00:00For you, your team, your employees, your investors, let's start with what this means to the company and the significance
00:06of it.
00:08Yes, thank you so much. Obviously, a momentous day for the company as we seek to continue to drive our
00:14growth journey.
00:15I think really so proud of our team, our companies and brands and the impact we make on the world
00:20and for our customers.
00:21So thank you. Excited to be here. Really proud of our team today.
00:24Going back to basics, you know, Madison Air is a provider of ventilation filtration systems.
00:31But, you know, on Bloomberg Tech, we're so focused on what's happening around the world in AI infrastructure that brings
00:38the data center into the conversation.
00:40Where does Madison Air fit in that story?
00:44Yeah, so data centers is about 20 percent of our commercial segment.
00:47But it's also one of more than 15 verticals in the commercial segment that we cultivate and grow and bring
00:53innovation and highly engineered solutions to our customers.
00:56Really, I think an underlying theme of our company.
00:58We serve a lot of markets benefiting from strong secular tailwinds, data centers being one of them.
01:04In the data center space, we bring custom air, liquid, and hybrid cooling solutions to the most demanding of environments,
01:12hyperscalers and co-locators who are really driving the AI revolution.
01:15And then once we design those custom solutions, we install them and service them, really adding value across the asset
01:22of that life cycle of that asset.
01:24Right. I appreciate that as it's placed within that segment on a revenue basis, it might be smaller,
01:31but there seems to be a lot of growth opportunity for you in data center.
01:35Also pretty supportive on the bottom line, right?
01:38What's the trajectory of that business for you?
01:41Yeah, I think strong performance really across the board.
01:44Most recently is 2025 when we grew sales 12 percent.
01:47We exited the year with two billion dollars in backlog, really embraced over four and a half billion dollars of
01:53orders.
01:54So the most forward looking, strongest forward looking indications we've had around the company to date in the company's history.
02:00In 2025, our commercial segment grew about 17 percent.
02:04Data centers clearly contributed that.
02:06But even if you strip out that growth, our commercial segment grew high single digits.
02:11Again, I think evidence of our balanced portfolio.
02:13We are really working to grow and win in a wide variety of segments benefiting from secular trends, including data
02:20centers.
02:21Your founder, Larry, he's going to effectively control the company, right, through ownership of all of the super voting shares.
02:29In the mechanics of an IPO, that's very interesting.
02:32What's the strategy there and how are you going to work with that as you grow this company?
02:38Well, the why underlying our IPO, first and foremost, is really to gain access to permanent capital that the public
02:44markets afford us,
02:45to really underwrite our growth ambitions, scale our mission and our impact for customers for years to come.
02:5175 percent of shares will be subject to a two-year lockup.
02:54And really, we've always operated under a controlled company mindset because we think it allows us to stay focused on
03:01thinking and acting long term
03:03and really has been key to our ability to deliver sustained above market performance.
03:08And so that's really we view that mindset to continue under the new governance structure, if you will.
03:13And I think we will continue to benefit from strong disciplined execution, good aligned interests, and continuing to drive above
03:21market performance
03:22and attractive returns over long cycles.
03:24We started this conversation by saying how historic this IPO was, the biggest U.S. industrial IPO since 1999.
03:30And it's been interesting to read about the history of the company and its growth, both organic and inorganic.
03:36And to summarize, like in the M&A context, you've kind of rolled up smaller brands.
03:41And I wonder at what pace that might continue in what your M&A activity looks like now the big
03:47one's done, the IPO's done.
03:50Yeah, we've really been purposely, intentionally building the market's leading indoor air quality solutions provider for residential and industrial markets
03:58since 2017.
03:59And a lot of that we have accomplished on an inorganic basis.
04:03We really want investors to think of us as an organic growth opportunity with M&A as a lever.
04:07Over the last five years, we've grown sales on a compound average basis at 8%.
04:12As I said, we exited last year growing 12%.
04:14So we are excited.
04:16I'm humbly confident and excited in our organic growth prospects.
04:20We will continue to use M&A as a lever.
04:22We think we have a pretty special capability there as well, having really cultivated relationships over a time frame.
04:27So think of us as an organic growth company with M&A as a continued growth lever.
04:31I want to bring it back to AI, but, you know, the way that I think about Madison Air is
04:37even outside of just the specific contribution to a data center build out.
04:42All of the factors that are impacting companies around the country and the world apply to you too, right?
04:48Access to labor, materials, supply chain, what we're seeing in energy.
04:53How do you feel at Madison's position right now?
04:55And what are you doing that's different in supply chain as you try and come out of this IPO in
05:00growth mode?
05:02Yeah, I really think that, look, today we are an 8% market share in a $40 billion TAM that
05:10is distinct and complementary from traditional HVAC.
05:12And as you're noting there, really underpinned by strong secular data centers, one of which is AI and compute.
05:18But manufacturing reshoring, the forever labor shortage in manufacturing and logistics environments, aging building stock, both homes and commercial building
05:27stock, and the drive for greater energy efficiency.
05:30All of those strong secular tailwinds underpin our market.
05:34So we really think we have room both to grow our positions where we are today and expand our opportunities.
05:40Whether that be in chip fabs, in pharmaceutical manufacturing production and the like, we have pointed our portfolio to what's
05:47driving the economy going forward.
05:48And we're excited about our growth journey as we look at it lying ahead.
05:52Jill, I'm so grateful you took us there.
05:54I broke a story last night with colleagues around the world that Elon Musk and the TerraFab project are really
06:00kind of kicking into gear.
06:01They're basically going to the supply chain for chip manufacturing and saying, how quickly can you give us quotes?
06:08And if we place orders, how quickly can you get us that equipment?
06:13Is there any relevance to you guys with TerraFab?
06:16Do you see an opportunity for what is on paper at just unimaginable scale of chip manufacturing in this country?
06:24Yeah.
06:25Well, you know, we exited last year with $2 billion in backlog.
06:28About $1 billion of that was in our data center business.
06:30We have very strong forward-looking demand across the company, including in data centers.
06:35And I think what really differentiates us in the data center space is we don't sell SKUs.
06:39We don't sell standard configured products.
06:41The people driving the AI revolution, you know, like TerraFab and others that you've really mentioned,
06:47come to us for deep domain expertise in rejecting a lot of thermal heat in complex environments, including data centers.
06:54And so we bring those, you know, domain experts, engineering and applications expertise that are able to sit toe-to
07:00-toe with some of those leading lights in the industry
07:03and build solutions that allow them to achieve max compute in their objectives.
07:07Now, you hit another important point, which is we've been at this for a while.
07:10Yes.
07:11You know, the data center business was born out of our customer handling business, which has done this for a
07:15combined 350 years.
07:16So we did not start doing this last week or last quarter.
07:19We've had a triple source supply chain.
07:21We've had 99 to 100 percent delivery rates for the hyperscalers and the co-locators we've been serving for years.
07:27And we are there to care for and optimize and ensure those assets perform at their best.
07:32We are differentiated.
07:33We are winning.
07:34And I think the best part of that story, and it's all within a very balanced set of end markets,
07:38we are not a data center pure play.
07:40We give investors great exposure to the obvious opportunity there, while at the same time growing nicely in other advanced,
07:47high-performance environments in the macro economy where air impacts customer outcomes.
07:53Away from the stock market, you know, a focus of the Bloomberg Tech audience is the role of debt in
07:58all of these projects.
08:00Let's call it the re-industrialization of America.
08:03I think, and correct me if I'm wrong, you know, coming out of this IPO, the debt loads, I think
08:07it looks like about $3 billion for you.
08:10What's the strategy?
08:11Do you see with time paying that down, that coming down quickly, or you're sanguine on the load and how
08:18you work it?
08:20Well, about 100% of the IPO proceeds we will use to retire debt.
08:26So, now, I don't know the exact calculation.
08:28I've been, you know, talking to a lot of folks today about green shoe execution.
08:31But, really, we should come out of that IPO about three and a half times trailing on a leverage basis.
08:36And then we continue to do what we do, which is grow our business and generate cash flow and expand
08:41our EBITDA, which should allow us to exit 2026 below three times levered on a trailing basis.
08:46Again, we run that play into next year, and we should be south of 2.5 times levered, as I
08:53say, before New Year's Eve, well before New Year's Eve in 2027.
08:56And, really, then it just comes back to the same play we've always been running.
09:01Great sales, higher margins.
09:03Our EBITDA margins, enterprise-wide at 26.5% or 800 to 1,000 basis points, better than the most
09:09of the competition we see out there.
09:11Our team is very focused and robust around converting that to free cash flow.
09:15We have an asset-light model whereby we can make our growth investments while remaining at a low single-digit
09:21CapEx.
09:22And we have an owner's mindset across the company, so good, disciplined use of cash.
09:26So, we feel good about that, you know, getting that balance sheet to the point where investors consistently told us
09:32they wanted to be.
09:33And that just opens up more optionality and flexibility for us going forward.
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