MOD Q1'27 Conference Call Notes

Three things from Modine Manufacturing's call, starting with: Supply chain constraints are actually LABOR inefficiencies masked as parts shortage

Three things that matter from Modine Manufacturing (MOD) in its Q1’27 call:

1. Supply chain constraints are actually LABOR inefficiencies masked as parts shortage: 450-550 bps margin hit from ‘excess labor and unfavorable overhead absorption’ reveals the real issue: Modine staffed up for volumes that didn’t materialize, burning $100M+ in unnecessary costs while blaming suppliers.

2. Record backlog means nothing when you can’t produce: Third consecutive quarter of ‘record order intake’ yet revenue down sequentially; the binding constraint isn’t demand, it’s execution as evidenced by Q1 data center margins cratering to 14.8% from normalized 20%.

3. CEO taking over data center business after head resigned is NOT normal: Art Laszlo’s sudden departure for ‘unexpected personal reasons’ with Neil stepping in directly signals deeper operational issues than admitted; you don’t have the CEO run a division if things are going well.

Disclosure Quality: D | Financial Quality: D

Track MOD’s promise history and grade trend: callsheetdaily.com/tickers/mod

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Delta Sheet

• ▼ Total Revenue: $680M (Q4, +47% YoY) → $530M (Q1, +28% YoY) (-22% sequential collapse)

• ▼ Data Center Revenue: $400M+ (Q4, +158% YoY) → $360M (Q1, +90% YoY) (Growth rate cut in half)

• ▼ Data Center EBITDA Margin: 19-20% (Q4) → 14.8% (Q1) (-470 bps deterioration)

• ▼ Commercial HVAC Revenue: $163M (Q4) → $130M (Q1, +22% YoY) (-20% sequential decline)

• ▼ Commercial HVAC EBITDA Margin: 19.1% (Q4) → 15.8% (Q1) (-330 bps compression)

• ▼ Adjusted EPS: $1.71 (Q4, +53% YoY) → $1.53 (Q1, +44% YoY) (Growth deceleration)

• ▼ Free Cash Flow: +$153M (Q4) → -$5M (Q1) ($158M deterioration)

• ▼ Net Debt: $363M (Q4) → $433M (Q1) (+$70M increase)

• - Data Center Backlog: Record (Q4) → Another significant increase (Still growing but can’t convert)

• ▼ Operating Cash Flow: Positive (Q4) → Negative territory (Working capital consuming cash)

• ▼ Contract Assets: Not disclosed → +$60M increase mentioned (Revenue recognition diverging from cash)

• - Performance Tech Revenue: $140M (Q4) → $140M (Q1, flat YoY) (Zero growth)