Madison Air Solutions Q3 sales rise 25.4% to $1.13B
The ebm-papst acquisition is expected to nearly double Madison Air’s total addressable market, subject to customary closing conditions and regulatory approvals.
Accepted by SEC EDGAR
Learn about SEC filing dates
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Madison Air Solutions Corp. (MAIR) reported third-quarter 2026 net sales of $1,126.7 million, up 25.4% from $898.4 million a year earlier, and net income of $107.4 million versus $56.8 million. Adjusted EBITDA was $298.3 million compared with $251.5 million, while gross margin was 36.8% versus 38.9%. Backlog was $3,187.2 million as of September 30, 2026, up 119.3% year over year; quarterly orders were $1,416.6 million, up 25.9%.
The company agreed to acquire ebm-papst, with closing expected soon after year-end subject to customary conditions and regulatory approvals; upon completion, the acquisition is expected to nearly double its total addressable market. The $2,217.4 million of net private-placement proceeds were included in cash at quarter-end. Acquisition-related derivatives generated a $52.2 million unrealized loss recorded in other expense. Disclosure controls were ineffective as of September 30, 2026 because of material weaknesses. Remediation continued; the weaknesses will not be considered remediated until enhanced controls operate effectively for a sufficient period and management concludes through testing that they are appropriately designed and operating effectively.
2 points · 1 major1 major · 2 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Major pointNine-month debt principal payments totaled $2,632.7 million through September 30, 2026. 22% of market cap
- Moderate pointThird-quarter net sales increased 25.4% to $1,126.7 million.
Negative
- Major pointMaterial weaknesses left disclosure controls ineffective as of September 30, 2026.
- Moderate pointAcquisition-related derivatives recorded a $52.2 million unrealized loss in third-quarter expense.
Filing Explained
The resale-registration commitment covers shares already issued; it is not another share issuance.
The placement is complete: Madison Air sold and issued 90,108,130 Class A shares at
The company also agreed to file a registration statement covering investors’ resale of the placement shares; registering those already-issued shares is distinct from issuing them.
Class A and Class B have equal economic rights, but Class B carries ten votes per share versus one for Class A; as of
Key Figures
Net sales: $1,126.7 million
Net income: $107.4 million
Adjusted EBITDA: $298.3 million
+5 more
8 metrics
Net sales
$1,126.7 million
Three months ended September 30, 2026; $898.4 million in the comparable 2025 period
Net income
$107.4 million
Three months ended September 30, 2026; $56.8 million in the comparable 2025 period
Adjusted EBITDA
$298.3 million
Three months ended September 30, 2026; $251.5 million in the comparable 2025 period
Backlog
$3,187.2 million
As of September 30, 2026; 119.3% above September 30, 2025
Orders
$1,416.6 million
Three months ended September 30, 2026; 25.9% above the comparable 2025 period
Cash and cash equivalents
$2,645.2 million
As of September 30, 2026
Private Placement net proceeds
$2,217.4 million
Included in cash and cash equivalents as of September 30, 2026, net of placement fees and offering costs
Unrealized derivative loss
$52.2 million
Recorded in other (income) expense for the three months ended September 30, 2026
Key Terms
Adjusted EBITDA, Backlog, organic revenue growth rate, material weakness
4 terms
Adjusted EBITDA financial
"Adjusted EBITDA | $ | 298.3"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
Backlog financial
"Backlog represents the total expected future revenue from confirmed customer orders"
A backlog is the amount of work or orders that a company has received but hasn't completed yet. It’s like a restaurant with many dishes to serve; the backlog shows how many orders are still waiting to be finished. It matters because a large backlog can indicate strong demand or potential delays in delivering products or services.
organic revenue growth rate financial
"net sales growth rate as adjusted for acquisitions and divestitures and currency exchange rates"
Organic revenue growth rate measures how much a company’s sales increase from its existing operations, excluding the effects of acquisitions, divestitures and currency changes. Investors care because it shows whether demand for the company’s products or services is actually expanding on its own — like judging a garden by how much the original plants grew rather than by counting new pots added — which helps assess sustainability of profits and management performance.
material weakness financial
"A material weakness is a deficiency, or a combination of deficiencies"
A material weakness is a significant flaw in the systems and checks a company uses to ensure its financial reports are accurate, meaning errors or fraud could happen and not be caught. For investors it matters because it raises the risk that reported results are unreliable—similar to finding a hole in a ship’s hull—potentially leading to corrected financials, regulatory action, reduced trust, and negative effects on stock value and borrowing costs.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were MAIR's third-quarter 2026 sales and earnings?
Net sales were $1,126.7 million and net income was $107.4 million for the three months ended September 30, 2026. In the prior-year quarter, net sales were $898.4 million and net income was $56.8 million. Adjusted EBITDA was $298.3 million, compared with $251.5 million.
Why were MAIR's disclosure controls ineffective?
The company cited material weaknesses in controls over significant accounts and disclosures, including segregation of duties and journal-entry preparation and review. It also identified weaknesses in IT controls for program changes, user access, computer operations, and software development. The weaknesses resulted in a balance-sheet classification adjustment and restatement of the Predecessor's 2024 and 2023 financial statements.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended September 30, 2026
or
For the transition period from _______ to _______
Commission File Number: 001-43236
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) (Zip Code)
(312 ) 262-6374
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☑ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
There were 267,671,615 shares of Class A common stock and 324,379,859 shares of Class B common stock outstanding at November 3, 2026.
Table of Contents
Page | |||||
Forward-Looking Statements | 3 | ||||
About Madison Air | 4 | ||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | 4 | ||||
Quantitative and Qualitative Disclosures about Market Risk | 17 | ||||
Controls and Procedures | 18 | ||||
Financial Statements (Unaudited) | 20 | ||||
Condensed Consolidated Balance Sheets (Unaudited) | 20 | ||||
Condensed Consolidated Statements of Income (Loss) (Unaudited) | 21 | ||||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | 22 | ||||
Condensed Consolidated Statements of Shareholders' Equity (Deficit) and Noncontrolling Interests (Unaudited) | 23 | ||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | 26 | ||||
Note 1. Introduction | 27 | ||||
Note 2. Basis of Presentation and Summary of Significant Accounting Policies | 28 | ||||
Note 3. Revenue Recognition | 28 | ||||
Note 4. Fair Value of Financial Instruments | 30 | ||||
Note 5. Business Acquisitions and Divestitures | 30 | ||||
Note 6. Goodwill and Other Intangible Assets | 31 | ||||
Note 7. Inventories | 31 | ||||
Note 8. Property, Plant and Equipment | 31 | ||||
Note 9. Income Taxes | 31 | ||||
Note 10. Accrued Expenses and Other Current Liabilities | 32 | ||||
Note 11. Debt | 33 | ||||
Note 12. Derivative Financial Instruments | 34 | ||||
Note 13. Leases | 35 | ||||
Note 14. Employee Benefit Plans | 36 | ||||
Note 15. Equity Appreciation Rights | 37 | ||||
Note 16. Related Party Transactions | 38 | ||||
Note 17. Earnings Per Share | 38 | ||||
Note 18. Product Warranties | 38 | ||||
Note 19. Accumulated Other Comprehensive Income | 39 | ||||
Note 20. Segment Information | 39 | ||||
Note 21. Commitments and Contingencies | 41 | ||||
Exhibits | 41 | ||||
Form 10-Q Cross Reference Index | 42 | ||||
Signatures | 42 | ||||
Forward-Looking Statements. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. The forward-looking statements included herein are subject to risks and uncertainties. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “positions,” “likely,” “target,” “goal,” “strategy” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, margin expansion, growth rates and financial results or our plans and objectives for future operations, growth initiatives or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
•our estimates of the size of the markets we serve, including our total addressable market and the runway for growth in those markets, prove to be inaccurate;
•an inability to reduce or effectively manage our significant indebtedness and interest expense, including through any future financings or refinancings;
•a failure to develop and maintain effective internal control over financial reporting, including a failure to design and implement sufficient controls to remediate our material weaknesses;
•the markets into which we sell our products and services decline, do not grow as expected, experience cyclicality or shift towards products or services outside of our portfolio;
•changes in the general economy, the housing market or other business conditions;
•difficulties executing, integrating or realizing expected benefits from acquisitions, dispositions or joint ventures, including with respect to the ebm-papst Acquisition (as defined below) or exposure to unexpected liabilities from such transactions;
•uncertainties as to the timing of the ebm-papst Acquisition and the risk that the ebm-papst Acquisition may not be completed in a timely manner or at all, including as a result of a failure to obtain required merger control clearances, foreign investment control clearances and European Commission clearance under the EU Foreign Subsidies Regulation, or the imposition of conditions or remedies in connection with such clearances;
•the occurrence of any event, change or other circumstance that could give rise to the termination of the SPA (as defined below), including circumstances requiring us to pay a break fee thereunder;
•the effect of the announcement or pendency of the ebm-papst Acquisition on our business relationships, operating results and business generally, including the disruption of our current business plans and operations, the diversion of management’s attention and our ability to retain and hire key personnel;
•unexpected costs, charges or expenses resulting from the ebm-papst Acquisition and potential litigation relating to the ebm-papst Acquisition;
•our ability to successfully integrate ebm-papst and realize the anticipated benefits of the ebm-papst Acquisition, including estimated costs, operational, tax and commercial synergies and the effects of the ebm-papst Acquisition on our earnings and financial condition;
•the restrictions imposed on our ability to conduct primary follow-on equity offerings during the two-year period following the Organizational Transactions (as defined below) and associated limitations on our ability to raise equity capital to fund growth initiatives, acquisitions or other strategic opportunities;
•increasing competitive pressures in our industry and the markets in which we operate;
•difficulties implementing our 80/20 operating model or other strategies intended to improve organic growth, including our artificial intelligence ("AI") initiatives;
•an inability to demonstrate or communicate the benefits of our Return on Air value proposition;
•the loss of key customers;
•delays, failures or other challenges in developing and commercializing new versions of our products or new features and accessories;
•unsuccessful efforts to expand into adjacent markets;
•supply shortages, rising raw material costs or disruptions in our distribution network;
•inconsistent practices, controls or decision-making arising from our decentralized organizational structure;
•the incurrence of events causing an impairment of goodwill or other asset impairment charges;
•disruption of our operations in our manufacturing facilities, wholesale locations or key customer operations, including as a result of tariffs or other trade policies;
2026 3Q Madison Air 3
•failures to protect or defend our intellectual property, including trade secrets or proprietary know-how, or our infringement, misappropriation or other violations of others’ intellectual property;
•operational disruptions at manufacturing, wholesale, or key customer locations, as well as labor shortages, disruptions or challenges in attracting and retaining qualified personnel;
•geopolitical conflicts, cybersecurity attacks, natural disasters, climate change, weather and seasonality that disrupt operations or adversely impact demand;
•changes in or noncompliance with varying domestic and foreign laws, regulations or government contracting requirements;
•warranty claims, product liability matters, recall claims, litigation or other legal proceedings, including alleged intellectual property infringement claims;
•violations of environmental, health and safety laws and regulations;
•changes in government regulations, trade policies and tariffs;
•decisions made by our founder who controls us; and
•other factors disclosed in the section entitled "Risk Factors" of our prospectus (the "Prospectus") filed pursuant to Rule 424(b)(4) with the Securities and Exchange Commission ("SEC") on April 17, 2026.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Prospectus and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
About Madison Air
Madison Air Solutions Corporation (NYSE: MAIR) ("Madison Air" or the "Company") is an air quality solutions provider serving priority commercial and residential markets. Through its portfolio of trusted brands, including Addison, AprilAire, Big Ass Fans, Broan-NuTone, Nortek Air Solutions, Nortek Data Center Cooling and Reznor, the company helps customers improve performance, protect critical assets and create healthier indoor environments. Madison Air's mission is to make the world safer, healthier and more productive through the power of better air.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of Madison Air Solutions Corporation as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and the related notes and other financial information of Madison Air Solutions Corporation included elsewhere in this Quarterly Report on Form 10-Q as well as audited consolidated financial statements and the related notes and other financial information of Madison Air Solutions Corporation and Madison Industries IAQ Solutions Corporation included in the Prospectus filed pursuant to Rule 424(b)(4) with the Securities and Exchange Commission ("SEC"). The following discussion contains forward-looking statements that involve risks and uncertainties. Actual results and timing of selected events could differ materially from those discussed or implied by the forward-looking statements as a result of various factors, including those discussed below and detailed elsewhere in this Quarterly Report on Form 10-Q, particularly in the section entitled “Forward-Looking Statements.” The operating results presented within this section are not necessarily indicative of the results that may be expected in any future period.
Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our,” “our business,” “the Company,” “Madison Air” and similar references refer to Madison Air Solutions Corporation and its consolidated subsidiaries following the consummation of the organizational transactions effected in connection with the Company's initial public offering ("IPO").
2026 3Q Madison Air 4
Business Overview
We take up to 25,000 breaths a day and spend up to 90% of our lives indoors, often breathing air that’s up to two to five times more polluted than outdoor air. Yet most people rarely think about the air we breathe at home, at school, in healthcare facilities and at work. Poor air quality doesn’t just affect comfort; it undermines health, productivity and performance.
At Madison Air, we see air differently. Our mission is to make the world safer, healthier and more productive through the power of better air. We’ve built a business that transforms air into tangible outcomes for customers and provides long-term growth opportunities for investors. We call this Return on AirTM.
We believe Madison Air is a leader in the mission-critical indoor air solutions market, powered by differentiated technologies that deliver superior air quality and tangible results: higher productivity, lower energy costs and improved operational performance in the most demanding environments.
From protecting uptime in a data center with Nortek Data Center Cooling, to enabling precision manufacturing with Nortek Air Solutions, to keeping families healthier at home with AprilAire and improving productivity and retention in the workplace with Big Ass Fans – better air delivers better outcomes. That’s the Madison Air advantage.
On April 17, 2026, the Company completed its IPO of 95,096,154 shares of Class A common stock, which includes shares issued after the underwriters fully exercised their option, at an offering price of $27.00 per share. In addition, the Company issued 3,703,704 shares of Class B common stock under a concurrent private placement at a price of $27.00 per share. The Company received net proceeds from the IPO and concurrent private placement of $2,584.2 million after deducting underwriting discounts and commissions (excluding offering related expenses).
Prior to the consummation of the IPO, Madison Air Solutions Corporation engaged in a series of organizational transactions (the “Organizational Transactions”), including (i) a spin-off of Madison Industries IAQ Solutions Corporation (the "Predecessor") from Madison Industries Holdings LLC ("Holdings" or "Madison Industries") whereby ownership interests in the Predecessor were distributed up from Madison Industries US Holdings Corporation to Holdings, which then contributed such ownership interests in the Predecessor to Madison Air Solutions Corporation in exchange for shares of its Class B common stock and, as a result, the Predecessor became a wholly owned subsidiary of the Company and (ii) certain holders of non-controlling interests in intermediary holding entities between the Predecessor and Madison Indoor Air Solutions LLC ("Madison IAS") engaged in a series of transactions that resulted in such holders of non-controlling interests receiving shares of the Company’s Class A common stock in exchange for their respective non-controlling interests in the intermediary holding entities and, as a result, each entity in the chain below the Company became a wholly owned subsidiary thereof.
Following the Organizational Transactions, the Company's capital structure consists of Class A and Class B common stock. The two classes of stock are identical in all economic respects, including rights to dividends and distributions, but differ with respect to voting rights. Holders of Class A common stock are entitled to one vote per share, while holders of Class B common stock are entitled to ten votes per share.
On August 15, 2026, the Company together with its wholly owned subsidiary, Madison Air Solutions Germany GmbH, a limited liability company organized under the laws of Germany (the "Purchaser"), entered into a Sale and Purchase Agreement (the "SPA") with Sturm Beteiligungs-GmbH & Co. KG ("Sturm KG"), Ziehl Beteiligungen GmbH & Co. KG ("Ziehl KG") and Philippiak Holding GmbH ("Philippiak GmbH" and, together with Sturm KG and Ziehl KG, the "Sellers"), pursuant to which, among other things, the Purchaser will acquire from the Sellers all of the issued and outstanding shares and limited partnership interests (collectively, the "Acquired Interests" and such acquisition, the “ ebm-papst Acquisition”) in ebm-papst Mulfingen GmbH & Co. KGaA & Co. KG, ebm-papst Mulfingen GmbH & Co. KGaA, ebm-papst Finanzierungsgesellschaft mbH and ebm-papst Verwaltungs GmbH (collectively, "ebm-papst"). The Company will serve as the Purchaser's Guarantor under the SPA. Upon completion, the acquisition is expected to nearly double the Company's total addressable market. The transaction remains subject to customary closing conditions, including regulatory approvals, and is expected to close soon after the end of the year. The acquisition has not been reflected in the accompanying condensed consolidated financial statements.
In anticipation of the ebm-papst Acquisition, on September 1, 2026, the Company sold an aggregate of 90,108,130 shares of its Class A common stock at a price of $24.97 per share in a private placement (the "Private Placement") to certain institutional investors (each, an "Institutional Investor" and collectively, the "Institutional Investors"), our founder, Larry Gies, and an entity affiliated with Mr. Gies. The Company received net proceeds $2,218.2 million from the Private Placement after deducting placement fees (excluding offering related expenses).
As of September 30, 2026, Mr. Gies and entities affiliated with Mr. Gies hold 59.0% of the economic interests in the Company and controlled approximately 93.1% of the voting power of the Company's outstanding common stock.
2026 3Q Madison Air 5
Trends and Other Factors Affecting Our Business and Results of Operations
We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below. The following are key factors that have affected, and may continue to affect, our operating results and financial performance:
Impacts of Macroeconomic and Geopolitical Conditions. Our operating results have been, and will likely continue to be, influenced by numerous factors affecting the markets we serve, including levels of residential and non-residential new construction, aging commercial and residential building stocks, and long-term secular growth trends, including energy resilience, AI and cloud-computing infrastructure investment, the restoring of advanced manufacturing, and a growing focus on human health and indoor air quality. New residential and non-residential construction activity and, to a lesser extent, residential remodeling and replacement activity are affected by seasonality and cyclical factors such as interest rates, credit availability, inflation, consumer spending, employment levels and other macroeconomic factors.
U.S. trade policy continues to evolve, contributing to macroeconomic uncertainty. The Company continues to receive refunds associated with tariffs previously imposed under emergency authorities and has recorded the associated benefit as a reduction to costs of goods sold. The Company continues to evaluate its exposure related to these matters, including the potential for additional refunds of previously paid tariffs. The ultimate outcome, including the timing and amount of any additional refunds, remains uncertain and may be affected by ongoing administrative processes. Currently, the U.S. government has implemented and continues to evaluate additional tariff measures affecting imports from numerous trading partners, including country-specific tariffs and duties on certain imported goods, components and raw materials. The Company is also monitoring ongoing trade negotiations with key partners, including Canada and Mexico, and potential changes to rules of origin and other provisions that could affect the availability of duty-free treatment. Recent changes to Section 232 tariffs on steel, aluminum, and copper, particularly the expansion of duties to the full value of certain imported products, may further increase effective tariff rates on metal intensive goods. These developments, together with ongoing inflationary pressures affecting labor, transportation, energy and raw material costs, elevated global tariff levels and increasing protectionist measures in other jurisdictions, may result in increased input costs, supply chain disruptions, pricing volatility, and reduced demand for the Company's products.
The majority of our operations are conducted in the United States. However, we have and continue to source raw materials from international suppliers and conduct operations in Canada, Mexico, China, the U.K. and throughout Europe, which exposes us to these operational, supply chain, and cost structure risks as well as foreign currency exchange rate fluctuations. These fluctuations can affect our input costs and procurement strategies. To help manage this risk, we utilize foreign exchange contracts to hedge a portion of our exposure. Changes in trade policies and regulations may make importing products and raw materials from China, Mexico, Canada and other countries more difficult and more costly. While we seek to continue to manage these dynamic geopolitical conditions, fluctuating exchange rates, and tariff policy changes, these factors may ultimately impact our input costs and overall financial performance.
Innovate and Strengthen Our Core Product Portfolio. We're building on our legacy of entrepreneurship and innovation to grow market share with new or underpenetrated products and value-added services. Our close connection to customers, at the point where decisions are made, gives us a deep understanding of their needs and the underlying market trends shaping their businesses. We believe this insight drives focused, purposeful innovation, helping us develop solutions our customers require. In addition, we believe that our new product pipeline is aligned with evolving energy efficiency requirements, which we expect will accelerate replacement demand. We have identified opportunities to enhance and extend our product portfolio, particularly in attractive, high-growth end markets like healthcare and cleanrooms where increasingly stringent building codes related to indoor air quality, digitization, and energy efficiency are driving demand. As we bring new products and enhancements to market, we may incur additional operating expenses, including research and development expense. Furthermore, we intend to capture additional upgrade and replacement opportunities by integrating more digital applications and features into our solutions.
Expand into Adjacent Markets. We believe that our application expertise, scale and breadth of products and services position us to expand our existing product lines into adjacent markets. We've identified opportunities where we believe we can bring existing product categories into new or adjacent niches - especially where we already have existing channel relationships. We plan to leverage our market position, trusted hero brands, deep customer and channel relationships, application expertise, differentiated technologies, and flexible manufacturing footprint to strategically enter these markets. Our Return on Air value proposition underpins this approach. For example, our comfort cooling solutions for manufacturing and logistics deliver safety, productivity and energy efficiency — Return on Air. Our ability to grow revenues is dependent on our ability to scale our offerings and enter adjacent markets.
Streamline Operations and Manage Costs with Owner’s Mindset. We're focused on simplifying our operations and managing costs with discipline. Across the enterprise, we are executing on opportunities to improve operational efficiency and reduce costs. These enhancements primarily revolve around supply chain, footprint and manufacturing efficiencies, automation, human capital management, benefits and insurance consolidation, and headcount planning. Areas of focus include product line transfers to lower-cost facilities while balancing labor, transportation and capital expenditure
2026 3Q Madison Air 6
requirements, utilization and productivity improvements (including through our 80/20 operating model) and standardized management techniques designed to reduce cost of goods sold and general and administrative expenses.
Our 80/20 operating model focuses our attention and resources on the most important elements of our business. The 80/20 operating model is designed to create a systematic process and tool set from which our teams simplify product offerings, focus resources and drive efficiency. We believe this philosophy is a key enabler to sustainable improvement in our operating and financial performance and has the potential to create further competitive advantages and an enhanced financial profile over time.
Pursue Value-Enhancing Acquisitions and Divestitures. As part of our business strategy, we continue to pursue strategic acquisition opportunities where we can accelerate growth and improve profitability by applying our mission, culture and disciplined 80/20 operating model. In August 2026, the Company entered into a definitive agreement to acquire ebm-papst, a leading global supplier of high-performance airflow technology and a pioneer in integrated electronically commutated fan and motor systems. Subject to the satisfaction of customary closing conditions and regulatory approvals, the transaction is expected to close soon after the end of the year.
Upon completion, the emb-papst Acquisition is expected to significantly expand the Company's total addressable market, product portfolio, engineering capabilities, global manufacturing footprint and exposure to attractive growth markets, including data centers, industrial applications and energy-efficient air movement solutions. The acquisition is also expected to increase the Company's international operations and foreign currency exposure and may result in additional integration, restructuring, transaction and financing-related costs. The Company's ability to realize the anticipated strategic and financial benefits of the transaction will depend upon a number of factors, including the successful completion of the acquisition, effective integration of the acquired operations, retention of customers and employees, realization of expected synergies and market conditions following closing.
Seasonality. Certain of our sales are seasonal as construction, repair and restoration activity generally increases during the summer months when there is favorable weather and longer daylight conditions. For certain high volume low speed fan customers, sales peak in the summer months as fans are replaced whereas sales of unit heaters and other heat products peak in the winter months. Significant tropical storms, hurricanes, regional floods and deep freezes increase the demand for restoration dehumidifiers and fans; such events are sporadic in nature and typically occur during their respective seasons. This seasonality is generally mitigated by other products and services we provide that have no material seasonal effect.
Incremental Public Company Expenses. Following our IPO, we continue to incur significant costs associated with operating as a public company. These costs were not incurred prior to the IPO and affect the comparability of current-period results to historical periods. Such costs include director and officer liability insurance expenses, as well as costs associated with third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal and investor and public relations activities. These costs are generally expensed as selling, general and administrative expenses in the condensed consolidated statements of income (loss).
Key Performance Indicators
Our management team also monitors key performance indicators to assist us in evaluating the performance of our business, including backlog and orders. We believe these key performance indicators are useful to investors in understanding and evaluating our results of operations in the same manner as our management team. However, the presentation of key performance indicators is presented for supplemental information purposes only and should not be considered as superior to or as a substitute for financial information presented in accordance with GAAP and may be different from similarly titled key performance indicators used by other companies. Key performance indicators have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for an analysis of our results as reported under GAAP.
Backlog and Orders. Backlog and orders are additional metrics that are meant to provide management with a deeper level of insight into the progress of specific strategic and growth initiatives. Backlog represents the total expected future revenue from confirmed customer orders that have been received but not yet shipped or rendered as of a given date. Backlog is applicable to sales of products, systems and services.
Orders represent the dollar value of customer purchase commitments signed over a given period, with confirmed pricing, quantities, and delivery terms. Orders provide management with a signal of customer demand for the Company’s products and services, as well as an indication of future revenues and performance. However, the timing and conversion of backlog and orders are subject to numerous uncertainties and risks and are not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year.
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The following tables summarize backlog and orders for the Commercial and Residential segments. Orders related to acquired companies are included from the date of acquisition forward:
| Backlog | September 30, 2026 | December 31, 2025 | September 30, 2025 | ||||||||||||||
| Commercial | $ | 3,109.1 | $ | 2,095.2 | $ | 1,381.8 | |||||||||||
| Residential | 78.1 | 65.6 | 71.4 | ||||||||||||||
| Total | $ | 3,187.2 | $ | 2,160.8 | $ | 1,453.2 | |||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Orders | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Commercial | $ | 1,052.3 | $ | 768.8 | $ | 3,043.2 | $ | 2,023.8 | |||||||||||||||
| Residential | 364.3 | 356.1 | 1,018.7 | 853.7 | |||||||||||||||||||
| Total | $ | 1,416.6 | $ | 1,124.9 | $ | 4,061.9 | $ | 2,877.5 | |||||||||||||||
Total backlog was $3,187.2 million as of September 30, 2026, an increase of 47.5% compared to December 31, 2025 and 119.3% compared to September 30, 2025. The increases were driven primarily by Commercial backlog, which reflects continued wins across several key technologies including air, liquid, and hybrid cooling, air handling and air movement. Residential backlog remained relatively stable, with backlog levels improving during 2026 despite continued broader market challenges. Current Residential backlog levels support near-term visibility and leave the segment well positioned to benefit from an eventual recovery in residential construction remodeling activity.
Total orders were $1,416.6 million and $4,061.9 million for the three and nine months ended September 30, 2026, respectively, representing increases of 25.9% and 41.2% over the corresponding prior-year periods. The increases were driven primarily by broad-based growth across the Commercial segment's end markets, including continued strength in data centers related demand. Comparability of the year-over-year periods was also impacted by the acquisition of Research Products Corporation ("AprilAire," and such acquisition, the "AprilAire Acquisition"), which contributed approximately $68.5 million and $398.2 million of Commercial and Residential orders, respectively, during the nine months ended September 30, 2026, compared to approximately $42.7 million and $226.1 million of Commercial and Residential orders, respectively, during the period from May 7, 2025 through September 30, 2025.
For the period from January 1, 2025 to May 6, 2025, AprilAire’s commercial brands generated orders of $36.3 million, that would have been accounted for in Madison Air’s Commercial segment had we owned AprilAire and its associated commercial brands during the period and residential brands generated orders of $147.4 million, that would have been accounted for in Madison Air’s Residential segment had we owned AprilAire and its associated residential brands during the period.
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Results of Operations
The following tables and accompanying narrative disclosures present our results of operations for the three and nine months ended September 30, 2026 and 2025. The results of operations presented are not necessarily indicative of results for future periods. The Company classified the results of operations and cash flows of Nortek Global HVAC LLC ("NGH") as discontinued operations in our condensed consolidated statements of income (loss) and condensed consolidated statements of cash flows for all periods presented.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
| (in millions, except share and per share data) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| Net sales | $ | 1,126.7 | $ | 898.4 | $ | 3,041.7 | $ | 2,408.4 | |||||||||||||||||||||
Cost of goods sold(1) | 704.0 | 539.6 | 1,879.6 | 1,472.8 | |||||||||||||||||||||||||
Selling, general and administrative expenses(2) | 149.2 | 135.0 | 452.8 | 382.9 | |||||||||||||||||||||||||
| Intangible amortization | 39.9 | 40.8 | 121.5 | 100.7 | |||||||||||||||||||||||||
| Restructuring expenses | 1.8 | 0.8 | 4.7 | 3.5 | |||||||||||||||||||||||||
| Other operating expenses | 16.9 | 0.8 | 21.5 | 12.5 | |||||||||||||||||||||||||
| Operating income | 214.9 | 181.4 | 561.6 | 436.0 | |||||||||||||||||||||||||
| Interest and financing expenses | 36.9 | 100.1 | 212.4 | 255.0 | |||||||||||||||||||||||||
| Other (income) expense, net | 50.4 | (3.1) | 50.2 | (12.6) | |||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 127.6 | 84.4 | 299.0 | 193.6 | |||||||||||||||||||||||||
| Income tax expense (benefit) | 20.2 | 25.4 | 78.1 | 58.6 | |||||||||||||||||||||||||
| Income (loss) from continuing operations | 107.4 | 59.0 | 220.9 | 135.0 | |||||||||||||||||||||||||
| Income (loss) from discontinued operations, net of taxes | — | (2.2) | — | (1.2) | |||||||||||||||||||||||||
| Net income (loss) | 107.4 | 56.8 | 220.9 | 133.8 | |||||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | 12.0 | 10.7 | 29.0 | |||||||||||||||||||||||||
| Net income (loss) attributable to the Company | $ | 107.4 | $ | 44.8 | $ | 210.2 | $ | 104.8 | |||||||||||||||||||||
| Non-GAAP and Other Financial Measures: | |||||||||||||||||||||||||||||
Gross Profit(3) | 414.2 | 349.3 | 1,134.7 | 910.0 | |||||||||||||||||||||||||
Gross Profit Margin(3) | 36.8 | % | 38.9 | % | 37.3 | % | 37.8 | % | |||||||||||||||||||||
Adjusted Gross Profit(4) | 422.7 | 364.6 | 1,162.1 | 948.4 | |||||||||||||||||||||||||
Adjusted Gross Profit Margin(4) | 37.5 | % | 40.6 | % | 38.2 | % | 39.4 | % | |||||||||||||||||||||
| Net Income (Loss) | 107.4 | 56.8 | 220.9 | 133.8 | |||||||||||||||||||||||||
| Net Income (Loss) Margin | 9.5 | % | 6.3 | % | 7.3 | % | 5.6 | % | |||||||||||||||||||||
Adjusted Net Income (Loss)(4) | 199.3 | 99.5 | 442.6 | 256.0 | |||||||||||||||||||||||||
Adjusted Net Income (Loss) Margin(4) | 17.7 | % | 11.1 | % | 14.6 | % | 10.6 | % | |||||||||||||||||||||
Adjusted EBITDA(4) | 298.3 | 251.5 | 797.5 | 645.4 | |||||||||||||||||||||||||
Adjusted EBITDA Margin(4) | 26.5 | % | 28.0 | % | 26.2 | % | 26.8 | % | |||||||||||||||||||||
(1)Exclusive of intangible amortization shown separately.
(2)Inclusive of equity appreciation rights expense of $11.3 million and $5.3 million for the three months ended September 30, 2026 and 2025, respectively, and $38.0 million and $32.6 million for the nine months ended September 30, 2026 and 2025, respectively.
(3)Gross Profit and Gross Profit Margin are presented in accordance with GAAP. For a reconciliation of Gross Profit and Gross Profit Margin, see "Non-GAAP Financial Measures.”
(4)Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income (loss), Adjusted Net Income (loss) margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For a reconciliation of each of Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income (loss), Adjusted Net Income (loss) margin, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable financial measures under GAAP, see “Non-GAAP Financial Measures.”
For the three months ended September 30, 2026. Net sales increased $228.3 million, or 25.4%, compared to the three months ended September 30, 2025. Higher volumes contributed the majority of the increase in organic net sales, reflecting continued demand across the portfolio, further supported by favorable pricing actions.
Other operating expenses increased $16.1 million, compared to the three months ended September 30, 2025. During the three months ended September 30, 2026, transaction expenses included costs related to the prospective acquisition of ebm-papst.
Interest and financing expenses decreased $63.2 million, or 63.1%, compared to the three months ended September 30, 2025. Contractual interest on outstanding debt obligations decreased by $55.1 million primarily attributable to lower average debt balances and favorable interest rate movements resulting from debt amendments. In addition, the Company generated $5.9 million of additional interest income related to higher cash and cash equivalent balances following the completion of the Private Placement.
Other (income) expense increased $53.5 million compared to the three months ended September 30, 2025. The increase was primarily related to a net $52.2 million loss on foreign currency forwards and collar contracts, interest rate swaps and cross currency swaps related to its prospective acquisition of ebm-papst. Hedge accounting was not applied to these instruments, and therefore all changes in fair value were recorded in other (income) expense, net in the condensed consolidated statements of income (loss). The foreign currency forward and collar contracts will mature or be terminated
2026 3Q Madison Air 9
at the close of the acquisition. The interest rate swaps and cross currency swaps will be used as a hedge for our interest rate and currency risk exposure following the ebm-papst Acquisition.
Income tax expense decreased $5.2 million compared to the three months ended September 30, 2025. The effective income tax rate was 15.8%, which is a decrease of 14.3% compared to the three months ended September 30, 2025. The decrease in the effective tax rate for the three months ended September 30, 2026 was primarily driven by the release of state valuation allowances recorded discretely in the third quarter of 2026.
For the nine months ended September 30, 2026. Net sales increased $633.3 million, or 26.3%, compared to the nine months ended September 30, 2025. The AprilAire Acquisition drove an aggregate $213.8 million of the net sales increase year-over-year. Organic net sales growth in our Commercial segment was partially offset by a modest organic net sales decline in our Residential segment, consistent with broader market trends. Higher volumes contributed the majority of the increase in organic net sales, reflecting continued demand across the portfolio, further supported by favorable pricing actions.
Other (income) expense increased by $62.8 million compared to the nine months ended September 30, 2025. The increase was primarily related to a net $52.2 million loss on foreign currency forwards and collar contracts, interest rate swaps, and cross currency swaps related to its prospective acquisition of ebm-papst and changes in non-cash gains and losses on foreign exchange, disposals of fixed assets, and other financial instruments.
Interest and financing expenses decreased $42.6 million, or 16.7%, compared to the nine months ended September 30, 2025. Contractual interest on outstanding debt obligations decreased by $62.3 million primarily attributable to lower average debt balances and favorable interest rate movements resulting from debt amendments. The favorable change in contractual interest was partially offset by a $27.7 million loss on debt extinguishment in connection with the repayment and modification of our Credit Agreement.
Income tax expense increased $19.5 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The effective income tax rate was 26.1%, which is a decrease of 4.2% compared to the nine months ended September 30, 2025. The decrease in the effective tax rate for the nine months ended September 30, 2026 was primarily driven by the release of the state valuation allowances recorded in the third quarter of 2026, partially offset by discrete write-offs in the second quarter of 2026 for executive compensation that is no longer deductible for tax purposes after the Company became a public business entity.
Results of Operations by Segment
The following tables and accompanying narrative disclosures present our results of segment operations for the three and nine months ended September 30, 2026 and 2025. The results of operations presented are not necessarily indicative of results for future periods. We report and manage our business through two segments: Commercial and Residential. We report certain activities and items that are not included in these segments within Central and other costs.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Commercial | $ | 771.9 | $ | 554.2 | $ | 2,040.6 | $ | 1,580.2 | |||||||||||||||||||||
Residential | 355.5 | 344.5 | 1,004.9 | 829.3 | |||||||||||||||||||||||||
| Segment net sales | 1,127.4 | 898.7 | 3,045.5 | 2,409.5 | |||||||||||||||||||||||||
| Eliminations | (0.7) | (0.3) | (3.8) | (1.1) | |||||||||||||||||||||||||
Total net sales | $ | 1,126.7 | $ | 898.4 | $ | 3,041.7 | $ | 2,408.4 | |||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Commercial | $ | 200.5 | $ | 162.2 | $ | 534.6 | $ | 446.6 | |||||||||||||||||||||
Residential | 104.9 | 93.9 | 282.8 | 209.8 | |||||||||||||||||||||||||
Segment Adjusted EBITDA(1) | 305.4 | 256.1 | 817.4 | 656.4 | |||||||||||||||||||||||||
| Central and other costs | (7.1) | (4.6) | (19.9) | (11.0) | |||||||||||||||||||||||||
Total Adjusted EBITDA | $ | 298.3 | $ | 251.5 | $ | 797.5 | $ | 645.4 | |||||||||||||||||||||
(1)For additional information regarding Segment Adjusted EBITDA, see Note 20 of our condensed consolidated financial statements.
Commercial. Commercial segment net sales increased $217.9 million, or 39.3%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025 primarily driven by broad-based growth across the segment, led by air, liquid and hybrid cooling, air movement and heat and commercial dehumidification solutions.
Commercial segment Adjusted EBITDA increased $38.3 million, or 23.6%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The EBITDA growth was driven by higher volumes and pricing, partially offset by success-based data center business mix, production ramp costs and inflation.
2026 3Q Madison Air 10
Commercial segment net sales increased $460.4 million, or 29.1%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. Organically, Commercial net sales increased by 26.7% driven by broad-based growth across the segment, led by air, liquid and hybrid cooling, air movement, and energy efficiency solutions. Acquisitions contributed $36.1 million, or 2.3%, of additional net sales in the period.
Commercial segment Adjusted EBITDA increased $88.0 million, or 19.7%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. Acquisitions contributed $9.2 million of incremental Commercial segment Adjusted EBITDA. Excluding the AprilAire Acquisition, Commercial segment Adjusted EBITDA growth was mainly driven by higher volumes and pricing, partially offset by production ramp costs and inflation.
Residential. Residential segment net sales increased $11.2 million, or 3.2%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025 primarily driven by pricing and demand for healthy air systems.
Residential segment Adjusted EBITDA increased $11.0 million, or 11.7%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The EBITDA growth was mainly driven by pricing, productivity improvements, and favorable net tariff impacts, partially offset by inflation.
Residential segment net sales increased $175.6 million, or 21.2%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. Organically, Residential net sales decreased by 0.4% driven by modest volume declines for ventilation solutions, net of price increases and strong demand for healthy air systems. Acquisitions contributed to $177.0 million, or 21.3%, of additional net sales in the period.
Residential segment Adjusted EBITDA increased $73.0 million, or 34.8%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. Acquisitions contributed $59.3 million of additional Residential segment Adjusted EBITDA. Excluding the AprilAire Acquisition, Residential segment Adjusted EBITDA increased by $2.7 million.
Non-GAAP Financial Measures
In addition to financial results determined in accordance with GAAP, we believe that the following non-GAAP measures, including Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin, Adjusted EBITDA, Adjusted EBITDA Margin, organic revenue growth rate, FCF and FCF Conversion, in each of the periods and forms presented below, are useful in evaluating the performance of our business.
We use these non-GAAP financial measures to measure the operational strength and performance of our business and believe these measures provide additional information to investors about certain non-cash items and items that we do not expect to continue at the same level in the future. Further, we believe these non-GAAP financial measures provide a meaningful measure of business performance and provide a basis for comparing our performance to that of other peer companies using similar measures. We use FCF and FCF Conversion as an additional liquidity measure and believe it provides useful information to investors about the cash generated from our core operations that may be available to repay debt, make other investments and return cash to shareholders.
When presented on a Pro Forma basis, such non-GAAP financial metrics solely give effect to the AprilAire Acquisition as if such transaction had occurred on January 1, 2025. These metrics are intended to give the reader an opportunity to evaluate the Company and have a basis for comparability after giving effect to certain significant merger, acquisition and disposal activity as determined consistent with Article 11 under Regulation S-X, as compared to the Company’s actual historical results.
However, the non-GAAP financial information is presented for supplemental information purposes only and should not be considered as superior to or as a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP or consistent with Article 11 under Regulation S-X, as applicable. Investors are encouraged to review each of the related GAAP and unaudited pro forma financial measures and the applicable reconciliation of these non-GAAP financial measures to their most directly comparable GAAP and unaudited pro forma financial measures, as applicable.
Non-GAAP measures and pro forma financial information have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for an analysis of our results as reported under GAAP. Because of these limitations, the non-GAAP measures and pro forma financial information discussed herein should not be considered as a replacement for net income, net sales growth rate or net cash from operating activities. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.
Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin, Adjusted EBITDA, and Adjusted EBITDA Margin are supplemental measures of operating performance that are not calculated in accordance with GAAP and do not represent, and should not be considered as, alternatives to net sales, net income (loss), income before tax provision or any other performance measure as determined by GAAP.
2026 3Q Madison Air 11
We define Adjusted Gross Profit as net sales less cost of goods sold, excluding the purchase accounting impacts of acquisitions such as amortization related to technology-related intangible assets and purchase accounting inventory adjustments. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by net sales. We define Adjusted Net Income (Loss) as net income (loss) as adjusted for certain items that impact comparability from period to period. These adjustments include net (income) loss from discontinued operations, amortization expense, transaction related expenses, restructuring expenses, equity appreciation rights expense, non-operating expenses (income), allocated Madison Industries costs, non-recurring professional and consulting expenses, and the tax effect of net income (loss) adjustments. We define Adjusted Net Income (Loss) Margin as Adjusted Net Income (Loss) divided by net sales. We define Adjusted EBITDA as net income (loss) as adjusted for net (income) loss from discontinued operations, interest and financing expenses, income tax expense (benefit), depreciation and amortization, transaction related expenses, restructuring expenses, equity appreciation rights expense, non-operating expenses (income), allocated Madison Industries costs, gain on insurance proceeds, and non-recurring professional and consulting expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales.
The following table reconciles Adjusted Gross Profit to GAAP Gross Profit, the most directly comparable GAAP measure:
| Actuals | Actuals | ||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net sales | $ | 1,126.7 | $ | 898.4 | $ | 3,041.7 | $ | 2,408.4 | |||||||||||||||
Cost of goods sold (excluding intangible amortization) | (704.0) | (539.6) | (1,879.6) | (1,472.8) | |||||||||||||||||||
| Technology intangible amortization | (8.5) | (9.5) | (27.4) | (25.6) | |||||||||||||||||||
| Gross Profit | 414.2 | 349.3 | 1,134.7 | 910.0 | |||||||||||||||||||
| Technology intangible amortization | 8.5 | 9.5 | 27.4 | 25.6 | |||||||||||||||||||
| Purchase accounting inventory adjustment | — | 5.8 | — | 12.8 | |||||||||||||||||||
| Adjusted Gross Profit | $ | 422.7 | $ | 364.6 | $ | 1,162.1 | $ | 948.4 | |||||||||||||||
| Gross Profit Margin | 36.8 | % | 38.9 | % | 37.3 | % | 37.8 | % | |||||||||||||||
| Adjusted Gross Profit Margin | 37.5 | % | 40.6 | % | 38.2 | % | 39.4 | % | |||||||||||||||
The following table reconciles Adjusted Net Income to net income (loss), the most directly comparable GAAP measure, and Adjusted Net Income (Loss) Margin to net income (loss) margin, the most directly comparable GAAP measure, in each of the periods and bases (actual historical and Pro Forma) presented below:
| Actuals | Actuals | Pro Forma(1) | |||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2025 | |||||||||||||||||||||||||
| Net income (loss) | $ | 107.4 | $ | 56.8 | $ | 220.9 | $ | 133.8 | $ | 67.6 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
Net (income) loss from discontinued operations(2) | — | 2.2 | — | 1.2 | 1.2 | ||||||||||||||||||||||||
| Amortization expense | 39.9 | 40.8 | 121.5 | 100.7 | 122.2 | ||||||||||||||||||||||||
Transaction related expenses(3) | 17.1 | 6.0 | 20.3 | 24.8 | 68.9 | ||||||||||||||||||||||||
Restructuring expenses(4) | 1.8 | 0.8 | 4.7 | 3.5 | 5.4 | ||||||||||||||||||||||||
Equity appreciation rights expense(5) | 11.3 | 5.3 | 38.0 | 32.6 | 38.0 | ||||||||||||||||||||||||
Non-operating expenses (income)(6) | 50.4 | (2.7) | 50.4 | (6.3) | (1.5) | ||||||||||||||||||||||||
Allocated Madison Industries costs(7) | — | 2.6 | 10.0 | 8.4 | 8.4 | ||||||||||||||||||||||||
Non-recurring professional and consulting expenses(8) | 0.7 | 1.9 | 2.6 | 4.0 | 4.0 | ||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | 27.7 | — | — | ||||||||||||||||||||||||
Gain on insurance proceeds(9) | — | — | — | (5.8) | (5.8) | ||||||||||||||||||||||||
Write-off of deferred tax asset(10) | — | — | 13.7 | — | — | ||||||||||||||||||||||||
Tax effect of net income (loss) adjustments(11) | (29.3) | (14.2) | (67.2) | (40.9) | (45.8) | ||||||||||||||||||||||||
| Adjusted net income (loss) | $ | 199.3 | $ | 99.5 | $ | 442.6 | $ | 256.0 | $ | 262.6 | |||||||||||||||||||
| Net sales | 1,126.7 | 898.4 | 3,041.7 | 2,408.4 | 2,587.2 | ||||||||||||||||||||||||
| Net income (loss) margin | 9.5 | % | 6.3 | % | 7.3 | % | 5.6 | % | 2.6 | % | |||||||||||||||||||
| Adjusted net income (loss) margin | 17.7 | % | 11.1 | % | 14.6 | % | 10.6 | % | 10.1 | % | |||||||||||||||||||
(1)Financial information presented on a Pro Forma basis solely to give effect to the AprilAire Acquisition as if such transaction had occurred on January 1, 2025. See the unaudited pro forma combined statements of operations filed as Exhibit 99.1 to this Quarterly Report on Form 10-Q for a description of the adjustments and assumptions underlying the Pro Forma financial information.
(2)Represents the results of discontinued operations from the divestiture of Nortek Global HVAC and its subsidiary.
(3)Represents direct transaction costs and acquisition related charges from acquisition and divestiture activity, including transaction fees, due diligence costs, transfer taxes and other direct costs related to acquisition activities, changes in the fair value of contingent consideration, purchase accounting adjustments, integration charges and
2026 3Q Madison Air 12
professional and legal fees, and gain on the disposition of business. For the three and nine months ended September 30, 2026 transaction cost primarily related to the prospective acquisition of ebm-papst in addition to $4.5 million of costs incurred in connection with the IPO. For the three and nine months ended September 30, 2025 transaction costs primarily related to the AprilAire Acquisition.
(4)Represents costs associated with discrete, approved restructuring programs designed to optimize the Company's organizational structure and operating footprint, including employee severance and facility rationalization activities.
(5)Represents compensation expense under the EAR Plan and Amended EAR Plan.
(6)Represents pension expense and non-cash operating gains and losses including, foreign currency transaction on intercompany loans fixed asset disposals, available-for-sale marketable securities. and derivative instruments not classified as hedging instruments. For the three and nine months ended September 30, 2026 non-operating expense (income) included an unrealized loss of $52.2 million on derivative instruments. Refer to Note 12. Derivative Financial Instruments for additional information.
(7)Represents indirect costs for support received from Madison Industries for certain internal and external corporate activities including, but not limited to, consolidation accounting, legal, and other Madison Industries corporate and infrastructure related services that will no longer be incurred following the consummation of the Company's IPO. This does not include services that will continue to be provided by Madison Industries International Holdings LLC following the consummation of the IPO pursuant to the Transition Services Agreement.
(8)Represents expenses for professional and consulting services related to non-recurring transactions including one-time audit, legal and consulting fees incurred to prepare for IPO and SOX implementation, consulting fees for productivity improvement projects, legal fees, and leadership recruiting and relocation fees.
(9)Represents a one-time gain on insurance proceeds from damage to one of our manufacturing facilities.
(10)Represents the write-off of a deferred tax asset related to compensation deductions that are no longer expected to be realized due to limitation on deductibility following the IPO.
(11)The tax effect from the adjustments assumes an estimated average worldwide marginal current tax rate of approximately 24.2% and 23.3% for the three and nine months ended September 30, 2026, respectively, and 25.0% and 25.1% for the three and nine months ended September 30, 2025, respectively.
The following table reconciles Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, and Adjusted EBITDA Margin to net income (loss) margin, the most directly comparable GAAP measure in each of the periods and bases (actual historical, Pro Forma and Pro Forma Adjusted) presented below:
| Actuals | Actuals | Pro Forma(1) | |||||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2025 | |||||||||||||||||||||||||||||||
| Net income (loss) | $ | 107.4 | $ | 56.8 | $ | 220.9 | $ | 133.8 | $ | 67.6 | |||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
Net (income) loss from discontinued operations(2) | — | 2.2 | — | 1.2 | 1.2 | ||||||||||||||||||||||||||||||
| Interest and financing expenses | 36.9 | 100.1 | 184.7 | 255.0 | 301.7 | ||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 20.2 | 25.4 | 78.1 | 58.6 | 42.1 | ||||||||||||||||||||||||||||||
| Depreciation and amortization | 52.5 | 53.1 | 160.1 | 135.6 | 161.3 | ||||||||||||||||||||||||||||||
Transaction related expenses(3) | 17.1 | 6.0 | 20.3 | 24.8 | 68.9 | ||||||||||||||||||||||||||||||
Restructuring expenses(4) | 1.8 | 0.8 | 4.7 | 3.5 | 5.4 | ||||||||||||||||||||||||||||||
Equity appreciation rights expense(5) | 11.3 | 5.3 | 38.0 | 32.6 | 38.0 | ||||||||||||||||||||||||||||||
Non-operating expenses (income)(6) | 50.4 | (2.7) | 50.4 | (6.3) | (1.5) | ||||||||||||||||||||||||||||||
Allocated Madison Industries costs(7) | — | 2.6 | 10.0 | 8.4 | 8.4 | ||||||||||||||||||||||||||||||
Non-recurring professional and consulting expenses(8) | 0.7 | 1.9 | 2.6 | 4.0 | 4.0 | ||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | 27.7 | — | — | ||||||||||||||||||||||||||||||
Gain on insurance proceeds(9) | — | — | — | (5.8) | (5.8) | ||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 298.3 | $ | 251.5 | $ | 797.5 | $ | 645.4 | $ | 691.3 | |||||||||||||||||||||||||
| Net sales | 1,126.7 | 898.4 | 3,041.7 | 2,408.4 | 2,587.2 | ||||||||||||||||||||||||||||||
| Net income (loss) margin | 9.5 | % | 6.3 | % | 7.3 | % | 5.6 | % | 2.6 | % | |||||||||||||||||||||||||
| Adjusted EBITDA Margin | 26.5 | % | 28.0 | % | 26.2 | % | 26.8 | % | 26.7 | % | |||||||||||||||||||||||||
(1)Financial information presented on a Pro Forma basis solely to give effect to the AprilAire Acquisition as if such transaction had occurred on January 1, 2025. See the unaudited pro forma combined statements of operations filed as Exhibit 99.1 to this Quarterly Report on Form 10-Q for a description of the adjustments and assumptions underlying the Pro Forma financial information.
(2)Represents the results of discontinued operations from the divestiture of Nortek Global HVAC and its subsidiary.
(3)Represents direct transaction costs and acquisition related charges from acquisition and divestiture activity, including transaction fees, due diligence costs, transfer taxes and other direct costs related to acquisition activities, changes in the fair value of contingent consideration, purchase accounting adjustments, integration charges and professional and legal fees, and gain on the disposition of business. For the three and nine months ended September 30, 2026 transaction cost primarily related to the prospective acquisition of ebm-papst in addition to $4.5 million of costs incurred in connection with the IPO. For the three and nine months ended September 30, 2025 transaction costs primarily related to the AprilAire Acquisition.
(4)Represents costs associated with discrete, approved restructuring programs designed to optimize the Company's organizational structure and operating footprint, including employee severance and facility rationalization activities.
(5)Represents compensation expense under the EAR Plan and Amended EAR Plan.
(6)Represents pension expense and non-cash operating gains and losses including, foreign currency transaction on intercompany loans, fixed asset disposals, available-for-sale marketable securities. and derivative instruments not classified as hedging instruments. For the three and nine months ended September 30, 2026 non-operating expense (income) included an unrealized loss of $52.2 million on derivative instruments. Refer to Note 12. Derivative Financial Instruments for additional information.
(7)Represents indirect costs for support received from Madison Industries for certain internal and external corporate activities including, but not limited to, consolidation accounting, legal, and other Madison Industries corporate and infrastructure related services that will no longer be incurred following the consummation of the Company's IPO. This does not include services that will continue to be provided by Madison Industries International Holdings LLC following the consummation of the IPO pursuant to the Transition Services Agreement.
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(8)Represents expenses for professional and consulting services related to non-recurring transactions including one-time audit, legal and consulting fees incurred to prepare for IPO and SOX implementation, consulting fees for productivity improvement projects, legal fees, and leadership recruiting and relocation fees.
(9)Represents a one-time gain on insurance proceeds from damage to one of our manufacturing facilities.
The following table sets forth the net impacts of the related pro forma adjustments on the Company's reconciliation of Pro Forma Adjusted EBITDA to Pro Forma net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.
Pro Forma(1) | |||||||||||
| Nine months ended September 30, 2025 | |||||||||||
| Net Income (loss) | $ | (66.2) | |||||||||
| Adjustments: | |||||||||||
| Interest and financing expenses | 46.7 | ||||||||||
| Income tax expense (benefit) | (16.5) | ||||||||||
| Depreciation and amortization | 25.7 | ||||||||||
Transaction related expenses(1) | 44.1 | ||||||||||
Restructuring expenses(2) | 1.9 | ||||||||||
Equity appreciation rights expense(3) | 5.4 | ||||||||||
| Non-operating expenses (income) | 4.8 | ||||||||||
| Adjusted EBITDA | $ | 45.9 | |||||||||
| Net Sales | 178.8 | ||||||||||
| Net Income (loss) margin | (37.0) | % | |||||||||
| Adjusted EBITDA Margin | 25.7 | % | |||||||||
(1)Represents direct transaction costs related to acquisition and divestiture activity, including transaction fees, due diligence costs, purchase accounting adjustments, and other acquisition related charges, such as one-time transaction related compensation, professional and legal fees. Transaction related expenses totaled $44.1 million for the nine months ended September 30, 2025 and related to the previous owners' divestiture of AprilAire.
(2)Represents severance costs incurred with respect to the previous owners' divestiture of AprilAire.
(3)Represents compensation expense that would have been incurred under the EAR Plan and one-time compensation related to the previous owners' divestiture of AprilAire.
Organic revenue growth rate. We define organic revenue growth rate as net sales growth rate as adjusted for acquisitions and divestitures and currency exchange rates. Sales from acquired businesses are excluded from the organic sales growth calculation for the first 12 months following the acquisition date, while sales from divested businesses are excluded for the 12 months preceding the divestiture. Organic revenue growth is based on continuing operations and excludes sales from discontinued operations.
We believe that organic revenue growth rate provides information to our management and investors about the underlying growth trends in our business and facilitating comparisons of our revenue performance with the performance in prior and future periods excluding any growth attributable to acquisitions. The following tables reconcile organic revenue growth rate to net sales growth rate, the most directly comparable GAAP measure.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Consolidated | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales growth rate | 25.4 | % | 31.5 | % | 26.3 | % | 26.4 | % | |||||||||||||||
| Less: Impact of: | |||||||||||||||||||||||
Acquisitions/divestitures | — | % | 24.2 | % | 8.2 | % | 13.5 | % | |||||||||||||||
| Currency exchange rates | — | % | — | % | 0.3 | % | (0.3) | % | |||||||||||||||
| Organic revenue growth rate | 25.4 | % | 7.3 | % | 17.8 | % | 13.2 | % | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Commercial | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales growth rate | 39.3 | % | 16.0 | % | 29.1 | % | 22.3 | % | |||||||||||||||
| Less: Impact of: | |||||||||||||||||||||||
Acquisitions/divestitures | — | % | 6.2 | % | 2.0 | % | 3.9 | % | |||||||||||||||
| Currency exchange rates | — | % | 0.1 | % | 0.4 | % | (0.3) | % | |||||||||||||||
| Organic revenue growth rate | 39.3 | % | 9.7 | % | 26.7 | % | 18.7 | % | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Residential | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales growth rate | 3.2 | % | 68.6 | % | 21.2 | % | 34.4 | % | |||||||||||||||
| Less: Impact of: | |||||||||||||||||||||||
Acquisitions/divestitures | — | % | 69.2 | % | 21.4 | % | 34.9 | % | |||||||||||||||
| Currency exchange rates | — | % | (0.1) | % | 0.2 | % | (0.3) | % | |||||||||||||||
| Organic revenue growth rate | 3.2 | % | (0.5) | % | (0.4) | % | (0.2) | % | |||||||||||||||
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Free Cash Flow and FCF Conversion
Free Cash Flow ("FCF") is a non-GAAP liquidity measure that we define as net cash flows provided by operating activities—continuing operations less purchases of property, plant and equipment plus proceeds from sale of property, plant and equipment. FCF Conversion is a non-GAAP liquidity measure that we define as FCF divided by net income (loss) from continuing operations.
We believe that FCF and FCF Conversion are useful indicators of liquidity that provide information to management and investors about the amount of cash provided by our core operations that, after the purchases of property, plant and equipment, interest servicing and tax payments, is available to be used for strategic initiatives and to pay down debt principal. FCF and FCF Conversion may have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our cash flows as reported under GAAP. The following table reconciles FCF to net cash flows provided by operating activities, the most directly comparable GAAP measure, and calculates FCF Conversion.
| Nine months ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net cash flows provided by (used in) operating activities | $ | 328.4 | $ | 333.3 | |||||||||||||||||||
| Net cash flow provided by (used in) operating activities - discontinued operations | — | 0.6 | |||||||||||||||||||||
| Net cash flows provided by operating activities— continuing operations | 328.4 | 332.7 | |||||||||||||||||||||
| Purchases of property, plant and equipment | (30.6) | (22.8) | |||||||||||||||||||||
| Proceeds from disposal of property, plant and equipment | 0.2 | 2.5 | |||||||||||||||||||||
| FCF | $ | 298.0 | $ | 312.4 | |||||||||||||||||||
| Net income (loss) from continuing operations | 220.9 | 135.0 | |||||||||||||||||||||
| Operating cash flow conversion—continuing operations | 148.7 | % | 246.4 | % | |||||||||||||||||||
| FCF Conversion | 134.9 | % | 231.4 | % | |||||||||||||||||||
Liquidity and Capital Resources
General. As of September 30, 2026, our principal sources of liquidity were cash and cash equivalents totaling $2,645.2 million and available balance under our Revolving Credit Facility of $1,358.2 million. During the third quarter 2026, the Company increased the capacity on its revolver by $65.0 million. Our liquidity position, together with expected cash flow from operations, provides financial flexibility to fund working capital needs, capital expenditures, and strategic initiatives and acquisition-related activities.
On August 15, 2026, the Company entered into a definitive agreement to acquire ebm-papst, a leading global supplier of airflow technology and electronically commutated fan and motor systems. The ebm-papst Acquisition is expected to close soon after the end of the year, subject to customary closing conditions and required regulatory approval. The acquisition will significantly expand the Company's total addressable market and is expected to be financed through a combination of cash on hand, including proceeds from the Company's recently completed Private Placement, and debt. As of September 30, 2026, the $2,217.4 million of proceeds from the Private Placement, net of placement fees and offering costs, were included in cash and cash equivalents. Because the ebm-papst Acquisition had not closed as of September 30, 2026, its effects are not reflected in the accompanying condensed consolidated financial statements.
In connection with the prospective ebm-papst Acquisition, the Company entered into foreign currency forwards and collar contracts, interest rate swaps and cross currency swaps related to its prospective acquisition of ebm-papst. The notional value of the foreign currency forwards and collar contracts was $2,382.4 million, the notional amount of interest rate swaps was $861.1 million, and the notional value of cross currency swaps was $861.1 million as of September 30, 2026. Hedge accounting was not applied to these instruments, and therefore all changes in fair value were recorded in other (income) expense, net in the condensed consolidated statements of income (loss). As of September 30, 2026 $46.2 million was recorded in accrued expenses and other current liabilities for foreign currency forwards and collar contracts. As of September 30, 2026, $2.4 million was recorded in other current assets and $24.7 million was recorded in other long-term assets for interest rate swaps. As of September 30, 2026, $2.0 million was recorded in other current assets and $35.1 million was recorded in other long-term liabilities for cross currency swaps. The foreign currency forward and collar contracts will mature or be terminated at the close of the acquisition. The interest rate swaps and cross currency swaps will be used as a hedge for our interest rate and currency risk exposure following the ebm-papst Acquisition. Refer to Note 12. Derivative Financial Instruments for additional information.
We believe our existing cash balances, available borrowings under our Revolving Credit Facility, anticipated cash generated from operations and financing arrangements associated with the acquisition will be sufficient to meet our operating requirements, anticipated acquisition funding obligation, capital expenditures and debt service requirements for the next twelve months.
Our future capital requirements will depend on many factors, including our company’s and our industry’s growth rates, the timing and extent of spending to support development efforts, the introduction of new and enhanced products and
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services offerings, the continuing market acceptance of our products and the timing and extent of acquisitions and dispositions. In the future, we may enter into arrangements to acquire or invest in businesses, services and technologies, including intellectual property rights. We may require access to capital to fund our operations, including general working capital for operating expenses, purchases of property and equipment for our operations, to make investments in our growth and for other needs. To the extent that existing cash and cash from operations are not sufficient to fund our future operations or growth, we may need to raise additional funds through public or private equity or additional debt financing. To the extent that we are unsuccessful in raising capital through additional debt or equity financings, our plans for continued growth may need to be moderated or curtailed.
We maintain a debt structure that consists of a term loan, senior notes, and a revolving credit facility. As of September 30, 2026, total debt outstanding consisted of $1,345.6 million under our Term Loans, $1,035.0 million under our Unsecured Notes and $700.0 million under our Secured Notes. There were no borrowings outstanding under our revolving credit facility, and $13.8 million of letters of credit were outstanding of which $6.8 million reduced our borrowing capacity, leaving substantial available capacity as of September 30, 2026.
During the second quarter of 2026, the Company completed its IPO. Proceeds from the IPO and concurrent private placement, together with cash on hand, were used to repay $2,425.7 million of remaining principal under the Company's Initial Term Loan and $200.0 million in principal under the Company's Incremental Term Loan, excluding the impact of the debt extinguishment. Following these prepayments, the Company’s sixth amendment to its credit agreement became effective and the Company entered into the seventh amendment to its credit agreement. These amendments resulted in an increase in our revolving credit facility of $960.0 million to $1,300.0 million and a reduction in the borrowing margin applicable to the Incremental Term Loan of 100 basis points for both SOFR and Base Rate loans and the removal of the margin step-up and step-down. Following the seventh amendment, the applicable margin for the Incremental Term Loan Facility is 1.75% for Term SOFR loans and 0.75% for Base Rate loans.
Our debt maturities extend through 2032. The revolving credit facility matures in 2028, subject to customary provisions.
Our credit agreement and indentures contain customary covenants and restrictions. A financial maintenance covenant under the credit agreement becomes applicable only if the Company has outstanding amounts drawn on the revolving credit facility above a certain threshold. We were in compliance with all debt covenants as of September 30, 2026 and expect to remain in compliance during the twelve months from the date of this Quarterly Report on Form 10-Q.
We remain focused on maintaining a strong liquidity position and disciplined capital structure while investing in organic growth and pursuing strategic opportunities. We may also opportunistically refinance or repay outstanding debt to enhance our capital structure and reduce cost of capital over time.
Cash Flows
The following table sets forth a summary of our operating, investing, and financing activities for the nine months ended September 30, 2026 and 2025.
| Nine months ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Continuing operations: | |||||||||||
| Net cash flows provided by operating activities | $ | 328.4 | $ | 332.7 | |||||||
| Net cash flows used in investing activities | (31.0) | (2,335.7) | |||||||||
| Net cash flows (used in) provided by financing activities | 2,139.9 | 1,949.3 | |||||||||
| Effect of exchange rate changes on cash | (0.5) | (0.8) | |||||||||
| Discontinued operations: | |||||||||||
| Net cash flows used in operating activities | — | 0.6 | |||||||||
| Net cash flows provided by investing activities | — | 4.9 | |||||||||
| Total net change in cash and cash equivalents | $ | 2,436.8 | $ | (49.0) | |||||||
Operating Activities. Net cash provided by operating activities decreased $4.3 million to $328.4 million during the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The decrease was primarily driven by increased working capital requirements, principally higher accounts receivable balances resulting from increased net sales and timing of customer collections, partially offset by higher net income and increased non-cash charges and favorable changes in accounts payable and accrued expenses. Inventory levels also increased compared to the prior-year period, reflecting growth in business activity and inventory investments to support customer demand.
Investing Activities. Net cash used in investing activities decreased $2,304.7 million to $31.0 million during the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The decrease was primarily attributable to the acquisition of AprilAire. During the nine months ended September 30, 2026, the primary use of cash in investing activities was the purchase of property, plant and equipment to support the growth of our existing manufacturing facilities. Investment in property, plant and equipment were up $7.8 million to $30.6 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. During the nine months
2026 3Q Madison Air 16
ended September 30, 2025, cash outflows for business acquisitions were $2,300.9 million, the Company facilitated the funding of a $95.0 million related party loan, and net proceeds from the sale of available for sale marketable securities were $80.5 million.
Financing Activities. Net cash provided by financing activities increased $190.6 million to $2,139.9 million during the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The increase was primarily attributable to issuance of common stock in connection with the Company IPO and private placements offset by cash outflows to reduce the Company's outstanding borrowings. During the second quarter 2026 proceeds from the Company's IPO and concurrent private placement were $2,574.9 million, net of $92.7 million of underwriting fees and offering costs, which were substantially offset by debt principal payments of $2,632.7 million. During the third quarter 2026 proceeds from the Company's subsequent Private Placement were $2,217.4 million, net of $32.6 million of placement fees and offering costs, which are expected to be used, together with additional acquisition financing, to fund the prospective ebm-papst Acquisition. In addition, the Company paid $56.4 million of tax withholding obligations related to the net share settlement of vested equity awards. During the nine months ended September 30, 2025, financing cash inflows were primarily driven by proceeds from the Incremental Term Loan of $1,732.5 million and capital contributions of $157.5 million, which were used to fund the AprilAire Acquisition.
Discontinued operations. Prior year cash flow provided by and used for discontinued operations were primarily the result of continued working capital settlements from the 2024 divestiture of NGH. There were no businesses classified as discontinued operations for the nine months ended September 30, 2026.
Indemnification Agreements
In the normal course of business, we provide indemnification of varying scope to customers against claims of infringement or other violation of intellectual property made by third parties arising from, in connection with, relating to or resulting from the use of our services, and from time to time we may be subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been material, but we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.
To the extent permitted under Delaware law, we have agreements whereby we indemnify our directors and officers for certain events or occurrences while the director or officer is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other purposes as of September 30, 2026 and 2025.
Critical Accounting Policies and Estimates
Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses. We believe that the most complex and sensitive judgments, because of their potential significance to the accompanying unaudited condensed consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. In "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Prospectus, we describe the significant accounting estimates and policies used in the preparation of the accompanying unaudited condensed consolidated financial statements. There have been no significant changes in our critical accounting estimates.
Quantitative and Qualitative Disclosures about Market Risk
Except as described below, there has been no significant change in our exposure to market risk during the nine months ended September 30, 2026. For discussions of our exposure to market risk, refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures about Market Risk" in our Prospectus.
Foreign Currency Risk. During the three months ended September 30, 2026, in connection with the prospective ebm-papst Acquisition, we entered into foreign currency forward and collar contracts, interest rate swaps and cross currency swaps to mitigate the foreign-currency appreciation in the euro-denominated purchase price. These instruments were entered into for purposes other than trading. As of September 30, 2026 the notional value of the foreign currency forwards and collar contracts was $2,382.4 million, the notional amount of interest rate swaps was $861.1 million, and the notional value of cross currency swaps was $861.1 million. The foreign currency forward and collar contracts will mature or be terminated at the close of the acquisition. The interest rate swaps and cross currency swaps will be used as a hedge for
2026 3Q Madison Air 17
our interest rate and currency risk exposure following the ebm-papst Acquisition, which is expected to significantly increase our international operations and foreign currency exposure.
Based on the foreign currency forwards and collar contracts outstanding as of September 30, 2026, a hypothetical 10% adverse change in the euro to U.S. dollar forward exchange rate would have caused a loss of approximately $217.6 million in the mark-to-mark valuation of those contracts.
Based on the interest rate swap contracts outstanding as of September 30, 2026, a hypothetical 100 basis points adverse change in the overnight SOFR curve would have caused a loss of approximately $37.2 million in the mark-to-mark valuation of those contracts.
Based on the cross currency swaps outstanding as of September 30, 2026, a hypothetical 10% adverse change in the euro to U.S. dollar forward exchange rate would have caused a loss of approximately $5.0 million in the mark-to-mark valuation of those contracts.
These amounts assume an instantaneous change in the applicable forward exchange rate, with all other variables held constant. They do not reflect the offsetting change in the U.S. dollar equivalent of the euro-denominated purchase price payable under the SPA or our other foreign currency exposures, and actual results may differ materiality from these hypothetical amounts. For additional information, refer to Note 12. Derivative Financial Instruments.
Controls and Procedures
Disclosure Controls and Procedures. The Company's management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2026. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2026 due to material weaknesses in internal control over financial reporting described below.
Material Weaknesses in Internal Control over Financial Reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
As previously reported in the Form 10-Q for the quarter ended June 30, 2026, the Company identified material weaknesses in its internal control over financial reporting as we did not design and maintain effective controls in response to the risks of material misstatement. The Company did not design and maintain adequate formal internal controls over significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls related to segregation of duties and the preparation and review of journal entries.
Additionally, we did not design and maintain effective information technology (“IT”) general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain: (i) program change management controls to ensure that IT program and data changes are identified, tested, authorized, and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel; (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored; and (iv) program development controls to ensure that new software development is tested, authorized and implemented appropriately.
The material weaknesses described above resulted in an error in the balance sheet classification of redeemable noncontrolling interests which resulted in an adjustment to the Predecessor's balance sheet as of December 31, 2025 and the restatement of the Predecessor's consolidated financial statements for the years ended December 31, 2024 and 2023. Additionally, each of the material weaknesses described above could result in misstatements of our account balances and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Plan to Remediate the Material Weaknesses. During the quarter ended September 30, 2026, in partnership with an external advisor, we have continued to evaluate and document the design and operating effectiveness of our internal controls and progress with the remediation of deficiencies, including the implementation and expected implementation of new control procedures. This implementation includes training and awareness of control operation and documentation requirements for employees.
While we believe these efforts will improve our internal controls and address the underlying causes of the material weaknesses, the material weaknesses will not be considered remediated until the newly designed and enhanced controls have operated for a sufficient period of time and management has concluded, through testing, that the controls are appropriately designed and operating effectively.
Changes in Internal Control Over Financial Reporting. As noted in the Plan to Remediate the Material Weaknesses section above, there have been changes in the Company's internal control over financial reporting that occurred during
2026 3Q Madison Air 18
the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Legal Proceedings
In the normal course of business, we are involved in a variety of lawsuits, claims and legal proceedings, including those related to commercial and contract disputes, employment matters, product liability and product defect claims, asbestos-related claims, environmental liabilities, intellectual property disputes, and tax-related matters. We may also receive requests for information from government agencies in connection with their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. We review such requests and notices and take appropriate action. Regardless of the outcome, litigation and investigations have the potential to have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Unregistered Sales of Equity and Use of Proceeds
During the quarter ended September 30, 2026, the Company sold an aggregate of 90,108,130 shares of its Class A common stock in the Private Placement. The information required by this Item was previously reported on the Company's Current Report on Form 8-K filed with the SEC on August 25, 2026.
Other Information
Insider Trading Arrangements. During the three months ended September 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
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Financial Statements (Unaudited)
Madison Air Solutions Corporation
Condensed Consolidated Balance Sheets (Unaudited)
| (in millions, except share and per share data) | September 30, 2026 | December 31, 2025 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories (Note 7) | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net (Note 8) | |||||||||||
| Goodwill (Note 6) | |||||||||||
| Other intangible assets, net (Note 6) | |||||||||||
| Other long-term assets | |||||||||||
| Total assets | |||||||||||
| Liabilities and Equity (Deficit) | |||||||||||
| Accounts payable | |||||||||||
| Customer deposits and deferred revenue | |||||||||||
| Accrued expenses and other current liabilities (Note 10) | |||||||||||
| Current maturities of long-term debt (Note 11) | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt (Note 11) | |||||||||||
| Deferred income taxes (Note 9) | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 21) | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Shareholders' equity (deficit) | |||||||||||
Class A common stock, $ | |||||||||||
Class B common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings (accumulated deficit) | ( | ||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Total shareholders' equity (deficit) | ( | ||||||||||
| Noncontrolling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2026 3Q Madison Air 20
Madison Air Solutions Corporation
Condensed Consolidated Statements of Income (Loss) (Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (in millions, except share and per share data) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
Cost of goods sold(1) | |||||||||||||||||||||||
Selling, general and administrative expenses(2) | |||||||||||||||||||||||
| Intangible amortization | |||||||||||||||||||||||
| Restructuring expenses | |||||||||||||||||||||||
| Other operating (income) expense | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest and financing expenses, net | |||||||||||||||||||||||
| Other (income) expense, net | ( | ( | |||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | |||||||||||||||||||||||
| Income tax expense (benefit) | |||||||||||||||||||||||
| Income (loss) from continuing operations | |||||||||||||||||||||||
| Income (loss) from discontinued operations, net of taxes | ( | ( | |||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | |||||||||||||||||||||||
| Net income (loss) attributable to the Company | $ | $ | $ | $ | |||||||||||||||||||
| Earnings (loss) per share from continuing operations | |||||||||||||||||||||||
| Basic earnings (loss) per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings (loss) per share | |||||||||||||||||||||||
| Earnings (loss) per share from discontinued operations | |||||||||||||||||||||||
| Basic earnings (loss) per share | |||||||||||||||||||||||
| Diluted earnings (loss) per share | |||||||||||||||||||||||
| Net Income (loss) per share | |||||||||||||||||||||||
| Basic earnings (loss) per share | |||||||||||||||||||||||
| Diluted earnings (loss) per share | |||||||||||||||||||||||
(1)Exclusive of intangible amortization shown separately
(2)Inclusive of equity appreciation rights expense of $11.3 and $5.3 for the three months ended September 30, 2026 and 2025, respectively, and $38.0 and $32.6 for the nine months ended September 30, 2026 and 2025, respectively.
The accompanying notes are an integral part of these condensed consolidated financial statements.
2026 3Q Madison Air 21
Madison Air Solutions Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | ||||||||||||||||||||
Actuarial gain (loss) on pension plans (net of tax of $ | ( | ( | ( | ||||||||||||||||||||
Gain (loss) on hedging instruments (net of tax of $( | ( | ( | |||||||||||||||||||||
Gain (loss) on available-for-sale marketable securities (net of tax of $ | ( | ||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Comprehensive income (loss) | |||||||||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interest | |||||||||||||||||||||||
| Comprehensive income (loss) attributable to the Company | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2026 3Q Madison Air 22
Madison Air Solutions Corporation
Condensed Consolidated Statements of Shareholders' Equity (Deficit) and Noncontrolling Interests (Unaudited)
| (in millions, except share data) | Class A Common Stock Shares | Class A Common Stock Amount | Class B Common Stock Shares | Class B Common Stock Amount | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity (Deficit) | Noncontrolling Interest | Total Equity (Deficit) | Redeemable Noncontrolling Interest | ||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||
| Distributions | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Net Income (loss) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Issuance of Class A common stock in initial public offering | — | — | — | — | ( | — | — | ( | — | ( | — | ||||||||||||||||||||||||
| Issuance of common stock in private placements | 0.0 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Tax attribution to Holdings from reorganization transaction | — | — | — | — | ( | — | — | ( | — | ( | — | ||||||||||||||||||||||||
| Equity Appreciation Rights expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Issuance of Class A common stock upon vesting of EAR units | 0.0 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Net share settlement of EAR awards | — | — | — | — | ( | — | — | ( | — | ( | — | ||||||||||||||||||||||||
| Balance at September 30, 2026 | ( | ||||||||||||||||||||||||||||||||||
2026 3Q Madison Air 23
| (in millions, except share data) | Class A Common Stock Shares | Class A Common Stock Amount | Class B Common Stock Shares | Class B Common Stock Amount | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity (Deficit) | Noncontrolling Interest | Total Equity (Deficit) | Redeemable Noncontrolling Interest | ||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||
| Distributions | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Net Income (loss) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||
| Increased value of redeemable noncontrolling interests | — | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||
| Issuance of Class A common stock in initial public offering | 0.0 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Issuance of common stock in private placements | 0.0 | 0.0 | — | — | — | — | |||||||||||||||||||||||||||||
| Remeasurement and exchange of noncontrolling interests for Class A common stock | 0.0 | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||
| Tax attribution to Holdings from reorganization transaction | — | — | — | — | ( | — | — | ( | — | ( | — | ||||||||||||||||||||||||
| Equity Appreciation Rights expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Issuance of Class A common stock upon vesting of EAR units | 0.0 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Net share settlement of EAR awards | — | — | — | — | ( | — | — | ( | — | ( | — | ||||||||||||||||||||||||
| Balance at September 30, 2026 | ( | ||||||||||||||||||||||||||||||||||
2026 3Q Madison Air 24
| (in millions, except share data) | Common Stock Shares | Common Stock Amount | Class B Common Stock Shares | Class B Common Stock Amount | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity (Deficit) | Noncontrolling Interest | Total Equity (Deficit) | Redeemable Noncontrolling Interest | ||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | ||||||||||||||||||||||||
| Contributions | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Distributions | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Redemptions of noncontrolling interests | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Net Income (loss) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Equity value attributable to noncontrolling interests in business acquisition | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | ||||||||||||||||||||||||
| (in millions, except share data) | Common Stock Shares | Common Stock Amount | Class B Common Stock Shares | Class B Common Stock Amount | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity (Deficit) | Noncontrolling Interest | Total Equity (Deficit) | Redeemable Noncontrolling Interest | ||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||
| Contributions | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Distributions | — | — | — | — | ( | — | — | ( | — | ( | — | ||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Redemptions of noncontrolling interests | — | — | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||
| Net Income (loss) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Equity value attributable to noncontrolling interests in business acquisition | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2026 3Q Madison Air 25
Madison Air Solutions Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Nine months ended September 30, | |||||||||||
| (in millions) | 2026 | 2025 | |||||||||
| Net Income (loss) | $ | $ | |||||||||
| (Income) loss from discontinued operations, net of taxes | |||||||||||
| Adjustments to reconcile net income to net cash flows from operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Equity appreciation rights | |||||||||||
| Non-cash interest expense | |||||||||||
| Purchase accounting inventory adjustment | |||||||||||
| (Gain) loss on extinguishment of debt | |||||||||||
| (Gain) loss on settlement of pension obligation | ( | ||||||||||
| Other (gains) losses, net | ( | ||||||||||
| Other | |||||||||||
| Changes to assets and liabilities, net of acquisitions and divestitures | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Accounts payable and accrued expenses | |||||||||||
| Customer deposits and deferred revenue | |||||||||||
Other assets and liabilities, net | ( | ( | |||||||||
| Net cash flows provided by operating activities - continuing operations | |||||||||||
| Net cash flow provided by (used in) operating activities - discontinued operations | |||||||||||
| Net cash flows provided by (used in) operating activities | |||||||||||
| Purchase of property, plant and equipment | ( | ( | |||||||||
| Proceeds from disposal of property, plant and equipment | |||||||||||
| Purchase of available-for-sale marketable securities | ( | ||||||||||
| Capitalized software development costs | ( | ||||||||||
| Proceeds from the sale of available-for-sale marketable securities | |||||||||||
| Issuance of related party loan | ( | ||||||||||
| Acquisitions of businesses, net of cash acquired | ( | ||||||||||
| Net cash flows provided by (used in) investing activities - continuing operations | ( | ( | |||||||||
| Net cash flows provided by (used in) investing activities - discontinued operations | |||||||||||
| Net cash flows provided by (used in) investing activities | ( | ( | |||||||||
| Proceeds from the issuance of common stock | |||||||||||
| Payment of underwriting fees and offering costs | ( | ||||||||||
| Contributions | |||||||||||
| Debt principal payments | ( | ( | |||||||||
| Proceeds from issuance of debt | |||||||||||
| Proceeds from related party loan | |||||||||||
| Distributions to Holdings | ( | ||||||||||
| Distributions to and redemptions of noncontrolling interests | ( | ||||||||||
| Contributions from noncontrolling interests | |||||||||||
| Payments of financing fees | ( | ( | |||||||||
| Taxes paid related to net share settlement of equity awards | ( | ||||||||||
| Payment of deferred consideration | ( | ||||||||||
| Payments on financing leases | ( | ( | |||||||||
| Net cash flows provided by (used in) financing activities | |||||||||||
| Effects of exchange rate changes on cash | ( | ( | |||||||||
| Net change in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at the beginning of the period | |||||||||||
| Cash and cash equivalents at the end of period | $ | $ | |||||||||
| Supplemental cash flow disclosures: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Supplemental disclosures of non-cash operating, investing, and financing activities: | |||||||||||
| Exchange of noncontrolling interests for Class A common stock | $ | $ | |||||||||
| Tax attribution to Holdings from reorganization transaction (Note 9) | |||||||||||
| Acquisition of Research Products - rollover equity (Note 5) | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2026 3Q Madison Air 26
Madison Air Solutions Corporation
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(in millions, except share and per share data or otherwise noted)
Note 1. Introduction
Nature of Operations. Madison Air Solutions Corporation (the “Company” or "Madison Air") is an air quality solutions provider for priority commercial and residential markets. Through its portfolio of trusted brands, including Addison, AprilAire, Big Ass Fans, Broan-NuTone, Nortek Air Solutions, Nortek Data Center Cooling and Reznor, the Company operates in high-value niches adjacent to traditional HVAC, helping customers improve performance, protect critical assets and create healthier indoor environments. Madison Air's mission is to make the world safer, healthier and more productive through the power of better air. The Company’s operations are classified into two reportable segments: Commercial and Residential.
Initial Public Offering. On April 17, 2026, the Company completed its IPO of 95,096,154 shares of Class A common stock, which includes shares issued after the underwriters fully exercised their option, at an offering price of $27.00 per share. In addition, the Company issued 3,703,704 shares of Class B common stock under a concurrent private placement at a price of $27.00 per share. The Company received net proceeds from the IPO and a concurrent private placement of $2,584.2 after deducting underwriting discounts and commissions (excluding offering related expenses). Prior to the IPO, deferred offering costs, which consisted of direct incremental legal, accounting, and other fees relating to the IPO, were capitalized in prepaids and other current assets in the condensed consolidated balance sheets. Upon consummation of the IPO, $8.8 of deferred offering costs, net of reimbursements received from the underwriters, were reclassified into shareholders' equity as an offset against the IPO proceeds.
Organizational Transactions. Prior to the consummation of the IPO, Madison Air Solutions Corporation engaged in a series of organizational transactions (the “Organizational Transactions”), including (i) a spin-off of Madison Industries IAQ Solutions Corporation (the "Predecessor") from Madison Industries Holdings LLC ("Holdings" or "Madison Industries") whereby ownership interests in the Predecessor were distributed up from Madison Industries US Holdings Corporation to Holdings, which then contributed such ownership interests in the Predecessor to Madison Air Solutions Corporation in exchange for shares of its Class B common stock and, as a result, the Predecessor became a wholly owned subsidiary of the Company and (ii) certain holders of non-controlling interests in intermediary holding entities between the Predecessor and Madison Indoor Air Solutions LLC ("Madison IAS") engaged in a series of transactions that resulted in such holders of non-controlling interests receiving shares of the Company’s Class A common stock in exchange for their respective non-controlling interests in the intermediary holding entities and, as a result, each entity in the chain below the Company became a wholly owned subsidiary thereof. As a result of the Organizational Transactions, the Company issued 320,676,155 shares of Class B common stock to Holdings, cancelled 1,000 shares of Class A common stock previously held by Holdings, and issued 81,791,959 shares of Class A common stock to former holders of the noncontrolling interests. The exchange of shares with noncontrolling interests holders resulted in a remeasurement of their interest at the IPO price of $27.00 per share. The difference between the carrying value of the noncontrolling interest received and the fair value of the Class A common stock was recorded as a reduction in additional paid-in capital. The transaction between the Company and Holdings is reflected on a retrospective basis. Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies, for additional information.
Following the Organizational Transactions, the Company's capital structure consists of Class A and Class B common stock. The two classes of stock are identical in all economic respects, including rights to dividends and distributions, but differ with respect to voting rights. Holders of Class A common stock are entitled to one vote per share, while holders of Class B common stock are entitled to ten votes per share.
Prospective Acquisition. On August 15, 2026, the Company together with its wholly owned subsidiary, Madison Air Solutions Germany GmbH, a limited liability company organized under the laws of Germany (the "Purchaser"), entered into a Sale and Purchase Agreement (the "SPA") with Sturm Beteiligungs-GmbH & Co. KG ("Sturm KG"), Ziehl Beteiligungen GmbH & Co. KG ("Ziehl KG") and Philippiak Holding GmbH ("Philippiak GmbH" and, together with Sturm KG and Ziehl KG, the "Sellers"), pursuant to which, among other things, the Purchaser will acquire from the Sellers all of the issued and outstanding shares and limited partnership interests (collectively, the "Acquired Interests" and such acquisition, the “ ebm-papst Acquisition”) in ebm-papst Mulfingen GmbH & Co. KGaA & Co. KG, ebm-papst Mulfingen GmbH & Co. KGaA, ebm-papst Finanzierungsgesellschaft mbH and ebm-papst Verwaltungs GmbH (collectively, "ebm-papst"). The Company will serve as the Purchaser's Guarantor under the SPA. Upon completion, the acquisition is expected to nearly double the Company's total addressable market. The transaction remains subject to customary closing conditions, including regulatory approvals, and is expected to close soon after the end of the year. The acquisition has not been reflected in the accompanying condensed consolidated financial statements.
Private Placement. On August 25, 2026, the Company entered into Securities Purchase Agreements pursuant to which the Company sold, in a private placement, an aggregate of 90,108,130 shares of the Company's Class A common stock at an offering price of $24.97 per share (the "Private Placement"). The Private Placement closed on September 1, 2026 for non-affiliate Institutional Investors and September 22, 2026 for affiliated investors. The Company received proceeds of
2026 3Q Madison Air 27
$2,250.0 which is recorded as an increase in common stock at par with the remaining balance increasing additional paid-in capital. Offering costs, which consisted of placement fees and direct incremental legal fees relating to the Private Placement were $32.6 which are recorded as a reduction in additional paid-in capital.
As part of the Private Placement, Larry Gies, Chairman of the Board, purchased 12,014,417 of Class A common stock and an entity affiliated with Mr. Gies, purchased 12,815,378 of Class A common stock. These purchases were made on the same terms and conditions as those applicable to other investors participating in the Private Placement.
In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the Institutional Investors pursuant to which the Company has agreed to file a registration statement covering the resale of shares issued to the Institutional Investors in the Private Placement. The Company may incur additional costs with satisfying its obligations under the Registration Rights Agreement. Such costs will be recorded as a reduction in additional paid-in capital in the period incurred.
As of September 30, 2026, Mr. Gies and entities affiliated with Mr. Gies hold approximately 59.0 % of the economic interests in the Company and controlled approximately 93.1 % of the voting power of the Company's outstanding common stock.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Financial Statement Presentation. The accompanying unaudited condensed consolidated financial statements are presented in accordance with United States Securities and Exchange Commission ("SEC") interim reporting requirements. Accordingly, the condensed consolidated financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for full financial statements and should be read in conjunction with the audited consolidated financial statements included in the prospectus (the "Prospectus") of the Company filed pursuant to Rule 424(b)(4) with the SEC on April 17, 2026.
The Organizational Transactions resulted in a new corporate and capital structure and a change in the reporting entity, which was accounted for as a transfer of entities under common control. Accordingly, the condensed consolidated financial statements for all periods reflect the financial position, results of operations, and cash flows of the Predecessor as if it had been a wholly-owned subsidiary of the Company for all periods presented.
The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed consolidated results for interim periods presented.
The unaudited condensed consolidated financial statements include the results of the Company and its majority-owned subsidiaries. The minority shareholders’ interest in majority-owned subsidiaries is reflected as redeemable noncontrolling interest and noncontrolling interest. All intercompany balances and transactions have been eliminated in the consolidated financial statements.
Reclassifications. Certain items previously reported in other operating expenses, including equity appreciation rights expense, have been reclassified from other operating expenses to selling, general, and administrative expenses. In addition, items within the statements of cash flows previously presented as separate gain and loss line items have been aggregated and presented as “Other (gains) losses, net,” with the exception of the loss on extinguishment of debt, which continues to be presented separately due to its materiality.
Recently Issued Accounting Pronouncements. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE) (“ASU 2024-03”), which requires public entities to disclose disaggregated information about expenses by nature on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements.
Note 3. Revenue Recognition
Revenue is recognized at a point-in-time or over time when performance obligations are satisfied. When revenue is recognized at a point-in-time, control generally transfers at time of shipment. Revenues are recognized over time if the customer simultaneously receives control as the Company performs work under a contract, if the customer controls the
2026 3Q Madison Air 28
asset as it is being produced, or if the product produced for the customer has no alternative use and the Company has a contractual right to payment with a reasonable profit margin. Revenue recognized over time relates solely to our Commercial segment. Revenue is measured based on the amount of consideration the Company expects to receive, reduced for estimates for return allowances, discounts and rebates. Product returns, customer allowances and rebates are estimated based on contractual obligations, historical experience and known trends. Revenues also exclude any impacts from value-added taxes, sales tax and other taxes where the Company is a pass-through conduit for collecting and remitting such taxes to governmental authorities. Taxes collected are included in accrued expenses and other current liabilities until the taxes are remitted to the appropriate taxing authorities. Payment terms vary by customer and the time between invoicing and due date is typically not significant.
For the three and nine months ended September 30, 2026 the Company had one customer account for approximately 13.9 % and 12.8 % of our net sales, respectively. The same customer accounted for approximately 15.0 % of our accounts receivable balance as of September 30, 2026.
Customer sales disaggregated by the timing of transfer are as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Products transferred at a point in time | $ | $ | $ | $ | |||||||||||||||||||
| Products transferred over time | |||||||||||||||||||||||
| Net Sales | $ | $ | $ | $ | |||||||||||||||||||
The transaction prices for long-term contracts are primarily fixed; however, transaction prices may include variable consideration which includes, for example increases or decreases to the transaction price for change orders. Change orders which modify the scope of terms of an original contract are included in the transaction price once approved, the recovery amount is probable and the amount can be reliably estimated. As of September 30, 2026, the aggregate amount of the transaction prices allocated to the remaining performance obligations was $25.6 , and the Company will recognize this revenue when equipment is delivered or installation service is completed, which is expected to occur over the next 12 to 36 months. Future contract modifications could affect the timing and the amount of the remaining performance obligations. The aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations excludes the value of remaining performance obligations for service contracts with an original expected duration of one year or less and contracts that are cancellable without penalty consistent with the transaction price.
The timing of revenue recognition, billings and cash collections results in contract assets and contract liabilities. Contract assets relate to the conditional right to consideration for any completed performance under a contract when costs are incurred in excess of billings. Contract liabilities relate to payments received in advance of performance under a contract or when the Company has a right to consideration that is conditioned upon transfer of good or service to the customer. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract. The Company does not capitalize costs to obtain a contract as these amounts would generally be recognized over a period less than one year and are not material.
Total contract assets and liabilities consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Contract assets, current (included in accounts receivable, net) | $ | $ | |||||||||
| Total contract assets | |||||||||||
| Contract liabilities, current (included in customer deposits and deferred revenue) | ( | ( | |||||||||
| Contract liabilities, long-term (included in other long-term liabilities) | ( | ( | |||||||||
| Total contract liabilities | ( | ( | |||||||||
| Net contract assets (liabilities) | $ | ( | $ | ( | |||||||
2026 3Q Madison Air 29
Note 4. Fair Value of Financial Instruments
ASC 820, Fair Value (“ASC 820”), defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measure date. ASC 820 also establishes a three-level valuation hierarchy based on the transparency of inputs utilized in the measurement and valuation of financial assets or liabilities. Level 1 inputs include quoted prices for identical instruments and are most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumption market participants would use in pricing the asset or liability. The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed below.
The following table presents information about certain financial assets that are required to be measured at fair value on a recurring basis as of September 30, 2026:
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Interest rate swaps and collars | |||||||||||||||||||||||
| Foreign currency derivatives | ( | ( | |||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
As of September 30, 2026, interest rates swaps and collar and foreign currency derivatives include instruments related to the prospective ebm-papst Acquisition. Refer to Note 12, Derivative Instruments for additional information.
The following table presents information about certain financial assets that are required to be measured at fair value on a recurring basis as of December 31, 2025:
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Marketable securities | |||||||||||||||||||||||
| Interest rate swaps and collars | ( | ( | |||||||||||||||||||||
| Foreign currency derivatives | |||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
Note 5. Business Acquisitions and Divestitures
In May 2025, the Company completed the acquisition of Research Products Corporation ("AprilAire", and such acquisition, the "AprilAire Acquisition") which expanded its operations within its Residential segment. The results of the acquired business have been included in the Company's condensed consolidated financial statements from the acquisition date.
The AprilAire Acquisition was funded with a combination of $160.1 of contributed capital, $410.0 cash on hand (including amounts paid for working capital settlement), a $1,750.0 Incremental Term Loan, and $217.3 of rollover equity in the form of redeemable equity interests issued to certain former owners of AprilAire. The redeemable equity were redeemable following the third anniversary of the acquisition closing date at a per unit intrinsic value of Madison Indoor Air Solutions LLC and therefore classified as redeemable noncontrolling interests. In connection with the IPO and the Organizational Transactions, the redeemable equity interests were exchanged for shares of the Company's Class A common stock and are no longer classified as mezzanine equity.
The AprilAire Acquisition includes a deferred consideration arrangement that requires additional consideration of $90.0 to be paid by the Company to the sellers of AprilAire of which $5.7 represents a liability assumed at acquisition. The present value of deferred consideration at acquisition was $74.2 . Amounts are payable 2 years after the acquisition date. As of September 30, 2026 the liability was $87.0 and is recorded in accrued expenses and other current liabilities. As of December 31, 2025, the liability was $77.2 and is recorded in other long-term liabilities.
For the nine months ended September 30, 2025, pro forma net sales and income from continuing operations were $2,587.2 and $111.7 , respectively. Pro Forma results give effect to the AprilAire Acquisition, together with adjustments directly attributable to the transaction, including acquisition financing and other transaction related adjustments, as if such transaction had occurred on January 1, 2024.
There were no
2026 3Q Madison Air 30
Note 6. Goodwill and Other Intangible Assets
The change in the carrying amount of goodwill for the nine months ended September 30, 2026 was as follows:
| Commercial | Residential | Total | |||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ||||||||||||||
The following tables provide the gross carrying amounts and accumulated amortization for other intangible assets subject to amortization at September 30, 2026 and December 31, 2025:
| Trademarks | Customer Relationships | Technology | Patents | Backlog and Other | Total | ||||||||||||||||||||||||||||||
| Gross carrying amount | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Accumulated amortization | — | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Trademarks | Customer Relationships | Technology | Patents | Backlog and Other | Total | ||||||||||||||||||||||||||||||
| Gross carrying amount | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Accumulated amortization | — | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Intangible asset amortization expense was $39.9 and $40.8 for the three months ended September 30, 2026 and 2025, respectively, and $121.5 and $100.7 for the nine months ended September 30, 2026 and 2025, respectively.
Note 7. Inventories
Inventories consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Inventories | $ | $ | |||||||||
Inventories are stated at the lower of cost or net realizable value with cost generally determined on the first in, first out (“FIFO”) method or at fair value when part of a business acquisition. Management determines the allowance for excess and obsolete inventory by evaluating inventory levels and customer demand. Reserve balances, primarily related to obsolete and slow-moving inventories were $35.7 and $33.0 at September 30, 2026 and December 31, 2025, respectively.
Note 8. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Machinery and equipment | |||||||||||
| Right-of-use assets - finance leases | |||||||||||
| Construction in progress | |||||||||||
| Total property, plant and equipment | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
Note 9. Income Taxes
On April 15, 2026, the Predecessor completed its spin-off from Madison Industries as part of the Organizational Transactions. Prior to the spin, the Predecessor was included in the consolidated federal income tax returns of Madison
2026 3Q Madison Air 31
Industries International Holdings, LLC ("MIH") and deferred tax assets and liabilities were calculated under a carve-out methodology. As a result of the spin-off, the Predecessor remeasured certain tax attributes and recorded a $41.1 reduction to deferred tax assets related to disallowed interest expense carryforwards. Because this adjustment arose from the allocation of tax attributes in connection with the spin-off and represented a transaction with the owners, the impact was recorded as an adjustment to additional paid-in capital within shareholders' equity, rather than through income tax expense.
During the third quarter 2026, MIH divested a group of subsidiaries and as a result, the Predecessor remeasured certain tax attributes and recorded a $28.6 reduction to deferred tax assets related to disallowed interest expense carryforwards. Because this adjustment arose from the allocation of tax attributes with owners, the impact was recorded as an adjustment to additional paid-in capital within shareholders' equity, rather than through income tax expense.
The Company's effective income tax rate was 15.8 % and 30.1 % for the three months ended September 30, 2026 and 2025, respectively, and 26.1 % and 30.3 %, for the nine months ended September 30, 2026 and 2025, respectively. The decrease in the effective tax rate for the three months ended September 30, 2026 was driven by release of state valuation allowances recorded discretely in the third quarter of 2026. The decrease in the effective tax rate for the nine months ended September 30, 2026 is driven by the release of the state valuation allowances recorded in the third quarter of 2026, partially offset by write-offs for disallowed executive compensation that were recorded in the second quarter of 2026.
As of September 30, 2026, tax years 2021 and later remain open to audit for the U.S. federal jurisdiction and tax years 2019 and later remain open to audit in U.S. state jurisdictions. Tax years 2018 and later remain open to audit in foreign locations.
The Organization for Economic Co-operation and Development (“OECD”) issued Pillar Two model rules for a global minimum tax of 15% effective January 1, 2024. While the United States has not adopted Pillar Two, other countries in which the Company operates have enacted such legislation or are considering implementation. Given our limited operations in low-tax jurisdictions, Pillar Two has not materially increased our global tax costs. On January 5, 2026, the OECD released a comprehensive package for a “side-by-side arrangement” with respect to Pillar Two. Notably, once adopted, this new guidance will prevent other countries from imposing tax on the U.S. profits of American companies. We will continue to monitor U.S. and international legislative developments, including further announcements on the side-by-side package, to assess any potential impacts on our operations. During the nine months ended September 30, 2026, we have not accrued any tax expenses in connection with the incorporation of the Pillar Two model rules.
Note 10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Seller earnout and deferred acquisition consideration | $ | $ | |||||||||
| Personnel and restructuring costs | |||||||||||
| Commercial costs | |||||||||||
| Warranty costs | |||||||||||
| Accrued interest | |||||||||||
| Right-of-use liabilities | |||||||||||
| Insurance and professional fees | |||||||||||
| Income tax payable | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
During the quarter ended June 30, 2026, the Company reclassified $84.7 of seller earnouts related to the AprilAire Acquisition from other long-term liabilities to accrued expenses and other current liabilities as the amounts will become due within the next 12 months.
During the quarter ended September 30, 2026, the Company entered into derivative instruments in connection with the proposed acquisition of ebm-papst. As of September 30, 2026, the current portion of derivative liabilities related to the ebm-papst Acquisition was $46.2 and is included in Other in the table above. Refer to Note 12. Derivative Financial Instruments for additional information.
2026 3Q Madison Air 32
Note 11. Debt
Long-term debt consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Term notes | $ | $ | |||||||||
| Senior notes | |||||||||||
| Senior secured notes | |||||||||||
| Equipment loans and financing leases | |||||||||||
| Mortgage payable | |||||||||||
| Discounts and financing fees, net | ( | ( | |||||||||
| Total debt | |||||||||||
| Less: Current maturities | ( | ( | |||||||||
| Long-term debt, net of current maturities | $ | $ | |||||||||
Term Notes and Revolving Credit Facility. In March 2026, the Company's subsidiary Madison IAQ LLC entered into the Sixth Amendment to the Credit Agreement (the "Sixth Amendment") which effectiveness was subject to prepayment of the Initial Term Loan and other customary conditions precedent. The Sixth Amendment became effective on May 15, 2026. The Company prepaid $2,425.7 of principal outstanding under the Initial Term Loan and recognized a loss on debt extinguishment of $26.2 , representing the write-off of unamortized discounts and financing fees. The loss is included in interest and financing expenses, in the condensed consolidated statements of income (loss). The Sixth Amendment also increased the capacity under the revolving credit facility to $1,300.0 . The Company capitalized $4.9 of lender fees and third-party costs associated with the Sixth Amendment, which are included in prepaid and other current assets and other long-term assets in the condensed consolidated balance sheets. Total deferred costs associated with the revolving credit facility, as of the effective date of the Sixth Amendment was $5.7 which is amortized on a straight-line basis through March 28, 2028.
In June 2026, the Company's subsidiary Madison IAQ LLC prepaid $200.0 of principal under its Incremental Term Loan Facility and entered into the Seventh Amendment to its Credit Agreement (the “Seventh Amendment”), which became effective on June 4, 2026. The Seventh Amendment reduced the applicable margin on borrowings under the Incremental Term Loan Facility by 100 1.75 % for Term SOFR loans and 0.75 % for Base Rate loans. In connection with the Seventh Amendment, the Company recognized a loss on debt extinguishment of $1.5 , related to the write-off of unamortized debt issuance costs and original issue discount. The loss is included in interest and financing expenses, in the condensed consolidated statements of income (loss).
In August 2026, the Company's subsidiary Madison IAQ LLC entered into the Eighth Amendment to its Credit Agreement (the "Eighth Amendment"), which became effective August 25, 2026. The Eighth Amendment increased the aggregate capacity under the revolving credit facility to $1,365.0 .
Borrowings under the Credit Agreement bear variable interest rates. The weighted average interest rate for borrowing outstanding under the term loans was 5.5 % and 6.7 % at September 30, 2026 and December 31, 2025, respectively, before giving effect to the benefit of interest rate hedges. During the nine months ended September 30, 2026 and 2025, no 25 basis points of the unused commitments. Following the quarter ended September 30, 2026, the fee may be reduced by 5 basis points based on the First Lien Net Leverage Ratio.
Senior Notes. The Company has $1,035.0 5.9 % per annum and are due in June 2029.
Senior Secured Notes. The Company has $700.0 4.1 % per annum and are due in June 2028.
Debt Covenants. Certain indebtedness contains a financial covenant and non-financial covenants. The financial covenant is only operative if the Company had outstanding amounts drawn on the Revolving Credit Facility above a certain threshold. Borrowings under the Revolving Credit Facility, Term Loan, and Senior Secured Notes are collateralized by a majority of the Company’s assets. The Company was in compliance with the covenants as of September 30, 2026.
Interest expense on long-term debt was $49.1 and $97.5 for the three months ended September 30, 2026 and 2025, respectively, and $188.6 and $247.2 for the nine months ended September 30, 2026 and 2025, respectively. Amortization of discounts and finance fees was $2.8 and $4.9 for the three months ended September 30, 2026 and 2025, respectively, and $11.0 and $12.0 for the nine months ended September 30, 2026 and 2025, respectively. Interest income was $10.1 and $4.2 for the three months ended September 30, 2026 and 2025, respectively, and $15.3 and $12.9 for the nine months ended September 30, 2026 and 2025, respectively, and is included within interest and financing expenses, net in the condensed consolidated statements of income (loss).
2026 3Q Madison Air 33
The Company had letters of credit outstanding of $13.8 6.8
The fair value of debt as of September 30, 2026 was $3,087.0 . The carrying value of the Company's debt approximates the fair value as of December 31, 2025.
Following the execution of the Sixth Amendment, the Company's Term Loans under the Credit Agreement are due at maturity and are no longer subject to scheduled principal amortization.
Note 12. Derivative Financial Instruments
The Company enters into commodity futures, foreign currency forwards, swaps, collars, and options, and interest rate swaps and collars. Commodity futures are intended and are effective as hedges of market price risk associated with the anticipated purchase of certain raw materials (primarily steel). Foreign currency forwards, swaps, collars and options are intended and are effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to foreign exchange rate changes of products manufactured in countries abroad and sold in the United States and the purchase of ebm-papst. Interest rate swaps are intended and are effective as hedges of market changes in interest rates associated with floating rate debt.
The Company does not engage in trading or other speculative use of derivative instruments. The Company recognizes all derivative instruments as assets and liabilities at fair value. The Company uses either hedge accounting or mark-to-market accounting for its derivative instruments. Derivatives that qualify for hedge accounting are designated as cash flow hedges by formally documenting the hedge relationships, including identification of the hedging instruments, the hedged items and other critical terms as well as the Company’s risk management objectives and strategies for undertaking the hedge transaction.
In connection with the prepayment of the Company’s Initial Term Loan (see Note 11), the Company terminated interest rate swaps and collars with an aggregate notional amount of $1,350 . The Company recognized a gain of $0.3 at termination date, representing the reclassification of previously deferred gains in accumulated other comprehensive income into earnings, within interest expense.
The Company entered into foreign currency forwards and collar contracts, interest rate swaps and cross currency swaps related to its prospective acquisition of ebm-papst. The notional value of the foreign currency forwards and collar contracts was $2,382.4 , the notional amount of interest rate swaps was $861.1 , and the notional value of cross currency swaps was $861.1 as of September 30, 2026. Hedge accounting was not applied to these instruments, and therefore all changes in fair value were recorded in other (income) expense, net in the condensed consolidated statements of income (loss). As of September 30, 2026, $46.2 was recorded in accrued expenses and other current liabilities for foreign currency forwards and collar contracts. As of September 30, 2026, $2.4 was recorded in other current assets and $24.7 was recorded in other long-term assets for interest rate swaps. As of September 30, 2026, $2.0 was recorded in other current assets and $35.1 was recorded in other long-term liabilities for cross currency swaps. The foreign currency forward and collar contracts will mature or be terminated at the close of the acquisition. The interest rate swaps and cross currency swaps will be used as a hedge for our interest rate and currency risk exposure following the ebm-papst Acquisition. For the three and nine months ended September 30, 2026 the Company recorded a loss of $52.2
As of the periods presented, all remaining derivative instruments are accounted for using hedge accounting.
As of September 30, 2026 and December 31, 2025, respectively, derivatives classified as hedges consisted of the following:
| Notional Amount | Assets | Liabilities | |||||||||||||||
| Interest rate swaps and collars | $ | $ | $ | ||||||||||||||
| Foreign currency swaps and options | ( | ||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ( | |||||||||||||
| Notional Amount | Assets | Liabilities | |||||||||||||||
| Interest rate swaps and collars | $ | $ | $ | ( | |||||||||||||
| Foreign currency swaps and options | |||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ( | |||||||||||||
All amounts reported in accumulated other comprehensive income (loss) for foreign currency swaps and options are expected to be reclassified to cost of goods sold during the next 12 months. Approximately $3.0 and $12.3 of this accumulated other comprehensive loss on interest rate swaps is expected to be reclassified into interest and financing expenses in 2027 and 2028, respectively. As of September 30, 2026, $0.7 was recorded in other current assets and $14.6 was recorded in other long-term assets for interest rate swaps and collars and $0.5 was recorded in other current assets and $0.2 was recorded in other long-term liabilities for foreign currency swaps and options. As of December 31, 2025,
2026 3Q Madison Air 34
$0.3 was recorded in other current assets and, $0.6 in accrued expenses and other current liabilities, $4.1 was recorded in other long-term liabilities for interest rate swaps and collars and $2.2 was recorded in other current assets for foreign currency swaps and options.
Amounts recorded to earnings for interest rate swaps and collars are included in interest and financing expenses, and amounts recorded to earnings for foreign currency swaps and options are included in cost of goods sold on the consolidated income statement.
The effects of derivative financial instruments classified as hedges on the Company’s condensed consolidated statements of income (loss) and comprehensive income for the periods ended September 30, 2026 consisted of the following:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| Gain (Loss) Recognized in OCI | Gain (Loss) Reclassified from Accumulated OCI to Earnings | Gain (Loss) Recognized in OCI | Gain (Loss) Reclassified from Accumulated OCI to Earnings | ||||||||||||||||||||
| Interest rate swaps and collars | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency swaps and options | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The effects of derivative financial instruments on the Company’s condensed consolidated statements of income (loss) and comprehensive income for the periods ended September 30, 2025 consisted of the following:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| Gain (Loss) Recognized in OCI | Gain (Loss) Reclassified from Accumulated OCI to Earnings | Gain (Loss) Recognized in OCI | Gain (Loss) Reclassified from Accumulated OCI to Earnings | ||||||||||||||||||||
| Interest rate swaps and collars | $ | $ | $ | ( | $ | ||||||||||||||||||
| Foreign currency swaps and options | ( | ||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Note 13. Leases
The Company leases manufacturing, warehouse and office facilities as well as manufacturing and office equipment under leases that expire at various dates through 2038. The facility leases generally provide that the Company is responsible for taxes, utilities, maintenance, and insurance.
The weighted-average remaining lease term for operating leases was 5.7 and 6.1 years and the weighted-average discount rate was 6.1 % and 6.3 % at September 30, 2026 and December 31, 2025, respectively. The weighted-average remaining lease term for finance leases was 3.0 and 3.1 years and the weighted-average discount rate was 5.3 % and 5.4 % at September 30, 2026 and December 31, 2025, respectively.
Supplemental balance sheet information related to leases is as follows:
| Operating Leases | Financial Statement Line Item in the Condensed Consolidated Balance Sheets (Unaudited) | September 30, 2026 | December 31, 2025 | |||||||||||
| ROU assets, net | Other long-term assets | $ | $ | |||||||||||
| Current lease liabilities | Accrued expenses and other current liabilities | |||||||||||||
| Long-term lease liabilities | Other long-term liabilities | |||||||||||||
| Total operating lease liabilities | $ | $ | ||||||||||||
| Finance Leases | Financial Statement Line Item in the Condensed Consolidated Balance Sheets (Unaudited) | September 30, 2026 | December 31, 2025 | |||||||||||
| ROU assets, net | Property, plant and equipment, net | $ | $ | |||||||||||
| Current lease liabilities | Current maturities of long-term debt | |||||||||||||
| Long-term lease liabilities | Long-term debt | |||||||||||||
| Total finance lease liabilities | $ | $ | ||||||||||||
The Company recorded lease expense as either cost of goods sold or selling, general, and administrative expenses within its consolidated statements of income (loss), depending upon the nature and use of the ROU assets. The Company records finance lease expense as depreciation expense within cost of goods sold or selling, general, and administrative expenses, depending upon the nature and use of the ROU assets, and as interest expense in its consolidated statements of income (loss).
2026 3Q Madison Air 35
The components of lease expense were as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Finance lease expense | — | ||||||||||||||||||||||
| Depreciation of ROU assets | |||||||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| Total lease expense | $ | $ | $ | $ | |||||||||||||||||||
The following table presents supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities:
| Nine months ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating cash flow from operating leases | $ | $ | |||||||||
| ROU assets obtained in exchange for new operating lease liabilities | |||||||||||
| Operating cash flows from finance leases | |||||||||||
| Financing cash flows for finance leases | |||||||||||
| ROU assets obtained in exchange for new finance lease liabilities | |||||||||||
In March 2026, the Company entered into a lease agreement for a production facility. The lease has an initial term of 7 years, commencing on March 20, 2026, with options to extend for two additional periods of 5 years each. Total minimum lease payments over the noncancelable term are approximately $37.7 . The lease is classified as an operating lease under ASC 842. In connection with the lease, the Company recognized a right of use asset of $30.1 and a corresponding lease liability of $30.1 on its condensed consolidated balance sheet.
Note 14. Employee Benefit Plans
Defined Contribution Plans. The Company sponsors U.S. and international defined contribution plans. Contributions to the plans were $4.9 and $4.7 for the three months ended September 30, 2026 and 2025, respectively, and $14.7 and $12.1 for the nine months ended September 30, 2026 and 2025, respectively.
Pension and Postretirement Plans. The Company has defined benefit pension plans (“Pension Plans”) which cover certain U.S. full-time and part-time as well as certain international employees. The benefits under the Pension Plans are determined based on a fixed monthly payment per year of service or on a combination of years of service and earnings. The Company’s funding policy is to make the minimum annual contributions required by applicable regulations. Certain Pension Plans are not fully funded by pension assets, so benefits paid under the obligation will be greater than benefit payments relieved from pension assets. Most of the long-term pension liability is due to certain hourly and salaried pension plans carried over from a business acquired in 2021. These plans are frozen and as a result, no new individuals, other than spouses of deceased participants, are eligible for participation in the Pension Plans.
In August 2026 the Company completed a group annuity contract covering a plan that represented a significant portion of its U.S. pension obligation. The Company transferred approximately $36.2 of outstanding pension projected benefit obligation along with plan assets of the same amount. As a result of the transaction, the Company recognized a pre-tax non-cash settlement gain of $2.5 for the quarter ended September 30, 2026 which is recorded in other (income) expense, net on the condensed consolidated statements of income (loss). This settlement gain reflects the accelerated recognition of unamortized actuarial gains previously recorded in accumulated other comprehensive income.
Discretionary contributions to the U.S. Plans and International Plans were as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| U.S Plans | $ | $ | $ | $ | |||||||||||||||||||
| International Plans | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
2026 3Q Madison Air 36
The components of net periodic pension expense (benefit) for the defined benefit pension plans are presented in the table below. Net periodic pension expense (benefit) is recorded in other (income) expense in the condensed consolidated statements of income(loss).
| U.S. Plans | International Plans | ||||||||||||||||||||||
| Three months ended September 30, | Three months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Net periodic pension expense (benefit) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| U.S. Plans | International Plans | ||||||||||||||||||||||
| Nine months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Net periodic pension expense (benefit) | $ | $ | $ | ( | $ | ( | |||||||||||||||||
Note 15. Equity Appreciation Rights
Certain employees of the Company and its subsidiaries participate in an Equity Appreciation Rights Plan (the “EAR Plan”) to provide an equity-value based long-term incentive to align the participants’ interest with those of the owners of the Company and to retain key employees. The Company’s EAR Plan was accounted for as a deferred compensation plan in accordance with ASC 710 – Compensation until the EAR Plan was amended on December 31, 2025 (“Amended EAR Plan”). The Amended EAR Plan is accounted for in accordance with ASC 718 – Compensation – Stock Compensation.
EAR Plan. Prior to December 31, 2025, awards under the EAR Plan are earned and payable upon the attainment of performance conditions, the occurrence of a qualifying liquidity event (as defined in the EAR Plan), or at the discretion of the EAR Plan manager. Awards generally vest over a five-year term and are settled in cash. Awards under the EAR Plan are subject to restrictive covenants including non-compete provisions. Valuation of the awards is based on the Company’s best estimate of amounts to be paid based on the EAR Plan manager’s assumptions around equity value, service period, and expected term and payout date. In addition, the Company has elected a policy of discounting the liability associated with the awards to its expected payout date.
Amended EAR Plan. Awards granted under the Amended EAR Plan generally cliff vest on the fifth anniversary of the grant date. In connection with the consummation of the IPO, holders of unvested EAR awards received EAR units at a conversion ratio of 1.186 units for each outstanding award, with such EAR units subject to the same vesting terms as the underlying unvested EAR awards. The conversion was accounted for under ASC 718. The Company concluded the conversion did not result in incremental fair value to the award holders; accordingly, no additional EAR expense was recognized as a result of the conversion. Following the conversion there were a total of 8,428,157 unvested EAR units outstanding with a weighted-average share price of $27.00 per share. Following the completion of the Company's IPO, the grant-date fair value of equity awards is based on the closing market price of the Company's Class A common stock on the grant date. Awards under the Amended EAR Plan are subject to restrictive covenants including non-compete provisions. Compensation expense for the Amended EAR Plan is recognized on a straight-line basis over the term of the award and the Company recognizes forfeitures as they occur.
When awards become fully vested, the Company has withheld and intends to withhold shares to satisfy employee tax obligations. As part of this process, cash payments are remitted to taxing authorities by the Company. These payments are reflected as financing activities, consistent with their treatment as share repurchases for accounting purposes.
The Company issued 180,134 units during the nine months ended September 30, 2026 with a weighted average fair value per unit of $34.81 per unit. During the nine months ended September 30, 2026, 1,180,436 units vested and 43,631 were forfeited. As of September 30, 2026, the total unvested units are 7,345,990 . Unrecognized compensation expense related to unvested awards was $83.6 and is expected to be recognized over a weighted-average period of 2.5 years.
Equity appreciation rights expense is included in selling, general, and administrative expenses in the accompanying unaudited condensed consolidated statements of income (loss).
2026 3Q Madison Air 37
Equity appreciation rights cost by award type was as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Equity appreciation rights expense - EAR Plan | $ | $ | $ | $ | |||||||||||||||||||
| Equity appreciation rights expense - Amended EAR Plan | |||||||||||||||||||||||
| Total Equity appreciation rights expense | $ | $ | $ | $ | |||||||||||||||||||
Note 16. Related Party Transactions
Prior to the IPO, the Predecessor received indirect support from Holdings for certain internal and external corporate activities including, but not limited to, consolidation accounting, tax services, legal, and other Madison Industries corporate and infrastructure related services. This support ceased following the spin-off of the Predecessor from Holdings in connection with the IPO. The Company incurred $10.7 of costs associated with these services during the nine months ended September 30, 2026 and did not incur any such costs following March 31, 2026. For the three and nine months ended September 30, 2025, the Company incurred $4.0 and $12.3 , respectively, related to these services. As of September 30, 2026 and December 31, 2025, there were no
In connection with the IPO and related spin-off from Holdings, the Company entered into a Transition Services Agreement ("TSA") with MIH effective April 15, 2026. Under the TSA, MIH provides certain transition services to support the Company's operation as a public company, including tax, information technology and other administrative support services. The Company incurred $0.9 and $1.4 related to TSA services for the three and nine months ended September 30, 2026, respectively, which were recorded in selling, general and administrative expenses in the condensed consolidated statements of income (loss). There were no amounts outstanding related to the TSA services as of September 30, 2026.
During the three and nine months ended September 30, 2026, the Company completed a related-party equity transaction involving Larry Gies and an entity affiliated with Mr. Gies. See Note 1, "Private Placement," for additional information.
Note 17. Earnings Per Share
The Company’s Class A and Class B common stock have identical economic rights, including equal participation in dividends on a per-share basis, and differ only with respect to voting rights. Accordingly, the Company presents EPS on a combined basis as a single class of common stock.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Income (loss) from continuing operations attributable to common share holders | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares outstanding - basic | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Weighted-average shares outstanding - diluted | |||||||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Net earnings per share - basic | $ | $ | $ | $ | |||||||||||||||||||
| Net earnings per share - diluted | |||||||||||||||||||||||
Basic earnings per share represents net income attributable to shareholders divided by the weighted average number of shares outstanding during the period. Diluted earnings per share considers the dilutive effect of potential shares, unless the inclusion of the potential shares would have an anti-dilutive effect. The treasury stock method is used to determine the potential dilutive shares resulting from assumed exercises of equity-related instruments.
Note 18. Product Warranties
The Company provides for estimated product warranty expenses when the Company sells the related products. Product warranty is estimated using historical claims experience, and claims costs may differ from amounts provided.
Changes in accrued warranty costs for the nine months ended September 30, 2026 were as follows:
| 2026 | |||||
| Beginning balance | $ | ||||
| Warranties recorded at time of sale | |||||
| Adjustments to pre-existing warranties | ( | ||||
| Settlements | ( | ||||
| Effect of exchange rate changes | ( | ||||
| Ending balance | $ | ||||
2026 3Q Madison Air 38
Current estimated warranty costs of $25.4 and $24.5 were recorded within accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, respectively. Long-term warranty costs of $23.4 and $24.0 were recorded within other long-term liabilities on the unaudited condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, respectively. The Company’s warranty period ranges from 1 year to 15 years.
Note 19. Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income (loss) for the nine months ended September 30, 2026 were as follows:
| Foreign Currency Translation | Defined Benefit Plans | Cash Flow Hedges | Available-for-sale Securities | Total | |||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ||||||||||||||||||||||||||||
| Reclassifications: | |||||||||||||||||||||||||||||
Realized gains - net(1) | ( | ( | ( | ||||||||||||||||||||||||||
| Exchange of noncontrolling interest for Class A common stock | ( | ( | ( | ||||||||||||||||||||||||||
| Income taxes | ( | ( | |||||||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||
(1)Amounts represent net gains and losses associated with cash flow hedges and available-for-sale securities that were reclassified to net earnings.
Changes in accumulated other comprehensive income (loss) for the nine months ended September 30, 2025 were as follows:
| Foreign Currency Translation | Defined Benefit Plans | Cash Flow Hedges | Available-for-sale Securities | Total | |||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||
| Reclassifications: | |||||||||||||||||||||||||||||
Realized gains - net(1) | |||||||||||||||||||||||||||||
| Income taxes | |||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
Note 20. Segment Information
The Company operates under two
Segment net sales include sales of equipment and services by our segments. Segment Adjusted EBITDA is determined based on performance measures used by our CODM. Our CODM uses Segment Adjusted EBITDA to assess performance and allocate resources to each segment, primarily through periodic budgeting and segment performance reviews. In connection with that assessment our CODM may exclude matters, such as significant, higher-cost restructuring programs, depreciation and amortization, and other costs determined by the CODM not to be reflective of the ongoing performance of the segment. Segment Adjusted EBITDA excludes results reported as discontinued operations.
The Company places more emphasis on segment profit and loss than it does on segment assets. As a result, the Company’s CODM does not assess performance, make strategic decisions, or allocate resources based on assets at the segment level. Accordingly, asset information is not disclosed by reportable segment.
2026 3Q Madison Air 39
Segment results are as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Commercial external sales | $ | $ | $ | $ | |||||||||||||||||||
| Intersegment sales | |||||||||||||||||||||||
| Total Commercial segment sales | |||||||||||||||||||||||
Segment cost of goods sold(1) | ( | ( | ( | ( | |||||||||||||||||||
| Segment selling, general and administrative expenses | ( | ( | ( | ( | |||||||||||||||||||
Segment EBITDA add-backs(2) | |||||||||||||||||||||||
| Commercial segment adjusted EBITDA | |||||||||||||||||||||||
| Residential external sales | |||||||||||||||||||||||
| Intersegment sales | |||||||||||||||||||||||
| Total Residential segment sales | |||||||||||||||||||||||
Segment cost of goods sold(1) | ( | ( | ( | ( | |||||||||||||||||||
| Segment selling, general and administrative expenses | ( | ( | ( | ( | |||||||||||||||||||
Segment EBITDA add-backs(2) | |||||||||||||||||||||||
| Residential segment adjusted EBITDA | |||||||||||||||||||||||
| Total external net sales | |||||||||||||||||||||||
| Total segment adjusted EBITDA | |||||||||||||||||||||||
Central and other costs(3) | ( | ( | ( | ( | |||||||||||||||||||
Allocated Madison Industries costs(4) | ( | ( | ( | ||||||||||||||||||||
| Segment EBITDA add-backs (excluding depreciation and purchase accounting adjustments) | ( | ( | |||||||||||||||||||||
| Depreciation | ( | ( | ( | ( | |||||||||||||||||||
| Intangible asset amortization | ( | ( | ( | ( | |||||||||||||||||||
| Restructuring expenses | ( | ( | ( | ( | |||||||||||||||||||
| Equity appreciation rights expense | ( | ( | ( | ( | |||||||||||||||||||
| Transaction related expenses | ( | ( | ( | ( | |||||||||||||||||||
Interest and financing expenses, net(5) | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense)(6) | ( | ( | |||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | $ | $ | $ | |||||||||||||||||||
(1)Exclusive of intangible amortization shown separately.
(2)Segment EBITDA add-backs primarily include adjustments to remove depreciation and non-recurring items. Commercial segment EBITDA add-backs for depreciation were $6.3 and $6.4 for the three months ended September 30, 2026 and 2025, respectively, and $19.5 and $19.0 for the nine months ended September 30, 2026 and 2025, respectively. Residential segment EBITDA add-backs for depreciation were $6.3 and $5.9 for the three months ended September 30, 2026 and 2025, respectively, and $19.1 and $15.9 , for the nine months ended September 30, 2026 and 2025, respectively. Commercial segment EBITDA add-backs for purchase accounting adjustments were $1.4 and $3.1 for the three and nine months ended September 30, 2025, respectively. Residential segment EBITDA add-back for purchase accounting adjustments were $4.4 and $9.7 for the three and nine months ended September 30, 2025, respectively.
(3)Primarily includes central selling, general and administrative expenses and gains and losses on foreign currency. For the nine months ended September 30, 2025, this includes a $3.9 gain on legal settlement.
(4)Direct and indirect support from Holdings for certain central activities including, but not limited to consolidation accounting, tax services, legal, and other Holdings central and infrastructure related services.
(5)Includes a $27.7 loss on the extinguishment of debt for the nine months ended September 30, 2026.
(6)Represents non-cash operating gains and losses including, foreign currency transaction on intercompany loans fixed asset disposals, available-for-sale marketable securities, and derivative instruments not classified as hedging instruments. For the three and nine months ended September 30, 2026 other income (expense) included an unrealized loss of $52.2
The following is a summary of net sales by geographic area, based upon the location of the selling business unit:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| U.S | $ | $ | $ | $ | |||||||||||||||||||
| Non-U.S | |||||||||||||||||||||||
| Americas | |||||||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | |||||||||||||||||||
2026 3Q Madison Air 40
The following is a summary of property, plant and equipment by geographic area:
| September 30, 2026 | December 31, 2025 | ||||||||||
| U.S | $ | $ | |||||||||
| Non-U.S | |||||||||||
| Americas | |||||||||||
| Europe | |||||||||||
| Asia Pacific | |||||||||||
| Total property, plant and equipment | $ | $ | |||||||||
In addition to property, plant, and equipment, definite-lived intangible assets are predominantly domiciled in the U.S.
Note 21. Commitments and Contingencies
The Company may be subject to claims and lawsuits. While any such matters contain an element of uncertainty, management believes that adequate provisions have been recorded and the ultimate disposition or resolution of current claims and lawsuits, if any, will not have a material adverse effect on its consolidated financial position. Liabilities recorded for such contingencies were not
Exhibits
| Exhibit Number | Description | |||||||
| 2.1* | Sale and Purchase Agreement, dated August 15, 2026, by and among Madison Air Solutions Corporation, Madison Air Solutions Germany GmbH, Sturm Beteiligungs-GmbH & Co. KG, Ziehl Beteiligungen GmbH & Co. KG and Philippiak Holding GmbH. | |||||||
| 2.2 | Equity Commitment Letter, dated August 15, 2026, by and between Madison Solutions LLC and Madison Air Solutions Corporation (incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on August 17, 2026). | |||||||
| 3.1 | Amended and Restated Certificate of Incorporation of Madison Air Solutions Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on April 17, 2026). | |||||||
| 3.2 | Amended and Restated Bylaws of Madison Air Solutions Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on April 17, 2026). | |||||||
| 10.1* | Eighth Amendment Credit and Guaranty Agreement, dated as of August 25, 2026 among Madison IAQ LLC, as borrower, Madison IAQ II LLC and certain subsidiaries of the borrower, as guarantors, and Wells Fargo Bank, National Association, as administrative agent. | |||||||
| 10.2 | Form of Securities Purchase Agreement, dated August 25, 2026, by and among Madison Air Solutions Corporation and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 25, 2026). | |||||||
| 10.3 | Securities Purchase Agreement, dated August 25, 2026, by and between Madison Air Solutions Corporation and Larry Gies (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 25, 2026). | |||||||
| 10.4 | Form of Registration Rights Agreement, dated August 25, 2026, by and among Madison Air Solutions Corporation and the investors party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 25, 2026). | |||||||
| 10.5 | Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on August 25, 2026). | |||||||
| 31.1* | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 31.2* | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.1* | Certification of the Chief Executive Officer and the Chief Financial Officer Pursuant to Rule 1350. | |||||||
| 99.1* | Unaudited Pro Forma Condensed Combined Financial Information for the three and nine months ended September 30, 2026. | |||||||
101* | The following material from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in IXBRL (Inline Extensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income (Loss), (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Shareholders' Equity (Deficit) and Noncontrolling Interests, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements. | |||||||
104* | Cover Page Interactive Data File (embedded within the iXBRL document and contained in Exhibit 101). | |||||||
* Filed herewith
2026 3Q Madison Air 41
Form 10-Q Cross Reference Index
| Page(s) | ||||||||
| Part I - FINANCIAL INFORMATION | ||||||||
| Item 1. | Financial Statements | 20 - 41 | ||||||
| Item 2. | Management's Discussion and Analysis and Financial Condition and Results of Operations | 4 - 17 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 - 18 | ||||||
| Item 4. | Controls and Procedures | 18 - 19 | ||||||
| Part II - OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | 19 | ||||||
| Item 1A. | Risk Factors | Not applicable(1) | ||||||
| Item 2. | Unregistered Sales of Equity and Use of Proceeds | 19 | ||||||
| Item 3. | Defaults Upon Senior Securities | Not applicable | ||||||
| Item 4. | Mine Safety Disclosures | Not applicable | ||||||
| Item 5. | Other Information | 18 | ||||||
| Item 6. | Exhibits | 41 | ||||||
| Signatures | 42 | |||||||
(1)Information regarding our risk factors is disclosed under the section entitled “Risk Factors” in the Prospectus, with such factors incorporated herein by reference. Please refer to that section for disclosures regarding the risks and uncertainties related to our business.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Madison Air Solutions Corporation (Registrant) | |||||||||||
| Date: | November 5, 2026 | By: | /s/ JILL WYANT | ||||||||
| Jill Wyant | |||||||||||
| President and Chief Executive Officer | |||||||||||
| By: | /s/ JJ FOLEY | ||||||||||
JJ Foley | |||||||||||
Chief Financial Officer | |||||||||||
2026 3Q Madison Air 42