Q3 FY2026
Filed Nov 5, 2026Madison Air grew Q3 2026 net sales 25.4% to $1,126.7 million, reported backlog of $3,187.2 million, and raised full-year 2026 net sales and Adjusted EBITDA guidance. Adjusted EBITDA margin fell to 26.5% from 28.0%.
Orders (up 25.9%), net sales (up 25.4%), net income (up 89.1%), Adjusted EBITDA (up 18.6%) and backlog (up 119.3%) all grew, and the company raised full-year net sales and Adjusted EBITDA guidance. Offsetting items are Adjusted EBITDA margin down 150 bp in the quarter, free cash flow slightly lower year over year, and a $50.4 million non-operating expense in the quarter that includes a $52.2 million unrealized derivative loss.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Backlog (September 30, 2026)other | $3.19B | – | up 119.3% |
| Net sales, three months ended September 30, 2026GAAP | $1.13B | – | up 25.4% |
| Net sales, nine months ended September 30, 2026GAAP | $3.04B | – | – |
| Cost of goods sold (excluding intangible amortization), three monthsGAAP | −$704M | – | – |
| Cost of goods sold (excluding intangible amortization), nine monthsGAAP | −$1.88B | – | – |
| Gross profit, three months ended September 30, 2026GAAP | $414.2M | – | – |
| Gross profit margin, three months ended September 30, 2026GAAP | 36.8% | – | – |
| Gross profit margin, nine months ended September 30, 2026GAAP | 37.3% | – | – |
| Adjusted gross profit margin, three months ended September 30, 2026non-GAAP | 37.5% | – | – |
| Net income, three months ended September 30, 2026GAAP | $107.4M | – | up 89.1% |
| Net income, nine months ended September 30, 2026GAAP | $220.9M | – | – |
| Net income margin, three months ended September 30, 2026GAAP | 9.5% | – | – |
| Net income margin, nine months ended September 30, 2026GAAP | 7.3% | – | – |
| EPS from continuing operations (diluted), three months ended September 30, 2026GAAP | 0.20 | – | – |
| EPS from continuing operations (diluted), nine months ended September 30, 2026GAAP | 0.48 | – | – |
| Adjusted net income, three months ended September 30, 2026non-GAAP | $199.3M | – | up 100.4% |
| Adjusted net income, nine months ended September 30, 2026non-GAAP | $442.6M | – | – |
| Adjusted net income margin, three months ended September 30, 2026non-GAAP | 17.7% | – | – |
| Adjusted net income margin, nine months ended September 30, 2026non-GAAP | 14.6% | – | – |
| Adjusted EPS (diluted), three months ended September 30, 2026non-GAAP | 0.38 | – | – |
| Adjusted EPS (diluted), nine months ended September 30, 2026non-GAAP | 0.98 | – | – |
| Adjusted EBITDA, three months ended September 30, 2026non-GAAP | $298.3M | – | up 18.6% |
| Adjusted EBITDA, nine months ended September 30, 2026non-GAAP | $797.5M | – | – |
| Adjusted EBITDA margin, three months ended September 30, 2026non-GAAP | 26.5% | – | – |
| Adjusted EBITDA margin, nine months ended September 30, 2026non-GAAP | 26.2% | – | – |
| Commercial Adjusted EBITDA, three months ended September 30, 2026non-GAAP | $200.5M | – | 23.6% |
| Residential Adjusted EBITDA, three months ended September 30, 2026non-GAAP | $104.9M | – | 11.7% |
| Central and other costs (Adjusted EBITDA), three months ended September 30, 2026non-GAAP | −$7.1M | – | – |
| Commercial Adjusted EBITDA, nine months ended September 30, 2026non-GAAP | $534.6M | – | 19.7% |
| Residential Adjusted EBITDA, nine months ended September 30, 2026non-GAAP | $282.8M | – | 34.8% |
| Central and other costs (Adjusted EBITDA), nine months ended September 30, 2026non-GAAP | −$19.9M | – | – |
| Interest and financing expenses, three months ended September 30, 2026GAAP | $36.9M | – | – |
| Interest and financing expenses, nine months ended September 30, 2026GAAP | $184.7M | – | – |
| Income tax expense, three months ended September 30, 2026GAAP | $20.2M | – | – |
| Income tax expense, nine months ended September 30, 2026GAAP | $78.1M | – | – |
| Organic sales, three months ended September 30, 2026non-GAAP | $1.13B | – | – |
| Organic sales, nine months ended September 30, 2026non-GAAP | $2.73B | – | – |
| Cash from operating activities (continuing operations), three months ended September 30, 2026GAAP | $172M | – | – |
| Cash from operating activities (continuing operations), nine months ended September 30, 2026GAAP | $328.4M | – | – |
| Free cash flow, three months ended September 30, 2026non-GAAP | $158M | – | – |
| Free cash flow, nine months ended September 30, 2026non-GAAP | $298M | – | – |
| Purchases of property, plant and equipment, nine months ended September 30, 2026GAAP | −$30.6M | – | – |
| Operating cash flow conversion (continuing operations), nine months ended September 30, 2026non-GAAP | 148.7% | – | – |
| FCF conversion, nine months ended September 30, 2026non-GAAP | 134.9% | – | – |
| Net leverage (September 30, 2026)non-GAAP | 0.4x | – | – |
| Adjusted net leverage (September 30, 2026)non-GAAP | 2.6x | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Commercial, three months ended September 30, 2026Company explanation: net sales increase of $217.9 million was primarily driven by broad-based growth across the segment, led by air, liquid and hybrid cooling, air movement and heat and commercial dehumidification solutions. Segment Adjusted EBITDA grew 23.6%, driven by higher volumes and pricing, partially offset by success-based data center business mix, production ramp costs and inflation. | $771.9M | – | 39.3% |
| Residential, three months ended September 30, 2026Company explanation: net sales increase of $11.2 million was primarily driven by pricing and demand for healthy air systems. Segment Adjusted EBITDA grew 11.7%, mainly driven by pricing, productivity improvements and favorable net tariff impacts, partially offset by inflation. | $355.5M | – | 3.2% |
| Commercial, nine months ended September 30, 2026Organic net sales increased 26.7%, driven by broad-based growth led by air, liquid and hybrid cooling, air movement, and energy efficiency solutions. Acquisitions contributed $36.1 million, or 2.3%, of additional net sales. | $2.04B | – | 29.1% |
| Residential, nine months ended September 30, 2026Organic net sales decreased 0.4%, driven by modest volume declines for ventilation solutions, net of price increases and strong demand for healthy air systems. Acquisitions contributed $177.0 million, or 21.3%, of additional net sales. | $1.00B | – | 21.2% |
Amounts quoted below without a unit are in millions, as in the filing’s tables. Per-share figures are as printed.
FY2026 (current guidance, based on information as of November 5, 2026) outlook
- Revenue$4,050 to $4,125 million
- NoteNet sales prior guidance (as of July 30, 2026): $3,825 to $3,925 million
- NoteAdjusted EBITDA current guidance: $1,040 to $1,070 million
- NoteAdjusted EBITDA prior guidance (as of July 30, 2026): $1,020 to $1,065 million
- NoteFiling states: Raised full-year net sales and Adjusted EBITDA guidance
- NoteGuidance may be impacted by factors outside of the Company's control; a GAAP reconciliation for forward Adjusted EBITDA is not provided because certain reconciling items cannot be estimated
Capital returns
- No share repurchase or dividend figures are printed in the filing.
- Company completed the PIPE (equity private placement); net proceeds of $2,217.4 million are included in cash and cash equivalents and are expected to finance the ebm-papst acquisition with additional debt financing.
- Company states the planned acquisition of ebm-papst is expected to close soon after the end of the year, with financing secured.
What drove it
- Company explanation: Commercial net sales growth was broad-based, led by air, liquid and hybrid cooling, air movement and heat and commercial dehumidification solutions.
- Company explanation: Big Ass Fans delivered particularly strong performance and continued whitespace penetration; Residential growth was led by AprilAire and adoption of Healthy Air solutions.
- Company explanation: Data center cooling growth; company margins reflected success-based mix from strong growth in this market and new-program ramp costs.
- Company states it made further progress on price/cost actions and ramp execution, and its services business delivered a record quarter.
- Company explanation: Commercial Adjusted EBITDA growth was driven by higher volumes and pricing, partially offset by success-based data center business mix, production ramp costs and inflation.
- Company explanation: Residential Adjusted EBITDA growth was mainly driven by pricing, productivity improvements, and favorable net tariff impacts, partially offset by inflation.
- Company states that orders increased 25.9% and backlog reached a record $3,187.2 million.
Concerns
- Adjusted EBITDA margin was 26.5% versus 28.0% a year earlier; company attributes the quarterly margin context to data center mix and new-program ramp costs.
- Adjusted gross profit margin was 37.5% versus 40.6% and GAAP gross profit margin was 36.8% versus 38.9%.
- Free cash flow was $158.0 million versus $160.0 million in the prior-year quarter; nine-month FCF was $298.0 million versus $312.4 million.
- Non-operating expenses (income) of $50.4 million versus $(2.7) million in the prior-year quarter, which includes an unrealized derivative loss of $52.2 million.
- Residential organic net sales decreased 0.4% in the nine months, with modest volume declines for ventilation solutions.
- Forward-looking statements cite material weaknesses in internal control over financial reporting that the company must remediate, and risks around the ebm-papst acquisition, including timing, regulatory clearances and a possible break fee.
- Filing states the company has significant indebtedness; pending ebm-papst acquisition financing includes additional debt.
What to watch
- Timing and completion of the ebm-papst acquisition, including merger control, foreign investment and EU Foreign Subsidies Regulation clearances.
- Size and terms of the additional debt financing for ebm-papst, and the pace of the company's stated leverage target.
- Conversion of the record $3,187.2 million backlog into net sales against the raised full-year net sales guidance of $4,050 to $4,125 million.
- Adjusted EBITDA margin trajectory as data center ramp costs and mix are described by the company.
- Residential organic growth, which was negative in the nine months.
- Remediation of the material weaknesses cited in the forward-looking statements.
- Non-operating items, including the derivative-related losses referenced in the reconciliation.
Balance sheet and cash flow
- Cash and cash equivalents at September 30, 2026: $2,645.2 million (December 31, 2025: $208.4 million).
- Cash and cash equivalents include $2,217.4 million of net proceeds from the equity private placement.
- Balance available on revolving credit facility at September 30, 2026: $1,358.2 million.
- Total debt at September 30, 2026: $3,057.0 million (December 31, 2025: $5,650.4 million).
- Net debt at September 30, 2026: $441.5 million (December 31, 2025: $5,510.6 million). Adjusted net debt: $2,658.9 million (December 31, 2025: $5,510.6 million).
- Net leverage 0.4x and Adjusted net leverage 2.6x at September 30, 2026; December 31, 2025 comparatives were 5.9x for both.
- Net cash from operating activities, nine months 2026: $328.4 million, versus $333.3 million total (including $0.6 million discontinued operations) in 2025 per the cash flow table.
- Company states that it had net investment of $30.4 million in capital expenditures for the nine months, net of proceeds. The cash flow table prints purchases of $(30.6) million and proceeds of $0.2 million.
- Unrealized loss of $52.2 million on derivative instruments is included in non-operating expense (income) of $50.4 million in both the three and nine months ended September 30, 2026.
Analysis
Madison Air reported third-quarter 2026 net sales of $1,126.7 million, up 25.4% from $898.4 million, with orders up 25.9% and backlog of $3,187.2 million, up 119.3%. Commercial net sales rose 39.3% to $771.9 million and Residential rose 3.2% to $355.5 million. The company attributes the Commercial growth to broad-based demand across cooling, air movement and dehumidification, and the Residential growth to pricing and healthy air systems. On a nine-month basis, the filing shows Residential organic net sales declining 0.4%, with the growth in that segment coming from the AprilAire acquisition, which added $177.0 million.
Profitability presents a mixed picture. GAAP net income rose to $107.4 million from $56.8 million and net income margin improved to 9.5% from 6.3%. Adjusted EBITDA rose 18.6% to $298.3 million, but its margin declined to 26.5% from 28.0%, and adjusted gross profit margin fell to 37.5% from 40.6%. The company explains the margin pressure as success-based data center mix and new-program ramp costs. Interest and financing expenses were $36.9 million against $100.1 million in the prior-year quarter, a figure the filing sets alongside the net income increase without explaining the relationship. Non-operating expenses were $50.4 million, which the reconciliation shows includes a $52.2 million unrealized derivative loss.
Cash generation was steady rather than growing. Operating cash flow from continuing operations was $172.0 million in the quarter against $172.3 million a year earlier, and free cash flow was $158.0 million against $160.0 million. Year to date, free cash flow was $298.0 million against $312.4 million, while FCF conversion was 134.9% against 231.4%. Capital expenditures in the nine-month cash flow table were $(30.6) million against $(22.8) million.
The balance sheet changed materially. Total debt fell to $3,057.0 million from $5,650.4 million at December 31, 2025, and cash rose to $2,645.2 million, including $2,217.4 million of net private placement proceeds. Net leverage was 0.4x and Adjusted net leverage was 2.6x, which the company presents with the private placement added back. The company says the proceeds are expected to finance the ebm-papst acquisition with additional debt, so the leverage figures will change once that transaction closes.
Management raised full-year 2026 guidance. Net sales guidance moved to $4,050 to $4,125 million from $3,825 to $3,925 million, and Adjusted EBITDA guidance moved to $1,040 to $1,070 million from $1,020 to $1,065 million. The figures to watch are the conversion of record backlog into the raised net sales range, Adjusted EBITDA margin relative to the 26.2% nine-month figure, and the timing and financing of ebm-papst. The filing also cites material weaknesses in internal control over financial reporting, which the company says it must remediate.
Management, verbatim
Our third quarter results demonstrate the power of disciplined execution against a clear long-term strategy.
Jill Wyant, President and CEO
Our strong year-to-date performance and record backlog give us the confidence to raise our full-year Madison Air outlook.
Jill Wyant, President and CEO
Our strong earnings quality and cash generation are reflected in free cash flow conversion of 135% year to date. We also successfully completed the PIPE financing, securing an important source of funding for our planned acquisition of ebm-papst.
JJ Foley, Chief Financial Officer
Not in the filing
stated, not guessed- Previous release outlook was not provided separately; vs_prior_guidance is empty. The filing's own table prints prior and current FY2026 ranges, which are reported in guidance.other.
- Operating income, operating expense lines (R&D, SG&A, restructuring as a P&L line) and total operating expenses are not printed in the filing.
- Order dollar value is not printed; only the 25.9% orders change is given.
- Prior-year backlog value is not printed; only the 119.3% change is given.
- Quarter-over-quarter (second quarter 2026) figures are not printed.
- Year-over-year percentage changes for total nine-month net sales, net income, adjusted net income, adjusted EBITDA and gross profit are not printed.
- Year-over-year percentage changes for total EPS, adjusted EPS, gross profit and cost of goods sold are not printed.
- Organic sales growth percentage for total company is not printed (only segment organic growth for nine months).
- Year-over-year change in adjusted EBITDA margin and gross margin in basis points is not printed.
- Prior-year comparatives for net leverage, adjusted net leverage, total debt, net debt and cash at the same period are not printed; the December 31, 2025 balance sheet figures are shown instead.
- Dividend and share repurchase figures are not printed.
- Full-year 2026 forward guidance for gross margin, operating expenses and tax rate is not printed.
- Cash and debt maturity details, and the terms and amount of the planned ebm-papst debt financing, are not printed.
- Share price reaction and analyst consensus are not provided in the documents.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.