Modine Outlines Multi-Year Strategy at Investor and Analyst Day

Modine's executive leadership team unveiled strategies to accelerate revenue growth and drive significant margin improvement

RACINE, Wis., June 22, 2022 /PRNewswire/ -- Modine Manufacturing Company (NYSE: MOD), a diversified global leader in thermal management technology and solutions, today hosted an Investor and Analyst Day at The New York Stock Exchange in New York, NY. Members of the executive management team presented the Company's strategy to transform the Company and drive increased shareholder value. Guided by the Company's commitment to 80/20, management detailed multi-phased plans to improve margins and cash flows while also accelerating revenue growth.

The highlights of the event included:

• The Company presented average annual revenue growth targets of 6 to 8 percent in the next two years, and 8 to 10 percent in the following three years, including a renewed focus on acquisitions.
  
  
• The Company presented adjusted EBITDA margin targets of 10 to 12 percent within the next two years, reaching 13 to 15 percent over the next five years.
  
  
• The Company's two new reporting segments – Performance Technologies and Climate Solutions – will manage the business around six verticals to drive a more focused and efficient organization.
  
  
• Modine's refreshed leadership team brings extensive global industrials experience with proven track records of execution and profitable growth to lead their respective businesses.
  
  
• Modine already possesses the capabilities, products and solutions to profitably grow market share in key markets. The reallocation of capital and resources will allow the Company to prioritize previously under-resourced areas of the business and unlock significant value.
  
  
• The 80/20 approach is the governing philosophy for the entire organization. It is a systemic way of examining the business, focusing resources and emphasizing the highest return opportunities.
  
  
• Modine expects its multi-phased transformation will result in a more capital efficient and higher margin business focused on faster-growing markets supported by global megatrends.

"Today we presented our strategy that builds upon a legacy of more than 100 years of innovation to transform Modine for a more sustainable future," said Modine President and Chief Executive Officer, Neil D. Brinker. "Our initiatives to refocus the organization are already well underway and are yielding improved results. With our new segment structure and refreshed management team, we have greatly simplified the business and created a high-performance organization. Our solidified foundation will allow us to increase our share in targeted markets by focusing on proven technologies and products where we have the right to win, shifting capital to businesses that were previously underfunded, while also improving businesses that are performing below our target margins. All of these efforts will lead to an acceleration of profitable growth for a more sustainable future as we shift our legacy focus on products to systems solutions, promote geographic expansion and evaluate opportunistic M&A to complement our technologies. I am incredibly excited about our future and the team we have in place for the next chapter in Modine's rich history."

Fiscal 2024 Financial Targets

• Revenue CAGR of 6 percent to 8 percent
• Adjusted EBITDA margin of 10 percent to 12 percent
• Capital expenditures of ~3 percent of revenue
• Free cash flow 3 percent to 5 percent of revenue
• Net leverage ratio target of 1.5x-2.5x

Fiscal 2027 Financial Targets

• Revenue CAGR of 8 percent to 10 percent
• Adjusted EBITDA margin of 13 percent to 15 percent
• Capital expenditures of ~3 percent of revenue
• Free cash flow 6 percent to 8 percent of revenue
• Net leverage ratio target of 1.5x-2.5x

"I have never been more excited about Modine's future as we evaluate the opportunities available to us over the next several years," added Modine Executive Vice President and Chief Financial Officer, Mick Lucareli. "The actions we are taking today will allow Modine to deliver stronger revenue growth, better margins, higher returns on capital and to drive significant value for all Modine stakeholders."

A webcast replay of the event will be available on the Investor Relations section of the Company's website at www.modine.com.

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," 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, 2022, 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 the COVID-19 pandemic on the national and global economy, our business, suppliers, customers, and employees; the overall health and pricing focus of Modine's customers; our ability to successfully execute our strategic and operational plans, including applying 80/20 principles to our business; our ability to effectively and efficiently modify our cost structure in response to sales volume increases or decreases and complete restructuring activities and realize benefits thereon; our ability to comply with the financial covenants in our credit agreements and to fund our global liquidity requirements efficiently; operational inefficiencies as a result of program launches, unexpected volume increases or decreases, and product transfers; economic, social and political conditions, changes and challenges in the markets where Modine operates and competes, including foreign currency exchange rate fluctuations, inflation, tariffs and sanctions (and potential trade war impacts resulting from tariffs, sanctions or retaliatory actions), supply chain disruptions and supplier constraints, including semiconductor shortages and logistic and transportation challenges, changes in interest rates or tightening of the credit markets, recession, restrictions associated with importing and exporting and foreign ownership, public health crises, and the general uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade, the COVID-19 pandemic, the military conflict in Ukraine and other matters, that have been or may be implemented in the U.S. or abroad; the impact on Modine of any significant increases in commodity prices, particularly aluminum, copper, steel and stainless steel (nickel) and other purchased components and related costs, and our ability to adjust product pricing in response to any such increases; the nature of and Modine's significant exposure to the vehicular industry and the dependence of this industry on the health of the economy; Modine's ability to recruit and maintain talent in managerial, leadership, operational and administrative functions; Modine's ability to protect its proprietary information and intellectual property from theft or attack; the impact of any substantial disruption or material breach of our information technology systems; costs and other effects of environmental investigation, remediation or litigation; and other risks and uncertainties identified by the Company in public filings with the U.S. Securities and Exchange Commission. Forward-looking statements are as of the date of this release, and the Company does not assume any obligation to update any forward-looking statements.

About Modine

Modine, with fiscal 2022 revenues of $2.1 billion, specializes in thermal management systems and components, bringing highly engineered heating and cooling components, original equipment products, and systems to diversified global markets. Modine is a global company headquartered in Racine, Wisconsin (USA), with operations in North America, South America, Europe and Asia. For more information about Modine, visit www.modine.com.

Forward-looking Non-GAAP Financial Measures

Adjusted EBITDA, adjusted EBITDA margin and free cash flow are not measures defined in generally accepted accounting principles (GAAP).  These non-GAAP measures are used by management to evaluate the Company's overall financial performance.  These measures are not, and should not be viewed as, a substitute for the applicable GAAP measures, and may be different from similarly-titled measures used by other companies.  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 by excluding certain items that it believes are not representative of its core business. The Company defines free cash flow as net cash provided by operating activities less expenditures for property, plant and equipment. This measure presents cash generated from operations during the period that is available for strategic capital decisions.

The Company's future projections for non-GAAP financial measures are based on management's expectations of future financial results. For example, adjusted EBITDA includes expectations for interest expense, the provision for income taxes, depreciation and amortization expense. Adjusted EBITDA also excludes certain cash and non-cash expenses or gains. These expenses and gains may be significant and include items such as restructuring expenses (including severance costs and plant consolidation and relocation expenses), impairment charges and certain other items.  Estimates of these expenses and gains are not available due to the low visibility and unpredictability of these items.

Kathleen Powers 
(262) 636-1687 
[email protected]  

SOURCE Modine Manufacturing Company