-term capacity locking agreement with a key strategic data center customer. Under the terms of this LTA, we will guarantee capacity to supply more than 4 billion of data center cooling products during calendar years 2027 through 2029. This agreement highlights the confidence our customers have in Modine and validates our need for our current investment in capacity expansion. This has been a year of tremendous accomplishments. I'm so proud of our team's execution and commitment. While we celebrate these successes, we are even more energized by the significant opportunities that lie ahead. Please turn to slide five. Climate Solutions delivered another outstanding, record-breaking year. The segment reported a 43% increase in revenues for the full fiscal year, including acquisitions. Organic sales grew 32% in fiscal 2026. Sales growth in this segment was also driven by data centers, which increased 73% to $1.1 billion. We ended the year with a strong fourth quarter performance in data centers with over $400 million in revenue. To put this in perspective, our chiller production in North America increased five-fold as compared to the prior year. This was despite production delays where we lost 20 shifts due to severe weather in the south. The team worked extremely hard to overcome the impact of this misproduction and make sure we delivered on our customers' commitments, which included significant overtime hours. In addition, we ended the year with our second consecutive quarter of record order intake. I recently toured several of our data center facilities, and I'm pleased to report that the expansion plans are progressing well. We've already shipped our first chillers from Jefferson City, Missouri, and we shipped air handling units and CDUs from our Franklin, Wisconsin plant in the fourth quarter. Overall, I'm very pleased and proud of this team's work. Their efforts have been instrumental to our revenue growth this quarter and will continue to allow us to grow to meet future demand. As we continue to execute on our capacity expansion, we are proactively managing our supply chain to ensure our growth trajectory. We are currently addressing challenges with a few key suppliers, which is affecting our production schedules and efficiency. We began to see a shortage of certain components late in the quarter, and we are implementing corrective actions. We have a dedicated team actively working on solutions, including qualifying new vendors to ensure a stable supply of components. We're confident in our ability to manage through these short-term challenges, and while this will temporarily impact our Q1 production plans, we do not anticipate any impact on our full-year outlook. From a market demand standpoint, we're in a great competitive position. The outlook remains incredibly strong, and we see no signs of slowdown. The hyperscalers are continuing their significant investments with a heavy concentration in North America. We are deepening our partnership with strategic customers, co-developing innovative products to meet their current and future cooling needs. One of the products I'm most excited about is our groundbreaking 3 megawatt chiller, which delivers a 50% increase in cooling capacity with only a 9% increase in footprint. As chip densities increases, data centers will require more cooling capacity within the same footprint. Our 3-megawatt chiller's modular design will be the solution for handling higher heat loads within the same space. We believe this will be a game changer. Innovating alongside our customers for what our dynamic cooling requirements over multi-year periods is giving us greater visibility into future demand, allowing us to invest in our key growth initiatives and products with greater conviction. Now turning to the rest of our climate solution segment. Our HTS business delivered a great quarter, with revenues up 19%. This was largely driven by higher coil sales to data center and heat pump customers. In HVAC technologies, revenues increased 51% from the prior year, driven by recent acquisitions. Our HVAC business on the East Coast and in the South also lost significant production time due to severe weather. Looking forward, we have a great deal to be excited about across this segment. The commercial HVAC portion of the Scott Springfield business is poised for a strong recovery from a down year. This business was negatively impacted by tariffs this past year, but is expected to rebound at fiscal 27. We're also seeing continued momentum in our coils business, not only with data center customers, but also in commercial HVAC markets. Similarly, our heating businesses are also expected to have a good year, led by agricultural heating and markets served by LB White. In summary, I'm very pleased with the performance of the climate solution segment, and I'm confident in our strategy as we head into the fiscal year 27. Please turn to page six. The performance technology segment is making excellent progress on preparing for the planned spinoff and merger with Gen Therm. There are numerous work streams preparing for the separation, including standing up IT systems to ensure that we can deliver a standalone operating business to Gen Therm at close. We have completed several major milestones and have others ahead of us, including GenTherm's S4 submission to the SEC and its subsequent shareholder approval, as well as a receipt of our IRS determination letter on the tax treatment of the reverse Morse trust transaction. Overall, this process remains on track, and we are still expecting to close this transaction before the end of the calendar year, presuming that all these necessary approvals are received. The team is excited about the road ahead, We have worked diligently to improve our business with higher adjusted EBITDA margins on flat to down revenues. Margins were lower this quarter as anticipated, primarily due to higher material costs, including the impact of tariffs. We expect this to improve in fiscal 27 as we pass through and recover these costs. While our vehicular markets have been challenging, we are seeing bright spots and opportunities for growth. The stationary power market continues to be strong, and we expect this to return to growth in fiscal 27. We are also encouraged by the emerging growth in our automotive and construction equipment businesses. Regarding the latest 232 aluminum tariffs, we are proactively working to mitigate their impact on our business. We have a proven track record of managing these situations and are in the process of working through this current round. We have factored a range of expected costs in our guidance, which Mick will discuss in more detail. Before I hand it over to Mick, I'd like to remind you of our upcoming changes to our segment reporting structures. The performance technology segment under the leadership of Jeremy Patton will continue to be reported as a segment until the expected spinoff and merger, which ends the term, closes later this year. Our climate solutions segment has been split into two segments beginning in fiscal 2027. Data centers led by Art Laszlo and commercial HVAC currently led by Eric McGinnis. Eric has announced that he will be retiring in June and his successor will be named at a later date. I'd like to sincerely thank Eric for his leadership and invaluable contributions to Modine over the past five years. We wish Eric a long, happy, and well-deserved retirement. With that, I'll turn the call over to Mick.