• Revenue Growth: 10% increase in third quarter sales.
• Data Center Revenue: Increased by 176%, with $106 million growth from the prior year.
• Scott Springfield Acquisition: Contributed $74 million in revenue.
• Climate Solutions Sales: Increased by 42%.
• Adjusted EBITDA: 18% increase, with a margin of 14.2%.
• Adjusted Earnings Per Share (EPS): $0.92, up 24% from the prior year.
• Free Cash Flow: $45 million generated in the third quarter, $102 million year-to-date.
• Net Debt: $287 million, $85 million lower than the prior fiscal year-end.
• Gross Margin: Improved by 160 basis points to 24.3%.
• Performance Technologies Revenue: Experienced headwinds with a decrease in sales.
• HVAC&R Sales: Increased by $14 million or 15%.
• Heat Transfer Product Sales: Declined by 13% or $13 million.
• Adjusted EBITDA Margin for Climate Solutions: Improved by 200 basis points to 21%.
• Fiscal '25 Outlook: Full year revenue growth trending towards the lower end of guidance range.

• Warning! GuruFocus has detected 4 Warning Signs with ALGN.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Modine Manufacturing Co (NYSE:MOD) reported strong year-over-year revenue growth and margin improvement, driven by the Climate Solutions segment.
• Data Center revenues increased by 176% this quarter, significantly boosted by the Scott Springfield acquisition.
• The company is expanding its manufacturing capacity in the Asia Pacific region with a new production facility in India, supporting both data center cooling products and genset modules.
• Modine Manufacturing Co (NYSE:MOD) achieved a 42% increase in sales and a 57% improvement in adjusted EBITDA in the Climate Solutions segment.
• The company generated $45 million of free cash flow in the third quarter, maintaining a strong balance sheet with a leverage ratio of 0.8.

Negative Points

• The Performance Technologies segment faced challenges with lower sales due to extended seasonal shutdowns and ongoing softness in vehicular markets.
• Heat Transfer product sales declined by 13% due to lower sales to commercial and residential HVAC, refrigeration, and European heat pump customers.
• The company anticipates significant revenue headwinds in Performance Technologies due to normal seasonal trends and ongoing market weakness.
• Market demand in the European heat pump market accounted for a significant portion of the decline in sales.
• Modine Manufacturing Co (NYSE:MOD) is facing potential tariff risks on U.S. imports from Canada, Mexico, and China, which could add complexity to market operations.

Q & A Highlights

Q: Are there any changes in data center build schedules following the DeepSeek announcement? A: Neil Brinker, President and CEO, stated that after discussions with major customers, particularly hyperscalers, there are no changes in their build schedules for the next couple of years. They remain committed to their demand for AI applications and data center construction.

Q: Can you elaborate on the competitive landscape for the CDU and the nature of the bidding process? A: Neil Brinker explained that while there is competition, Modine is involved in both competitive bidding and new product development. The focus is on developing bespoke solutions that meet customer specifications, which helps Modine win contracts despite the competitive environment.

Q: What is driving the significant growth in the Scott Springfield Manufacturing (SSM) segment, and what is the outlook for this business? A: Neil Brinker attributed the growth to strong relationships with hyperscalers and investments in facilities and R&D. These efforts have built credibility and trust, leading to increased revenue and market share. The outlook remains positive with continued growth expected.

Q: When can we expect vehicular markets to return to positive growth, and what are the current market conditions? A: Michael Lucareli, CFO, noted a slight rebound in the auto market, particularly in Europe, but expects a soft 2025 for medium and heavy-duty trucks. Agricultural and construction markets may see improvement in the second half of 2025, with Modine focusing on niche areas.

Q: How confident are you in achieving the targets set at the Investor Day, particularly in the data center segment? A: Neil Brinker expressed strong confidence in achieving the targets, citing ongoing capacity expansion, product development, and strong customer relationships as key factors supporting their growth trajectory.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.