Summary of Madison Air Q1 2026 Earnings Call

1Key Financial Results and Metrics

Net Sales: Pro forma net sales increased by 13% year-over-year to $924 million.

Adjusted EBITDA: Grew by 16% to $234 million, with adjusted EBITDA margins expanding by 70 basis points to 25.3%.

Free Cash Flow: Generated $50 million, representing a conversion rate of 117%.

Net Income: Adjusted net income rose 36% year-over-year to $93 million.

Backlog: Reached a record $2.5 billion, up 116% year-over-year, indicating strong future revenue visibility.

2Strategic Updates and Business Highlights

Madison Air operates in a $40 billion North American addressable market, focusing on air quality solutions across commercial and residential sectors.

The company has seen strong demand in mission-critical environments such as data centers, healthcare, and clean energy.

The Residential segment, particularly through the AprilAire brand, is positioned for growth, with a focus on healthier air solutions.

The company is investing in aftermarket services, which are growing at a double-digit CAGR and expected to contribute more significantly to revenue.

The IPO allowed Madison Air to strengthen its balance sheet, with proceeds used to reduce debt.

3Forward Guidance and Outlook

2026 Guidance: Projected net sales between $3.75 billion and $3.85 billion, indicating mid to high single-digit growth.

Adjusted EBITDA: Expected to be between $1.02 billion and $1.065 billion, reflecting high single-digit to low double-digit growth.

Free Cash Flow: Anticipated to exceed 100% of net income.

The company aims to achieve a net leverage ratio of less than 2.5x within the next 12 months.

4Challenges and Points of Concern

Market Conditions: The company is monitoring potential impacts from geopolitical tensions, particularly the Middle East conflict, on supply chains.

Residential Market: Despite growth in the Residential segment, there is softness in housing starts and remodeling activity, which could affect future performance.

Tariff Costs: Anticipated gross tariff costs of $100 million present a near-term margin headwind.

Commercial Segment: Some hesitancy in customer decision-making was noted, particularly affecting air handling technology sales.

5Notable Q&A Insights

Data Center Growth: Data center orders were a significant driver, with a balanced growth between liquid cooling and traditional air conditioning.

Commercial Business Outlook: There is confidence in a sequential revenue step-up in the Commercial segment, driven by strong order momentum.

AprilAire Integration: The integration of AprilAire is on track, with continued growth opportunities in the residential market, particularly in indoor air quality solutions.

Service Opportunities: The aftermarket services segment is expected to grow faster than equipment sales, with ongoing investments to enhance service capabilities. Overall, Madison Air's first quarter as a public company reflects strong financial performance and strategic positioning for future growth, despite some challenges in the market landscape.