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").
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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. As of June 30, 2026, Holdings retained approximately 64.7% of the economic interests in the Company and controlled approximately 95.2% of the voting power of the Company's outstanding common stock.
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 megatrends including energy resilience, AI and cloud-computing growth, restoring of advanced manufacturing, and a growing focus on human health. 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. In February 2026, the U.S. Supreme Court invalidated certain tariffs previously imposed under emergency authorities, resulting in refund obligations and ongoing litigation. The Company began to receive tariff refunds in the three months ended June 30, 2026, 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. Concurrently, the U.S. government has implemented and continues to evaluate additional tariff
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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 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 will 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.
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
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respective seasons. This seasonality is generally mitigated by other products and services we provide that have no material seasonal effect.
Incremental Public Company Expenses. During the period leading up to, and following our IPO, we have incurred and will continue to incur significant expenses that we did not incur as a private company. Those 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.
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 June 30, 2026 December 31, 2025 June 30, 2025
Commercial $ 2,802.4 $ 2,095.2 $ 1,159.8
Residential 66.0 65.6 71.5
Total $ 2,868.4 $ 2,160.8 $ 1,231.3
Three months ended June 30, Six months ended June 30,
Orders 2026 2025 2026 2025
Commercial $ 997.0 $ 577.1 $ 1,990.9 $ 1,255.0
Residential 334.4 293.2 654.4 497.6
Total $ 1,331.4 $ 870.3 $ 2,645.3 $ 1,752.6
Total backlog was $2,868.4 million as of June 30, 2026, an increase of 32.7% compared to December 31, 2025 and 133.0% compared to June 30, 2025. The increases were driven primarily by Commercial backlog, which represented substantially all of the growth for each period presented. Residential backlog remained relatively stable during each period. The growth in Commercial backlog reflects continued wins across several key technologies including air, liquid, and hybrid cooling, air handling and air movement.
Total orders were $1,331.4 million and $2,645.3 million for the three and six months ended June 30, 2026, respectively, compared to $870.3 million and $1,752.6 million for 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") on May 7, 2025, which contributed approximately $45.6 million and $246.3 million of Commercial and Residential orders, respectively, during the six months ended June 30, 2026, compared to approximately $16.5 million and $80.9 million of Commercial and Residential orders, respectively, during the period from May 7, 2025 through June 30, 2025.
For the period from April 1, 2025 to May 7, 2025, AprilAire’s commercial brands generated orders of $10.3 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. For the period from January 1, 2025 to May 7, 2025, AprilAire’s commercial brands
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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.
For the period from April 1, 2025 to May 7, 2025, AprilAire’s residential brands generated orders of $38.3 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. For the period from January 1, 2025 to May 7, 2025, AprilAire’s 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.
Results of Operations
The following tables and accompanying narrative disclosures present our results of operations for the three and six months ended June 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 June 30, Six months ended June 30,
(in millions, except share and per share data) 2026 2025 2026 2025
Net sales $ 991.3 $ 819.6 $ 1,915.0 $ 1,510.0
Cost of goods sold(1) 604.9 497.2 1,175.6 933.2
Selling, general and administrative expenses(2) 149.3 142.3 303.6 247.9
Intangible amortization 40.7 34.7 81.6 59.9
Restructuring expenses 0.6 2.6 2.9 2.7
Other operating expenses 0.5 10.9 4.6 11.7
Operating income 195.3 131.9 346.7 254.6
Interest and financing expenses 84.8 89.1 175.5 154.9
Other (income) expense, net (0.6) (6.5) (0.2) (9.5)
Income (loss) from continuing operations before income taxes 111.1 49.3 171.4 109.2
Income tax expense (benefit) 40.6 18.5 57.9 33.2
Income (loss) from continuing operations 70.5 30.8 113.5 76.0
Income (loss) from discontinued operations, net of taxes — — — 1.0
Net income (loss) 70.5 30.8 113.5 77.0
Less: Net income attributable to noncontrolling interests 1.3 8.5 10.7 17.0
Net income (loss) attributable to the Company $ 69.2 $ 22.3 $ 102.8 $ 60.0
Non-GAAP and Other Financial Measures:
Gross Profit(3) 377.0 313.7 720.5 560.7
Gross Profit Margin(3) 38.0 % 38.3 % 37.6 % 37.1 %
Adjusted Gross Profit(4) 386.4 329.4 739.4 583.8
Adjusted Gross Profit Margin(4) 39.0 % 40.2 % 38.6 % 38.7 %
Net Income (Loss) 70.5 30.8 113.5 77.0
Net Income (Loss) Margin 7.1 % 3.8 % 5.9 % 5.1 %
Adjusted Net Income (Loss)(4) 147.7 86.5 243.3 156.5
Adjusted Net Income (Loss) Margin(4) 14.9 % 10.6 % 12.7 % 10.4 %
Adjusted EBITDA(4) 265.8 225.5 499.2 393.8
Adjusted EBITDA Margin(4) 26.8 % 27.5 % 26.1 % 26.1 %
(1)Exclusive of intangible amortization shown separately.
(2)Inclusive of equity appreciation rights expense of $16.3 million and $22.1 million for the three months ended June 30, 2026 and 2025, respectively, and $26.7 million and $27.3 million for the six months ended June 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 June 30, 2026. Net sales increased $171.7 million, or 20.9%, compared to the three months ended June 30, 2025. The AprilAire Acquisition drove an aggregate $66.9 million of the net sales increase year-over-year. The remaining $104.8 million was attributable to organic growth in our Commercial segment partially offset by a modest organic net sales decline in our Residential segment. Refer to "Results of Operations by Segment" below for a discussion of Net Sales by segment.
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The AprilAire Acquisition also impacted the comparability of gross profit and operating expenses between periods. Incremental costs of goods sold, selling, general and administrative expenses and technology intangible amortization attributable to the AprilAire Acquisition were approximately $26.1 million, $11.2 million, and $0.8 million respectively.
Interest and financing expenses decreased $4.3 million compared to the corresponding prior-year period. Interest and financing expenses included a $27.7 million loss on debt extinguishment in connection with the repayment and modification of our Credit Agreement. 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 repay $200.0 million in principal under the Company's Incremental Term Loan. Excluding the impact of the debt extinguishment, interest expense decreased $32.0 million, driven by lower average borrowings following the debt repayment transactions and lower interest rate on the Incremental Term Loan.
Income tax expense was $40.6 million for the three months ended June 30, 2026, an increase of $22.1 million compared to income tax expense of $18.5 million for the three months ended June 30, 2025. The decrease in the effective tax rate for the three months ended June 30, 2026 was driven by lower overall state tax impacts, primarily discrete items recorded in the second quarter of 2025; the decrease is 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.
For the six months ended June 30, 2026. Net sales increased $405.0 million, or 26.8%, compared to the six months ended June 30, 2025. The AprilAire Acquisition drove an aggregate $213.1 million of the net sales increase year-over-year. The remaining $191.9 million was attributable to organic growth in our Commercial segment, partially offset by a modest organic net sales decline in our Residential segment. Refer to "Results of Operations by Segment" below for a discussion of Net Sales by segment.
The AprilAire Acquisition also impacted the comparability of gross profit and operating expenses between periods. Incremental costs of goods sold, selling, general and administrative expenses and technology intangible amortization attributable to the AprilAire Acquisition were approximately $106.4 million, $38.6 million, and $2.8 million respectively.
Interest and financing expenses increased $20.6 million compared to the corresponding prior-year period. Interest and financing expenses included a $27.7 million loss on debt extinguishment recognized in connection with the repayment and modification of the Credit Agreement in 2026 as described above. Excluding the impact of the debt extinguishment, interest expense decreased $7.1 million driven by lower average borrowings following the debt repayment transactions and lower interest rate on the Incremental Term Loan.
Income tax expense was $57.9 million for the six months ended June 30, 2026, an increase of $24.7 million compared to income tax expense of $33.2 million for the six months ended June 30, 2025. The increase in the effective tax rate for the six months ended June 30, 2026 is primarily due to discrete write-offs in the second quarter of 2026 for executive compensation that is no longer deductible for tax purposes.
Results of Operations by Segment
The following tables and accompanying narrative disclosures present our results of segment operations for the three and six months ended June 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 June 30, Six months ended June 30,
2026 2025 2026 2025
Commercial $ 658.9 $ 532.4 $ 1,268.7 $ 1,026.0
Residential 333.8 287.3 649.4 484.8
Segment net sales 992.7 819.7 1,918.1 1,510.8
Eliminations (1.4) (0.1) (3.1) (0.8)
Total net sales $ 991.3 $ 819.6 $ 1,915.0 $ 1,510.0
Three months ended June 30, Six months ended June 30,
2026 2025 2026 2025
Commercial $ 173.1 $ 156.0 $ 334.1 $ 284.4
Residential 98.6 72.7 177.9 115.9
Segment Adjusted EBITDA(1) 271.7 228.7 512.0 400.3
Central and other costs (5.9) (3.2) (12.8) (6.5)
Total Adjusted EBITDA $ 265.8 $ 225.5 $ 499.2 $ 393.8
(1)For additional information regarding Segment Adjusted EBITDA, see Note 20 of our condensed consolidated financial statements.
Commercial. Commercial segment net sales increased $126.5 million, or 23.8%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. Organically, our Commercial net sales increased by 22.3%
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driven by broad-based growth across the segment, led by air, liquid and hybrid cooling, custom air handling, and air movement solutions. These increases were partially offset by modest volume declines in commercial dehumidification. Acquisitions contributed $9.3 million, or 1.7%, of additional net sales for the three months ended June 30, 2026.
For the period from April 1, 2025 to May 7, 2025, AprilAire's commercial brands generated net sales of $9.9 million, that would have been accounted for in the Company's Commercial segment had we owned AprilAire and its associated commercial brands during such period.
Commercial segment Adjusted EBITDA increased $17.3 million, or 11.1%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. Acquisitions contributed $3.4 million of incremental Adjusted EBITDA to the Commercial segment growth. Excluding the AprilAire acquisition, Commercial segment Adjusted EBITDA growth was mainly driven by volume growth.
Net sales for our Commercial segment increased $242.7 million, or 23.7%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. Organically, our Commercial net sales increased by 19.8% driven by broad-based growth across the segment, led by air, liquid and hybrid cooling, air movement, and energy efficiency solutions. These increases were partially offset by modest volume declines in commercial dehumidification. Acquisitions contributed $36.1 million, or 3.5%, of additional net sales for the six months ended June 30, 2026.
For the period from January 1, 2025 to May 7, 2025, AprilAire's commercial brands generated net sales of $34.2 million, that would have been accounted for in the Company's Commercial segment had we owned AprilAire and its associated commercial brands during such period.
Commercial segment Adjusted EBITDA increased $49.7 million, or 17.5%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. Acquisitions contributed $9.2 million of incremental Commercial segment Adjusted EBITDA to the Commercial segment growth. Excluding the AprilAire Acquisition, Commercial Segment Adjusted EBITDA growth was mainly driven by volume growth.
Residential. Residential segment net sales increased $46.5 million, or 16.2%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. Organically, our Residential net sales decreased by 4.8% driven by modest volume declines in our professional distribution channels for ventilation solutions, net of price increases. Acquisitions contributed $56.4 million, or 19.6%, of additional net sales for the three months ended June 30, 2026.
For the period from April 1, 2025 to May 7, 2025, AprilAire's residential brands generated net sales of $38.4 million, that would have been accounted for in the Company's Residential segment had we owned AprilAire and its associated commercial brands during such period.
Residential segment Adjusted EBITDA increased $25.9 million, or 35.6%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. Acquisitions contributed $21.8 million of incremental Adjusted EBITDA. Excluding the AprilAire Acquisition, Residential segment Adjusted EBITDA increased by $4.1 million due to productivity, pricing and favorable net tariff impacts partially offset by modest volume declines.
Net sales for our Residential segment increased $164.6 million, or 34.0%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. Organically, our Residential net sales decreased by 3.4% driven by modest volume declines in our professional distribution channels for ventilation solutions, net of price increases. Acquisitions contributed to $177.0 million, or 36.5%, of additional net sales for the six months ended June 30, 2026.
For the period from January 1, 2025 to May 7, 2025, AprilAire's residential brands generated net sales of $144.6 million, that would have been accounted for in the Company's Residential segment had we owned AprilAire and its associated commercial brands during such period.
Residential segment Adjusted EBITDA increased $62.0 million, or 53.5%, for the six months ended June 30, 2026, compared to the six months ended June 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
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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.
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 June 30, Six months ended June 30,
2026 2025 2026 2025
Net sales $ 991.3 $ 819.6 $ 1,915.0 $ 1,510.0
Cost of goods sold (excluding intangible amortization) (604.9) (497.2) (1,175.6) (933.2)
Technology intangible amortization (9.4) (8.7) (18.9) (16.1)
Gross Profit 377.0 313.7 720.5 560.7
Technology intangible amortization 9.4 8.7 18.9 16.1
Purchase accounting inventory adjustment — 7.0 — 7.0
Adjusted Gross Profit $ 386.4 $ 329.4 $ 739.4 $ 583.8
Gross Profit Margin 38.0 % 38.3 % 37.6 % 37.1 %
Adjusted Gross Profit Margin 39.0 % 40.2 % 38.6 % 38.7 %
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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 Pro Forma(1) Actuals Pro Forma(1)
Three months ended June 30, Three months ended June 30, Six months ended June 30, Six months ended June 30,
2026 2025 2025 2026 2025 2025
Net income (loss) $ 70.5 $ 30.8 $ 16.5 $ 113.5 $ 77.0 $ 10.8
Adjustments:
Net (income) loss from discontinued operations(2) — — — — (1.0) (1.0)
Amortization expense 40.7 34.7 40.8 81.6 59.9 81.4
Transaction related expenses(3) (0.8) 17.9 17.9 3.2 18.8 62.9
Restructuring expenses(4) 0.6 2.6 2.6 2.9 2.7 4.6
Equity appreciation rights expense(5) 16.3 22.1 23.9 26.7 27.3 32.7
Non-operating expenses (income)(6) (0.7) (0.5) 4.3 — (3.6) 1.2
Allocated Madison Industries costs(7) — 2.6 2.6 10.0 5.8 5.8
Non-recurring professional and consulting expenses(8) 0.8 1.1 1.1 1.9 2.1 2.1
Loss on extinguishment of debt 27.7 — — 27.7 — —
Gain on insurance proceeds(9) — (5.8) (5.8) — (5.8) (5.8)
Write-off of deferred tax asset(10) 13.7 — — 13.7 — —
Tax effect of net income (loss) adjustments(11) (21.1) (19.0) (23.0) (37.9) (26.7) (45.8)
Adjusted net income (loss) $ 147.7 $ 86.5 $ 80.9 $ 243.3 $ 156.5 $ 148.9
Net sales 991.3 819.6 867.9 1,915.0 1,510.0 1,688.8
Net income (loss) margin 7.1 % 3.8 % 1.9 % 5.9 % 5.1 % 0.6 %
Adjusted net income (loss) margin 14.9 % 10.6 % 9.3 % 12.7 % 10.4 % 8.8 %
(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 related to 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, and other acquisition related charges, such as integration charges and professional and legal fees, and gain on the disposition of business For the three and six months ended June 30, 2026, transaction expenses included professional and legal fees, and other costs associated with becoming a public company offset by $1.2 million gain on contingent consideration remeasurement. Transaction expenses for the three months and six months ended June 30, 2025 primarily related to the AprilAire Acquisition.
(4)Represents costs and expenses in connection with various restructuring initiatives.
(5)Represents compensation expense under the EAR Plan and Amended EAR Plan.
(6)Represents foreign currency gains and losses on corporate intercompany loans, gains and losses on sale of fixed assets, gains and losses on marketable securities and other non-operating items. For the three months ended June 30, 2026, non-operating expenses (income) included $1.0 million foreign currency translation gain on intercompany loans, offset by $0.4 million loss on disposal of fixed assets. For the three months ended June 30, 2025, non-operating expenses (income) included $0.8 million gain on available-for-sale marketable securities, and $1.6 million gain on disposal of fixed assets offset by a $1.9 million foreign currency translation loss on intercompany loans. For the six months ended June 30, 2026, non-operating expenses (income) included $0.9 million foreign currency translation gain on intercompany loans offset by a $0.5 million loss on disposal of fixed assets. For the six months ended June 30, 2025, non-operating expenses (income) included $1.9 million gain on available-for-sale marketable securities, $1.3 million gain on divestiture of Nortek Global HVAC and its subsidiary, $1.4 million gain on disposal of fixed assets, $0.3 million foreign currency translations loss on intercompany loans and $0.2 million of pension expense.
(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. For the three months ended June 30, 2026, non-recurring professional and consulting expenses included $0.7 million for one-time audit, legal and consulting fees incurred to prepare for IPO and SOX implementation and $0.1 million in consulting fees for productivity improvement projects. For the three months ended June 30, 2025, these services primarily included $0.5 million in consulting fees for productivity improvement projects, $0.3 million in legal fees, and $0.3 million in leadership recruiting and relocation fees. For the six months ended June 30, 2026, non-recurring professional and consulting expenses included $1.6 million for one-time audit, legal and consulting fees incurred to prepare for IPO and SOX
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implementation and $0.4 million in consulting fees for productivity improvement projects. For the six months ended June 30, 2025, these services primarily included $1.2 million in consulting fees for productivity improvement projects, $0.4 million in legal fees, and $0.5 million in 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 above adjustments assumes an estimated worldwide marginal current tax rate of approximately 24.9% and 24.6% for the three and six months ended June 30, 2026, respectively, and 25.4% and 25.1% for the three and six months ended June 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 Pro Forma(1) Actuals Pro Forma(1)
Three months ended June 30, Three months ended June 30, Six months ended June 30, Six months ended June 30,
2026 2025 2025 2026 2025 2025
Net income (loss) $ 70.5 $ 30.8 $ 16.5 $ 113.5 $ 77.0 $ 10.8
Adjustments:
Net (income) loss from discontinued operations(2) — — — — (1.0) (1.0)
Interest and financing expenses 57.1 89.1 102.6 147.8 154.9 201.6
Income tax expense (benefit) 40.6 18.5 17.6 57.9 33.2 16.7
Depreciation and amortization 53.7 47.1 54.5 107.6 82.4 108.1
Transaction related expenses(3) (0.8) 17.9 17.9 3.2 18.8 62.9
Restructuring expenses(4) 0.6 2.6 2.6 2.9 2.7 4.6
Equity appreciation rights expense(5) 16.3 22.1 23.9 26.7 27.3 32.7
Non-operating expenses (income)(6) (0.7) (0.5) 4.3 — (3.6) 1.2
Allocated Madison Industries costs(7) — 2.6 2.6 10.0 5.8 5.8
Non-recurring professional and consulting expenses(8) 0.8 1.1 1.1 1.9 2.1 2.1
Loss on extinguishment of debt 27.7 — — 27.7 — —
Gain on insurance proceeds(9) — (5.8) (5.8) — (5.8) (5.8)
Adjusted EBITDA $ 265.8 $ 225.5 $ 237.8 $ 499.2 $ 393.8 $ 439.7
Net sales 991.3 819.6 867.9 1,915.0 1,510.0 1,688.8
Net income (loss) margin 7.1 % 3.8 % 1.9 % 5.9 % 5.1 % 0.6 %
Adjusted EBITDA Margin 26.8 % 27.5 % 27.4 % 26.1 % 26.1 % 26.0 %
(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 related to 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, and other acquisition related charges, such as integration charges and professional and legal fees, and gain on the disposition of business For the three and six months ended June 30, 2026, transaction expenses included professional and legal fees, and other costs associated with becoming a public company offset by $1.2 million gain on contingent consideration remeasurement. Transaction expenses for the three months and six months ended June 30, 2025 primarily related to the AprilAire Acquisition.
(4)Represents costs and expenses in connection with various restructuring initiatives.
(5)Represents compensation expense under the EAR Plan and Amended EAR Plan.
(6)Represents foreign currency gains and losses on corporate intercompany loans, gains and losses on sale of fixed assets, gains and losses on marketable securities and other non-operating items. For the three months ended June 30, 2026, non-operating expenses (income) included $1.0 million foreign currency translation gain on intercompany loans, offset by $0.4 million loss on disposal of fixed assets. For the three months ended June 30, 2025, non-operating expenses (income) included $0.8 million gain on available-for-sale marketable securities, and $1.6 million gain on disposal of fixed assets offset by a $1.9 million foreign currency translation loss on intercompany loans. For the six months ended June 30, 2026, non-operating expenses (income) included $0.9 million foreign currency translation gain on intercompany loans offset by a $0.5 million loss on disposal of fixed assets. For the six months ended June 30, 2025, non-operating expenses (income) included $1.9 million gain on available-for-sale marketable securities, $1.3 million gain on divestiture of Nortek Global HVAC and its subsidiary, $1.4 million gain on disposal of fixed assets, $0.3 million foreign currency translations loss on intercompany loans and $0.2 million of pension expense.
(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
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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. For the three months ended June 30, 2026, non-recurring professional and consulting expenses included $0.7 million for one-time audit, legal and consulting fees incurred to prepare for IPO and SOX implementation and $0.1 million in consulting fees for productivity improvement projects. For the three months ended June 30, 2025, these services primarily included $0.5 million in consulting fees for productivity improvement projects, $0.3 million in legal fees, and $0.3 million in leadership recruiting and relocation fees. For the six months ended June 30, 2026, non-recurring professional and consulting expenses included $1.6 million for one-time audit, legal and consulting fees incurred to prepare for IPO and SOX implementation and $0.4 million in consulting fees for productivity improvement projects. For the six months ended June 30, 2025, these services primarily included $1.2 million in consulting fees for productivity improvement projects, $0.4 million in legal fees, and $0.5 million in leadership recruiting and relocation fees.
(9)Represents 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) Pro Forma(1)
Three months ended June 30, Six months ended June 30,
2025 2025
Net Income (loss) $ (14.3) $ (66.2)
Adjustments:
Interest and financing expenses 13.5 46.7
Income tax expense (benefit) (0.9) (16.5)
Depreciation and amortization 7.4 25.7
Transaction related expenses(1) — 44.1
Restructuring expenses(2) — 1.9
Equity appreciation rights expense(3) 1.8 5.4
Non-operating expenses (income) 4.8 4.8
Adjusted EBITDA $ 12.3 $ 45.9
Net Sales 48.3 178.8
Net Income (loss) margin (29.6) % (37.0) %
Adjusted EBITDA Margin 25.5 % 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 six months ended June 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 June 30, Six months ended June 30,
Consolidated 2026 2025 2026 2025
Net sales growth rate 20.9 % 28.7 % 26.8 % 23.6 %
Less: Impact of:
Acquisitions/divestitures 6.6 % 14.0 % 13.3 % 7.4 %
Currency exchange rates 0.2 % 0.1 % 0.6 % (0.4) %
Organic revenue growth rate 14.1 % 14.6 % 12.9 % 16.6 %
Three months ended June 30, Six months ended June 30,
Commercial 2026 2025 2026 2025
Net sales growth rate 23.8 % 24.7 % 23.6 % 26.0 %
Less: Impact of:
Acquisitions/divestitures 1.3 % 4.4 % 3.2 % 2.5 %
Currency exchange rates 0.2 % 0.1 % 0.6 % (0.5) %
Organic revenue growth rate 22.3 % 20.2 % 19.8 % 24.0 %
2026 2Q Madison Air 14
Three months ended June 30, Six months ended June 30,
Residential 2026 2025 2026 2025
Net sales growth rate 16.1 % 36.2 % 33.9 % 17.4 %
Less: Impact of:
Acquisitions/divestitures 20.8 % 34.9 % 36.9 % 17.8 %
Currency exchange rates 0.1 % (0.1) % 0.4 % (0.4) %
Organic revenue growth rate (4.8) % 1.4 % (3.4) % — %
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.
Six months ended June 30,
2026 2025
Net cash flows provided by (used in) operating activities $ 156.4 $ 160.1
Net cash flow provided by (used in) operating activities - discontinued operations — (0.3)
Net cash flows provided by operating activities— continuing operations 156.4 160.4
Purchases of property, plant and equipment (16.5) (10.5)
Proceeds from disposal of property, plant and equipment 0.1 2.5
FCF $ 140.0 $ 152.4
Net income (loss) from continuing operations 113.5 76.0
Operating cash flow conversion—continuing operations 137.8 % 211.1 %
FCF Conversion 123.3 % 200.5 %
Liquidity and Capital Resources
General. As of June 30, 2026, our principal sources of liquidity were cash and cash equivalents totaling $261.8 million and available balance under our Revolving Credit Facility of $1,294.3 million. Our liquidity position, together with expected cash flow from operations, provides financial flexibility to fund working capital needs, capital expenditures, and strategic initiatives.
We believe these sources of liquidity will be sufficient to meet our operating requirements, 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 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. Although we currently are not a party to any agreement and do not have any understanding with any third parties with respect to potential investments in, or acquisitions of, businesses or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. We cannot assure you that such additional financing will be available at terms acceptable to us, or at all. In addition, we may opportunistically seek to raise additional capital to fund our continued growth. 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 June 30, 2026, total debt outstanding consisted of $1,345.6 million under our Term Loans, $1,035.0 million under our Secured Notes and $700.0 million under our Unsecured Notes. There were no borrowings outstanding under our revolving credit facility, and
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$12.9 million of letters of credit were outstanding of which $5.7 reduced our borrowing capacity, leaving substantial available capacity as of June 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 June 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 six months ended June 30, 2026 and 2025.
Six months ended June 30,
2026 2025
Continuing operations:
Net cash flows provided by operating activities $ 156.4 $ 160.4
Net cash flows used in investing activities (17.0) (2,312.6)
Net cash flows (used in) provided by financing activities (86.3) 1,958.9
Effect of exchange rate changes on cash 0.3 0.1
Discontinued operations:
Net cash flows used in operating activities — (0.3)
Net cash flows provided by investing activities — 7.0
Total net change in cash and cash equivalents $ 53.4 $ (186.5)
Operating Activities. Net cash provided by operating activities was $156.4 million during the six months ended June 30, 2026, compared to $160.4 million during the six months ended June 30, 2025. The decrease was primarily driven by working capital investments partially offset by higher net income adjusted for non-cash items. Working capital used $136.0 million of cash during the six months ended June 30, 2026, compared to $18.4 million for the six months ended June 30, 2025. For the six months ended June 30, 2026, investments in working capital were driven by increases in accounts receivable which reflects higher sales activity, particularly within the Commercial segment.
Investing Activities. Net cash used in investing activities was $17.0 million during the six months ended June 30, 2026, compared to $2,312.6 million during the six months ended June 30, 2025. The decrease in cash used was primarily attributable to the acquisition of Acoustiflo and AprilAire in the prior-year period, which resulted in net cash outflows of $2,290.1 million. In addition, the Company facilitated the funding of a $95.0 million related party loan during the six months ended June 30, 2025. The prior year cash flows were partially offset by net proceeds from purchases and sales of available-for-sale marketable securities of $80.5 million. Net investment in property, plant and equipment remained relatively consistent between periods.
Financing Activities. Net cash used in financing activities was $86.3 million during the six months ended June 30, 2026, compared to proceeds of $1,958.9 million during the six months ended June 30, 2025. The change was primarily attributable to proceeds from the Company's IPO and concurrent private placement of $2,667.6 million, net of $92.4 million of underwriting fees and offering costs, which were substantially offset by debt principal payments of $2,632.7 million. In addition, the Company paid $53.7 million of tax withholding obligations related to the net share settlement of vested equity awards. During the six months ended June 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.
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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 six months ended June 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 June 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.
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