Modine Posts Fourth Straight Record Quarter, Lifts FY2027 Outlook
Modine Manufacturing's adjusted EBITDA climbed 40% to a record $146.1 million as its data-center cooling business kept reshaping the company ahead of a planned spin-off.
Modine Manufacturing (MOD), a thermal-management maker now built around data-center cooling systems, reported net sales of $954.4 million for the quarter ended March 31, up 47% from $647.2 million a year earlier and its fourth consecutive record quarter. Net earnings rose 47% to $73.6 million, or $1.36 a share, while adjusted earnings climbed 53% to $1.71 a share.
The quarter capped a year in which Modine's results diverged sharply depending on which line investors read. Full-year net sales reached a record $3.18 billion, up 23%, or $597.6 million, from the prior year. Full-year net earnings fell 34% to $123.3 million and earnings per share dropped by the same margin to $2.26, the result of a $116.1 million non-cash charge tied to the termination of a U.S. pension plan that Modine recorded in the fiscal third quarter. Adjusted EBITDA, which strips out that charge, still rose 20% for the year to a record $471.0 million.
The pension charge drove Modine to a $46.8 million net loss and a $0.90 per-share loss in the third quarter even as adjusted EBITDA that quarter rose 37% year over year, underscoring how much of the annual earnings swing traced to a single non-recurring item rather than to operating performance. No equivalent charge appeared in the fourth quarter.
Data Centers, the segment built around liquid cooling for hyperscale computing, drove the acceleration. Segment sales rose sequentially every quarter of the fiscal year, from $183.7 million in the first quarter to $401.9 million in the fourth, lifting the segment from roughly 27% to about 42% of total company revenue. Margins in that segment moved the other direction for part of the year: adjusted EBITDA margin compressed from 22.1% in the first quarter to 18.1% in the second before recovering to 19.1% by the fourth, as Modine absorbed capacity-expansion costs to keep pace with demand. Company-wide adjusted EBITDA margin followed a similar arc, bottoming at 14.0% in the second quarter and expanding to 15.3% by the fourth. Fourth-quarter gross margin still fell 320 basis points year over year to 22.5%, which the company attributed to the same data-center capacity investments along with higher tariffs and material costs.
Modine's other cost lines told the story of a company in transition. "Disposition costs" tied to Modine's pending Reverse Morris Trust transaction with Gentherm first appeared in the third quarter at $2.4 million and grew to $12.5 million in the fourth, bringing the full-year total to $15.0 million. A $3.9 million loss on the sale of assets tied to settling an Austrian automotive business loan showed up for the first time in the fourth quarter, while acquisition and integration costs tied to two prior-year deals, which totaled $5.3 million for the year, dropped out of the disclosure entirely after the second quarter. Corporate and eliminations losses widened to $17.1 million in the third quarter before narrowing to $15.6 million in the fourth, tracking the buildup in disposition costs.
The results arrived alongside a recast segment structure. Modine reported the quarter under a new three-segment presentation—Data Centers, Performance HVAC and Commercial Technologies—replacing the prior Climate Solutions and Performance Technologies split, following the company's announced spin-off of its Performance Technologies business to Gentherm.
Modine issued fiscal 2027 guidance calling for net sales growth of 20% to 35% and adjusted EBITDA of $650 million to $680 million, implying growth of 38% to 44%. That marks a step up from the guidance Modine gave after its third-quarter results, which had called for 20% to 25% sales growth and adjusted EBITDA of $455 million to $475 million. Sequential momentum backed the higher bar: fourth-quarter sales rose 18.6% from the third quarter and adjusted EBITDA rose 22.2%, extending the sequential acceleration management had flagged after the third quarter, when sales rose 31% from the second.
The pending Gentherm transaction leaves Modine's near-term reporting in flux, with disposition costs likely to keep building until the spin-off closes.