Q2 FY2027
Filed Nov 3, 2026Strong growth in Data Centers and Commercial HVAC segments supports higher full-year revenue outlook for core business following the spin-off of Performance Technologies
Net sales grew 35 percent, led by 95 percent Data Centers growth and 23 percent Commercial HVAC growth, while adjusted EBITDA increased 31 percent and the company raised its core-business revenue outlook. GAAP net earnings and earnings per share declined because of $29.5 million of income tax expense related to legal entity restructuring for the Performance Technologies spin-off, while gross margins declined across all three segments and free cash flow was negative.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, three months ended September 30GAAP | $994.4M | – | 35 percent |
| Net sales, six months ended September 30GAAP | $1.87B | – | – |
| Gross profit, three months ended September 30GAAP | $205.4M | – | 25 percent |
| Gross margin, three months ended September 30GAAP | 20.7 percent | – | decreased by 160 basis points |
| Gross profit, six months ended September 30GAAP | $387.4M | – | – |
| Gross margin, six months ended September 30GAAP | 20.7 percent | – | – |
| Selling, general and administrative expenses, three months ended September 30GAAP | $104.6M | – | 24 percent |
| Selling, general and administrative expenses, six months ended September 30GAAP | $207.9M | – | – |
| Restructuring expenses, three months ended September 30GAAP | $3M | – | – |
| Restructuring expenses, six months ended September 30GAAP | $6.9M | – | – |
| Disposition costs, three months ended September 30non-GAAP | $14.1M | – | – |
| Disposition costs, six months ended September 30non-GAAP | $21.2M | – | – |
| Operating income, three months ended September 30GAAP | $97.8M | – | 33 percent |
| Operating income, six months ended September 30GAAP | $172.6M | – | – |
| Interest expense, three months ended September 30GAAP | $8.5M | – | – |
| Interest expense, six months ended September 30GAAP | $14.9M | – | – |
| Provision for income taxes, three months ended September 30GAAP | $57.7M | – | – |
| Provision for income taxes, six months ended September 30GAAP | $52M | – | – |
| Net earnings, three months ended September 30GAAP | $30.3M | – | decreased $14.5 million, or 32 percent |
| Net earnings, six months ended September 30GAAP | $104.6M | – | – |
| Net earnings attributable to Modine, three months ended September 30GAAP | $30M | – | – |
| Net earnings attributable to Modine, six months ended September 30GAAP | $103.9M | – | – |
| Diluted earnings per share attributable to Modine shareholders, three months ended September 30GAAP | $0.56 | – | decreased $0.27, or 33 percent |
| Diluted earnings per share attributable to Modine shareholders, six months ended September 30GAAP | $1.93 | – | – |
| Adjusted EBITDA, three months ended September 30non-GAAP | $136.2M | – | increased $32.4 million, or 31 percent |
| Adjusted EBITDA margin, three months ended September 30non-GAAP | 13.7 percent | – | – |
| Adjusted EBITDA, six months ended September 30non-GAAP | $242.7M | – | – |
| Adjusted EBITDA margin, six months ended September 30non-GAAP | 13.0 percent | – | – |
| Adjusted earnings per share, three months ended September 30non-GAAP | $1.35 | – | increased $0.29, or 27 percent |
| Adjusted earnings per share, six months ended September 30non-GAAP | $2.87 | – | – |
| Net cash used for operating activities, three months ended September 30GAAP | −$98.5M | – | – |
| Net cash used for operating activities, six months ended September 30GAAP | −$57.1M | – | a decrease of $86.2 million |
| Expenditures for property, plant and equipment, six months ended September 30GAAP | −$88.5M | – | – |
| Free cash flow, three months ended September 30non-GAAP | −$140.6M | – | – |
| Free cash flow, six months ended September 30non-GAAP | −$145.6M | – | a decrease of $115.3 million |
| Total debt, September 30other | $724.3M | – | – |
| Cash and cash equivalents, September 30GAAP | $150.6M | – | – |
| Net debt, September 30non-GAAP | $573.7M | – | an increase of $210.9 million from the end of fiscal 2026 |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Data CentersHigher sales to hyperscale customers in North America. | $439.7M | – | 95 percent |
| Commercial HVACHigher sales of coils, coatings, and heating and ventilation products. | $285.5M | – | 23 percent |
| Performance TechnologiesHigher sales to power generation and commercial vehicle customers were largely offset by lower sales to automotive and off highway customers. | $287.7M | – | increase of less than 1 percent |
Fiscal 2027 outlook
- Revenue$3.1 to $3.2 billion
- NoteAdjusted EBITDA: $470 to $500 million
- NoteRevenues expected to increase 50 to 55 percent from the prior year, excluding Performance Technologies from both periods
- NoteFull-year adjusted EBITDA for continuing business expected to represent a growth rate in excess of 50 percent from the prior year, excluding Performance Technologies from both periods
- NoteInterest expense of approximately $26 to $30 million
- NoteProvision for income taxes of approximately $95 to $105 million
- NoteDepreciation and amortization expense of approximately $56 to $61 million
- NoteApproximately $20 to $25 million of additional costs during the second half of fiscal 2027, primarily for transaction advisory, legal, accounting, tax and other professional services
Capital returns
- Purchases of treasury stock of $(65.7) million for the six months ended September 30, 2026.
- Purchases of treasury stock of $(5.7) million for the six months ended September 30, 2025.
- The company stated that purchases of stock in conjunction with its equity compensation plan contributed to the increase in net debt.
What drove it
- Data Centers revenue increased 95 percent, primarily from higher sales to hyperscale customers in North America.
- Commercial HVAC revenue increased 23 percent, driven by coils, coatings, and heating and ventilation products.
- Record orders and backlog in Data Centers and expanding data center cooling opportunities within Commercial HVAC supported management's outlook commentary.
- The company entered into long-term agreements with multiple strategic suppliers to secure critical components for existing backlog and future business needs.
- The Performance Technologies spin-off was completed on October 1, 2026, and its historical results will be reported as discontinued operations beginning in the third fiscal quarter.
Concerns
- Consolidated gross margin decreased by 160 basis points to 20.7 percent, with lower gross margins in each of the three business segments.
- Data Centers gross margin was 19.7 percent, 470 basis points lower than the prior year, due primarily to higher material, component and tariff costs.
- Commercial HVAC gross margin was 23.1 percent, 140 basis points lower than the prior year, primarily due to unfavorable sales mix and higher material and tariff costs.
- Performance Technologies gross margin was 18.6 percent, 30 basis points lower than the prior year, primarily due to higher material and tariff costs.
- Net earnings declined 32 percent and diluted earnings per share declined 33 percent, including $29.5 million of income tax expense from legal entity restructuring steps.
- Free cash flow was a use of $(145.6) million for the six months ended September 30, 2026, due primarily to higher Data Centers capital expenditures and higher net working capital.
- Net debt increased $210.9 million from the end of fiscal 2026.
What to watch
- Data Centers revenue conversion, record orders and backlog, and the impact of long-term supplier agreements on capacity fulfillment.
- Gross-margin recovery in Data Centers, Commercial HVAC and the continuing business amid material, component and tariff costs.
- Working-capital and inventory demands associated with growing data center cooling demand.
- Capital expenditures to increase Data Centers production capacity and the resulting free-cash-flow trajectory.
- Execution costs from the Reverse Morris Trust transaction, including approximately $20 to $25 million of expected additional second-half fiscal 2027 costs.
- The third-quarter presentation of Performance Technologies as discontinued operations and the comparability of continuing-business results.
Balance sheet and cash flow
- Cash and cash equivalents were $150.6 million as of September 30, 2026, compared with $73.5 million as of March 31, 2026.
- Debt due within one year was $46.9 million and long-term debt was $677.4 million as of September 30, 2026.
- Total debt was $724.3 million and net debt was $573.7 million as of September 30, 2026.
- Trade receivables were $795.1 million and inventories were $697.5 million as of September 30, 2026.
- Net cash used for operating activities was $(57.1) million for the six months ended September 30, 2026, compared with $29.1 million in the prior year.
- Expenditures for property, plant and equipment were $(88.5) million for the six months ended September 30, 2026, compared with $(59.4) million in the prior year.
- Free cash flow was $(145.6) million for the six months ended September 30, 2026, compared with $(30.3) million in the prior year.
- Net increase in debt was $287.6 million for the six months ended September 30, 2026, compared with $224.6 million in the prior year.
Analysis
Modine reported a strong revenue quarter, with net sales increasing 35 percent to $994.4 million. Data Centers was the principal growth engine, with sales of $439.7 million, up 95 percent, primarily from hyperscale customers in North America. Commercial HVAC sales increased 23 percent to $285.5 million, supported by coils, coatings, and heating and ventilation products. Performance Technologies sales increased less than 1 percent to $287.7 million before the October 1 spin-off.
Profitability increased on an adjusted basis but margins weakened. Gross profit rose 25 percent to $205.4 million and operating income increased 33 percent to $97.8 million. Adjusted EBITDA increased 31 percent to $136.2 million, while adjusted EBITDA margin was 13.7 percent versus 14.0 percent in the prior year. Consolidated gross margin fell 160 basis points to 20.7 percent, reflecting declines in every business segment. Data Centers gross margin declined 470 basis points to 19.7 percent, citing material, component and tariff costs, while Commercial HVAC cited unfavorable mix as well as higher material and tariff costs.
GAAP net earnings declined to $30.3 million from $44.8 million and diluted earnings per share declined to $0.56 from $0.83. The release attributes this decline to the higher income-tax provision associated with legal entity restructuring completed for the Performance Technologies spin-off. The quarter included $29.5 million of income tax expense from those restructuring steps. Adjusted earnings per share increased to $1.35 from $1.06, and the quarter also included $14.1 million of disposition costs related to the Reverse Morris Trust transaction with Gentherm.
Cash conversion remains the principal financial constraint in the reported six-month period. Net cash used for operating activities was $(57.1) million and free cash flow was $(145.6) million, compared with $29.1 million of operating cash flow and $(30.3) million of free cash flow in the prior year. Management attributed the cash-flow decline to higher Data Centers capacity capital expenditures and higher working capital, including inventory to support data center cooling demand. Net debt rose to $573.7 million from $362.8 million at the end of fiscal 2026, while purchases of treasury stock were $(65.7) million for the six months.
Management raised its fiscal 2027 continuing-business outlook after the Performance Technologies spin-off. It expects net sales of $3.1 to $3.2 billion and adjusted EBITDA of $470 to $500 million, with revenue expected to increase 50 to 55 percent from the prior year excluding Performance Technologies from both periods. The guidance framework shifts reported comparisons beginning in the third quarter because Performance Technologies will be presented as discontinued operations. The central operational issues are sustaining Data Centers growth and backlog fulfillment while managing supplier inputs, production-capacity investment, margin pressure and working-capital needs.
Management, verbatim
Data Centers and Commercial HVAC delivered strong quarters, with revenue growth of 95% and 23%, respectively.
Neil D. Brinker, President and Chief Executive Officer
Demand for our products remains very robust, highlighted by record orders and backlog in our Data Centers segment and expanding opportunities to serve the data center cooling market within Commercial HVAC.
Neil D. Brinker, President and Chief Executive Officer
We are updating our Fiscal 2027 financial outlook to reflect the higher expectations for our core businesses and the successful spin-off of the Performance Technologies business.
Neil D. Brinker, President and Chief Executive Officer
Not in the filing
stated, not guessed- Prior fiscal-quarter comparisons for reported operating metrics were not provided.
- Prior company outlook was not provided, so no comparison of actual results with prior guidance is available.
- Guidance for gross margin, operating expenses, tax rate, operating cash flow, free cash flow, capital expenditures, cash, debt and capital returns was not provided.
- Dividend declarations or payments were not provided.
- A quarterly cash-flow statement beyond net cash used for operating activities, capital expenditures and free cash flow was not provided.
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.