Modine Reports Another Record Quarter, Raises Full-Year Earnings Guidance
- Strong Q1 results with significant revenue and margin expansion
- Net sales expected to increase by 6% to 11% for the full year
- Adjusted EBITDA expected to be $280 million to $295 million, a 32% to 39% increase
- None.
Accelerating benefits from 80/20 actions support transformation and progress towards long-term targets; strong Q1 results lead to upward revision to full-year earnings outlook
First Quarter Highlights:
- Net sales of
increased 15 percent from the prior year$622.4 million - Operating income of
increased$66.5 million , or 160 percent, from the prior year$40.9 million - Adjusted EBITDA of
increased$80.4 million , or 91 percent, from the prior year$38.2 million - Earnings per share of
compared to$0.85 in the prior year$0.27 - Adjusted earnings per share of
compared to$0.85 in the prior year$0.32
Revised Fiscal 2024 Outlook:
- Net sales up
6% to11% - Adjusted EBITDA of
to$280 million , an increase of$295 million 32% to39% over the prior year
"This was an incredible quarter for Modine, with record revenue and significant margin expansion, as both segments exceeded expectations by driving strong growth and operational improvements," said Modine President and Chief Executive Officer, Neil D. Brinker. "The benefits of the 80/20 activities taken to transform our business are coming earlier than we originally planned, leading to our first quarter results being stronger than expected. In particular, I am extremely proud of the Performance Technologies team, who are embracing 80/20 principles to improve commercial terms while continuing to deliver value to our customers. The Data Center vertical also had a strong quarter, with orders materializing earlier than expected. We are still in the early stages of our transformation journey, with further opportunities for margin improvement while we invest for future growth in our most attractive markets."
Financial Results
Net sales increased 15 percent in the first quarter to
Gross profit increased 53 percent in the first quarter to
Selling, general and administrative ("SG&A") expenses increased
Operating income in the first quarter was
Earnings per share was
First Quarter Segment Review
- Climate Solutions segment sales were
, compared with$271.8 million one year ago, an increase of 11 percent. This increase was driven by higher sales of data center cooling products, partially offset by lower sales of heat transfer products and HVAC and refrigeration products. The segment reported gross margin of 25.4 percent, which was 480 basis points higher than the prior year, primarily due to higher sales volume. The segment reported operating income of$244.4 million , a 64 percent increase from the prior year. Adjusted EBITDA was$44.3 million , an increase of$49.7 million , or 53 percent, from the prior year.$17.3 million - Performance Technologies segment sales were
, compared with$358.9 million one year ago, an increase of 18 percent. This increase primarily resulted from higher sales across all product groups as well as favorable commercial pricing, including favorable retroactive adjustments. The segment reported gross margin of 16.3 percent, up 550 basis points from the prior year. The margin improvement was primarily driven by the favorable impact of higher sales. The segment reported operating income of$304.3 million , a$32.0 million improvement compared to the prior year, primarily due to higher gross profit. Adjusted EBITDA was$24.6 million , an increase of$40.1 million , or 135 percent, from the prior year.$23.0 million
Balance Sheet & Liquidity
Net cash provided by operating activities for the quarter ended June 30, 2023 was
Total debt was
Outlook
"Our performance in the first quarter exceeded our expectations, leading to a stronger outlook for the full fiscal year," added Brinker. "In Performance Technologies, we have focused on improving commercial terms and have recaptured margin lost to material, labor, and overhead inflation over the past several years. In Climate Solutions, we have invested for growth in key markets such as data centers, which continues to drive significant value. We are maintaining a cautious stance on the second half of the year due to continued softness in certain end markets, but remain confident in our ability to execute on our strategic initiatives and deliver on our financial commitments as we build further momentum towards our transformation."
Based on current exchange rates and market outlook, Modine provides its revised outlook for fiscal 2024:
Fiscal 2024 | Current Outlook |
Net Sales | + |
Adjusted EBITDA |
Conference Call and Webcast
Modine will conduct a conference call and live webcast, with a slide presentation, on Thursday, August 3, 2023 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its first quarter fiscal year 2024 financial results. The webcast and accompanying slides will be available on the Investor Relations section of the Modine website at www.modine.com. Participants are encouraged to log on to the webcast and conference call about ten minutes prior to the start of the event. A replay of the audio and slides will be available on the Investor Relations section of the Modine website at www.modine.com on or after August 3, 2023. A call-in replay will be available through midnight on August 10, 2023 at 877-660-6853, (international replay 201-612-7415); Conference ID# 13739421. The Company will post a transcript of the call on its website on or after August 8, 2023.
About Modine
At Modine, we are Engineering a Cleaner, Healthier World™. Building on more than 100 years of excellence in thermal management, we provide trusted systems and solutions that improve air quality and conserve natural resources. More than 11,000 employees are at work in every corner of the globe, delivering the solutions our customers need, where they need them. Our Climate Solutions and Performance Technologies segments support our purpose by improving air quality, reducing energy and water consumption, lowering harmful emissions and enabling cleaner running vehicles and environmentally friendly refrigerants. Modine is a global company headquartered in
Forward-Looking Statements
This press release contains statements, including information about future financial performance and market conditions, accompanied by phrases such as "believes," "estimates," "expects," "plans," "anticipates," "intends," "projects," and other similar "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995. Modine's actual results, performance or achievements may differ materially from those expressed or implied in these statements because of certain risks and uncertainties, including, but not limited to those described under "Risk Factors" in Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended March 31, 2023 and under Forward-Looking Statements in Item 7 of Part II of that same report. Other risks and uncertainties include, but are not limited to, the following: the impact of potential adverse developments or disruptions in the global economy and financial markets, including impacts related to inflation, rising energy costs, along with supply chain challenges or supplier constraints, tariffs, sanctions and other trade issues or cross-border trade restrictions; the impact of other economic, social and political conditions, changes and challenges in the markets where we operate and compete, including foreign currency exchange rate fluctuations, increases in interest rates or tightening of the credit markets, recession or recovery therefrom, restrictions associated with importing and exporting and foreign ownership, public health crises, and the general uncertainties, including the impact on demand for our products and the markets we serve, from regulatory and/or policy changes, including those related to tax and trade, climate change, COVID-19 or future public health threats, the military conflict in
Non-GAAP Financial Disclosures
Adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, net debt, and free cash flow (which are defined below) as used in this press release are not measures that are defined in generally accepted accounting principles (GAAP). These non-GAAP measures are used by management as performance measures to evaluate the Company's overall financial performance and liquidity. These measures are not, and should not be viewed as, substitutes for the applicable GAAP measures, and may be different from similarly-titled measures used by other companies.
Definition – Adjusted EBITDA and adjusted EBITDA margin
The Company defines adjusted EBITDA as net earnings excluding interest expense, the provision or benefit for income taxes, depreciation and amortization expenses, other income and expense, restructuring expenses, impairment charges and certain other gains or charges. Adjusted EBITDA margin represents adjusted EBITDA as a percentage of net sales. The Company believes that adjusted EBITDA and adjusted EBITDA margin provide relevant measures of profitability and earnings power. The Company views these financial metrics as being useful in assessing operating performance from period to period by excluding certain items that it believes are not representative of its core business. Adjusted EBITDA, when calculated for the business segments, is defined as GAAP operating income excluding depreciation and amortization expenses, restructuring expenses, impairment charges, and certain other gains or charges.
Definition – Adjusted earnings per share
Diluted earnings per share plus restructuring expenses, impairment charges, and excluding changes in income tax valuation allowances and certain other gains or charges. Adjusted earnings per share is an overall performance measure, not including non-cash impairment charges, costs associated with restructuring activities and certain other gains or charges.
Definition – Net debt
The sum of debt due within one year and long-term debt, less cash and cash equivalents. Net debt is an indicator of the Company's debt position after considering on-hand cash balances.
Definition – Free cash flow
Free cash flow represents net cash provided by operating activities less expenditures for property, plant and equipment. Free cash flow presents cash generated from operations during the period that is available for strategic capital decisions.
Forward-looking non-GAAP financial measure
The Company's fiscal 2024 guidance includes adjusted EBITDA, as defined above, which is a non-GAAP financial measure. The full-year fiscal 2024 guidance for adjusted EBITDA is based upon the Company's estimates for interest expense of approximately
Modine Manufacturing Company | |||
Consolidated statements of operations (unaudited) | |||
(In millions, except per share amounts) | |||
Three months ended June 30, | |||
2023 | 2022 | ||
Net sales | $ 622.4 | $ 541.0 | |
Cost of sales | 494.5 | 457.6 | |
Gross profit | 127.9 | 83.4 | |
Selling, general & administrative expenses | 61.4 | 56.3 | |
Restructuring expenses | - | 1.5 | |
Operating income | 66.5 | 25.6 | |
Interest expense | (5.9) | (4.1) | |
Other expense – net | (0.6) | (2.3) | |
Earnings before income taxes | 60.0 | 19.2 | |
Provision for income taxes | (14.7) | (4.9) | |
Net earnings | 45.3 | 14.3 | |
Net earnings attributable to noncontrolling interest | (0.5) | - | |
Net earnings attributable to Modine | $ 44.8 | $ 14.3 | |
Net earnings per share attributable to Modine shareholders – diluted | $ 0.85 | $ 0.27 | |
Weighted-average shares outstanding – diluted | 53.0 | 52.4 | |
Condensed consolidated balance sheets (unaudited) | |||
(In millions) | |||
June 30, 2023 | March 31, 2023 | ||
Assets | |||
Cash and cash equivalents | $ 92.5 | $ 67.1 | |
Trade receivables | 399.8 | 398.0 | |
Inventories | 333.5 | 324.9 | |
Other current assets | 68.3 | 56.4 | |
Total current assets | 894.1 | 846.4 | |
Property, plant and equipment – net | 310.3 | 314.5 | |
Intangible assets – net | 79.1 | 81.1 | |
Goodwill | 165.6 | 165.6 | |
Deferred income taxes | 81.2 | 83.7 | |
Other noncurrent assets | 77.6 | 74.6 | |
Total assets | $ 1,607.9 | $ 1,565.9 | |
Liabilities and shareholders' equity | |||
Debt due within one year | $ 27.7 | $ 23.4 | |
Accounts payable | 317.5 | 332.8 | |
Other current liabilities | 161.5 | 150.9 | |
Total current liabilities | 506.7 | 507.1 | |
Long-term debt | 330.0 | 329.3 | |
Other noncurrent liabilities | 126.7 | 129.9 | |
Total liabilities | 963.4 | 966.3 | |
Total equity | 644.5 | 599.6 | |
Total liabilities & equity | $ 1,607.9 | $ 1,565.9 | |
Modine Manufacturing Company | |||
Condensed consolidated statements of cash flows (unaudited) | |||
(In millions) | |||
Three months ended June 30, | |||
2023 | 2022 | ||
Cash flows from operating activities: | |||
Net earnings | $ 45.3 | $ 14.3 | |
Adjustments to reconcile net earnings to net cash provided by | |||
operating activities: | |||
Depreciation and amortization | 13.7 | 13.9 | |
Stock-based compensation expense | 1.5 | 1.1 | |
Deferred income taxes | 3.1 | (0.9) | |
Other – net | 1.4 | 0.8 | |
Changes in operating assets and liabilities: | |||
Trade accounts receivable | (2.7) | 0.7 | |
Inventories | (7.9) | (38.5) | |
Accounts payable | (9.5) | 6.8 | |
Other assets and liabilities | (3.2) | 16.3 | |
Net cash provided by operating activities | 41.7 | 14.5 | |
Cash flows from investing activities: | |||
Expenditures for property, plant and equipment | (15.1) | (10.4) | |
Other – net | (3.3) | - | |
Net cash used for investing activities | (18.4) | (10.4) | |
Cash flows from financing activities: | |||
Net increase in debt | 4.5 | 14.2 | |
Other – net | (0.8) | (2.2) | |
Net cash provided by financing activities | 3.7 | 12.0 | |
Effect of exchange rate changes on cash | (0.2) | (2.6) | |
Net increase in cash, cash equivalents and restricted cash | 26.8 | 13.5 | |
Cash, cash equivalents and restricted cash - beginning of period | 67.2 | 45.4 | |
Cash, cash equivalents and restricted cash - end of period | $ 94.0 | $ 58.9 | |
Modine Manufacturing Company | |||
Segment operating results (unaudited) | |||
(In millions) | |||
Three months ended June 30, | |||
2023 | 2022 | ||
Net sales: | |||
Climate Solutions | |||
Performance Technologies | 358.9 | 304.3 | |
Segment total | 630.7 | 548.7 | |
Corporate and eliminations | (8.3) | (7.7) | |
Net sales |
Three months ended June 30, | ||||||
2023 | 2022 | |||||
Gross profit: | $'s | % of sales | $'s | % of sales | ||
Climate Solutions | $ 69.0 | 25.4 % | $ 50.4 | 20.6 % | ||
Performance Technologies | 58.6 | 16.3 % | 33.0 | 10.8 % | ||
Segment total | 127.6 | 20.2 % | 83.4 | 15.2 % | ||
Corporate and eliminations | 0.3 | - | - | - | ||
Gross profit | $ 127.9 | 20.6 % | $ 83.4 | 15.4 % |
Three months ended June 30, | ||||
2023 | 2022 | |||
Operating income: | ||||
Climate Solutions | ||||
Performance Technologies | 32.0 | 7.4 | ||
Segment total | 76.3 | 34.4 | ||
Corporate and eliminations | (9.8) | (8.8) | ||
Operating income | ||||
Modine Manufacturing Company | |||
Adjusted financial results (unaudited) | |||
(In millions, except per share amounts) | |||
Three months ended June 30, | |||
2023 | 2022 | ||
Net earnings | |||
Interest expense | 5.9 | 4.1 | |
Provision for income taxes | 14.7 | 4.9 | |
Depreciation and amortization expense | 13.7 | 13.9 | |
Other expense – net | 0.6 | 2.3 | |
Restructuring expenses (a) | - | 1.5 | |
Environmental charges (b) | 0.2 | 1.2 | |
Adjusted EBITDA | |||
Net earnings per share attributable to Modine shareholders - diluted | |||
Restructuring expenses (a) | - | 0.03 | |
Environmental charges (b) | - | 0.02 | |
Adjusted earnings per share |
(a) | The fiscal 2023 restructuring expenses primarily consist of employee severance expenses related to targeted headcount reductions. There was no tax benefit associated with the restructuring expenses. | ||||
(b) | Environmental charges, including related legal costs, are recorded as SG&A expenses at Corporate and relate to a previously-owned |
Segment adjusted financial results (unaudited) | |||||||||||||||
(In millions) | |||||||||||||||
Three months ended June 30, 2023 | Three months ended June 30, 2022 | ||||||||||||||
Climate | Performance | Corporate and | Total | Climate | Performance | Corporate and | Total | ||||||||
Operating income | $ 44.3 | $ 32.0 | $ (9.8) | $ 66.5 | $ 27.0 | $ 7.4 | $ (8.8) | $ 25.6 | |||||||
Depreciation and amortization expense | 5.4 | 8.1 | 0.2 | 13.7 | 5.4 | 8.2 | 0.3 | 13.9 | |||||||
Restructuring expenses (a) | - | - | - | - | - | 1.5 | - | 1.5 | |||||||
Environmental charges (a) | - | - | 0.2 | 0.2 | - | - | 1.2 | 1.2 | |||||||
Adjusted EBITDA | $ 49.7 | $ 40.1 | $ (9.4) | $ 80.4 | $ 32.4 | $ 17.1 | $ (7.3) | $ 42.2 | |||||||
Net sales | $ 271.8 | $ 358.9 | $ (8.3) | $ 622.4 | $ 244.4 | $ 304.3 | $ (7.7) | $ 541.0 | |||||||
Adjusted EBITDA margin | 18.3 % | 11.2 % | 12.9 % | 13.3 % | 5.6 % | 7.8 % | |||||||||
(a) See the Adjusted EBITDA reconciliation above for information on restructuring expenses and other adjustments. | |||||||||||||||
Modine Manufacturing Company | ||||
Net debt (unaudited) | ||||
(In millions) | ||||
June 30, 2023 | March 31, 2023 | |||
Debt due within one year | $ 27.7 | $ 23.4 | ||
Long-term debt | 330.0 | 329.3 | ||
Total debt | 357.7 | 352.7 | ||
Less: cash and cash equivalents | 92.5 | 67.1 | ||
Net debt | $ 265.2 | $ 285.6 | ||
Free cash flow (unaudited) | ||||
(In millions) | ||||
Three months ended June 30, | ||||
2023 | 2022 | |||
Net cash provided by operating activities | $ 41.7 | $ 14.5 | ||
Expenditures for property, plant and equipment | (15.1) | (10.4) | ||
Free cash flow | $ 26.6 | $ 4.1 | ||
Kathleen Powers
(262) 636-1687
kathleen.t.powers@modine.com
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SOURCE Modine