Research Reports

Prepared Highlights

Climate Solutions revenue +24% YoY, driven by data center +42% ($67M) and HVAC Technologies +25% ($17M inorganic); Heat Transfer Solutions +2% ($3M) (CEO, CFO, prepared).
Performance Technologies revenue -4% YoY; heavy-duty equipment flat, on-highway -3% ($7M); adjusted EBITDA +3%, margin +90bps to 14.7% (CFO, prepared).
Consolidated sales +12% YoY; gross margin -290bps to 22.3%; adjusted EBITDA +4%, margin 14%; adjusted EPS $1.06 (+9%) (CFO, prepared).
Free cash flow -$30M in Q2, including $9M restructuring/acquisition costs; net debt $498M, leverage ratio 1.2x (CFO, prepared).
Data center capacity expansion: 5 chiller lines in Grenada, MS (2 lines producing); Franklin, WI initial production this quarter; Jefferson City, MO first 2 lines in Q4; Grand Prairie, TX (5 lines) early next fiscal year; Chennai, India launched; U.K. expansion early next fiscal year (CEO, prepared).
Hired 1,200 employees for data center YTD, including temporary/contract workers and redeployed talent from Performance Technologies (CEO, prepared).
Data center revenue growth path: >60% this fiscal year, targeting >$2B in fiscal 2028 (CEO, prepared).
Performance Technologies SG&A reduced ~$7M in Q2; tariffs recovered via surcharges and pass-throughs (CFO, prepared).
Official guidance (fiscal 2026): total company sales growth 15%–20%; Climate Solutions sales growth 35%–40% (data center >60%); Performance Technologies sales flat to -7% (improved from -2% to -12%); adjusted EBITDA $440M–$470M; free cash flow 2.5%–3% of sales (CFO, prepared).

Mgmt Quotes

"We are accelerating other planned investments to meet the unprecedented demand for our products." (CEO)
"I currently see a path to deliver more than 60% revenue growth in data center this year on our way to achieve over $2 billion in revenues in fiscal 2028." (CEO)
"This is a very heavy lift for the data center team, but I remain confident in our ability to execute, meeting our targets and customer commitments." (CEO)
"We anticipate a significant jump in revenue between Q3 and Q4 driven by new capacity coming online." (CEO)
"We would exit the fiscal year at the highest quarterly margin rate, and we would fully expect additional margin expansion in the new fiscal year." (CFO)

Prepared Metrics

Metric	Value	Speaker/Context
Climate Solutions revenue growth	+24% YoY	CFO, prepared
Data center revenue growth	+42% ($67M)	CFO, prepared
HVAC Technologies revenue growth	+25% ($17M)	CFO, prepared
Heat Transfer Solutions revenue growth	+2% ($3M)	CFO, prepared
Performance Technologies revenue change	-4% YoY	CFO, prepared
Performance Technologies adjusted EBITDA margin	14.7% (+90bps)	CFO, prepared
Consolidated gross margin	22.3% (-290bps)	CFO, prepared
Consolidated adjusted EBITDA margin	14%	CFO, prepared
Adjusted EPS	$1.06 (+9%)	CFO, prepared
Free cash flow (Q2)	-$30M	CFO, prepared
Net debt	$498M	CFO, prepared
Leverage ratio	1.2x	CFO, prepared
Fiscal 2026 total company sales growth guidance	15%–20%	CFO, prepared
Fiscal 2026 Climate Solutions sales growth guidance	35%–40%	CFO, prepared
Fiscal 2026 data center sales growth guidance	>60%	CFO, prepared
Fiscal 2026 Performance Technologies sales growth guidance	flat to -7%	CFO, prepared
Fiscal 2026 adjusted EBITDA guidance	$440M–$470M	CFO, prepared
Fiscal 2026 free cash flow guidance	2.5%–3% of sales	CFO, prepared

Q&A Batch (1-3 of 3)

Q1 — Matt Summerville

Topic: Climate segment margin contraction breakdown and path to normalization
Key points:
- Data center expansion caused 225–250 bps margin drag (~$10M–$12M higher costs, split between labor/overhead/material).
- HTS (heat pump settlements) contributed ~125 bps headwind; HVAC Technologies & other ~100 bps (mix + start-up integration costs).
- To reach Q3 targets, need $40M–$50M incremental capacity (≥2 chiller lines); for Q4, another $75M–$100M volume capacity (≥5 more chiller lines).
Mgmt stance: Bullish – expect sequential margin improvement in Q3/Q4, with Q4 implied guidance of ~20%+ segment margin; beyond normalization, incremental margins “very high” as capacity fills.

Q2 — David Tarantino

Topic: Confidence in margin normalization and long-term data center sales target raise
Key points:
- Mature data center plants already operate at margins at or above segment average; new greenfield lines face fixed-cost absorption and inefficiencies.
- Data center sales target for fiscal 2028 raised to “above $2 billion” (from ~$2 billion 90 days ago), driven by stronger order/funnel activity and new products (e.g., modular data centers).
- Market share: started low single digits, now low double digits; at $2B, estimated 15%–20% of addressable HVAC market in calendar 2027.
Mgmt stance: Bullish – confidence from order profiles, new product launches, and customer relationships; CapEx deployment accelerated based on visibility.

Q3 — Noah Kaye

Topic: Incremental margins, Performance Technologies turnaround, and divestiture update
Key points:
- At existing facilities, incremental gross profit per dollar of sales is ~30% (typical run rate).
- Performance Technologies (PT) focus: same playbook (stabilize, efficiency, customer funnel); Jeremy onboard to accelerate structure.
- Divestiture process: “business as usual,” evaluating strategic options; no specific update.
Mgmt stance: Neutral-to-bullish on PT – stabilizing, awaiting market recovery; cautious on timing (cycles last 1.5–2 years, early stabilization signals).