Core Insights - Worthington Steel, Inc. is set to release its quarterly earnings on December 17, 2025, with anticipated earnings per share of $0.48 and revenue of approximately $797.25 million, which are critical for assessing the company's financial health [1][6] Group 1: Company Recognition - Worthington Steel has been recognized as one of the best places to work in IT, highlighting its commitment to a positive work environment that can enhance employee satisfaction and productivity [2][6] Group 2: Financial Metrics - The company has a price-to-earnings (P/E) ratio of 15.15, indicating reasonable market valuation in terms of earnings [3][6] - Worthington Steel's price-to-sales ratio is 0.59, suggesting that its market value is relatively low compared to its sales, which may attract value-seeking investors [3] - The enterprise value to sales ratio stands at 0.67, reflecting the company's total valuation in relation to its revenue [4] - An enterprise value to operating cash flow ratio of 12.28 indicates how the market values the company's cash flow and overall operations [4] Group 3: Financial Stability - The debt-to-equity ratio of 0.30 indicates a low level of debt compared to equity, suggesting that the company is not overly reliant on borrowing [5][6] - A current ratio of 1.66 reflects good liquidity, allowing the company to cover its short-term liabilities effectively [5]

Core Insights - Worthington Steel, Inc. has been recognized as one of the Best Places to Work in IT for 2026, ranking No. 33 among large organizations, marking its eighth consecutive year on this list [1][3] Company Achievements - The company’s IT team has modernized global systems and introduced AI-driven tools, enhancing operational efficiency and supporting growth through integration and modernization projects [1][2] - Worthington Steel implemented Oracle Fusion Cloud ERP and Analytics to modernize its electrical steel operations in Canada, significantly reducing capital project approval cycle times from weeks to days [1][2] Employee Engagement and Development - Worthington Steel received honorable mentions in the categories of "Training and Development" and "Retention and Engagement," highlighting its commitment to employee growth and satisfaction [1][3] - The company emphasizes a people-first philosophy, focusing on employee opportunities and community strengthening [7] Technological Advancements - The IT organization has advanced the use of AI tools across various business functions, improving accuracy and efficiency, allowing teams to concentrate on higher-value tasks [2] - Integration of the Sitem Group acquisition involved upgrading infrastructure and cybersecurity, reinforcing Worthington Steel's digital foundation [2]

Core Insights - Meros Investment Management has fully exited its position in Worthington Steel, resulting in a liquidation valued at nearly $5.3 million, which reflects a significant portfolio adjustment [2][10]. Company Overview - Worthington Steel, based in Columbus, Ohio, operates as a steel processor with a diversified product portfolio, serving various industrial sectors including automotive, heavy truck, agriculture, construction, and energy [6][9]. - As of the latest market close, Worthington Steel shares were priced at $35.92, with a market capitalization of $1.8 billion, revenue of $3.1 billion, and net income of $118.6 million for the trailing twelve months (TTM) [4][6]. Recent Performance - The company reported a 5% revenue growth to $872.9 million in the most recent quarter, alongside an increase in operating income to $48.3 million and net earnings of $36.8 million, all showing meaningful improvement from the previous year [7]. - Adjusted earnings per share rose to $0.77 from $0.56, indicating positive traction in core spreads despite some volume softness in certain categories [7]. Market Context - Worthington Steel's stock has underperformed, down 18% over the past year, while the S&P 500 has increased by 13% during the same period [3]. - The exit by Meros Investment Management raises questions about investor sentiment, especially as the company appears to be stabilizing after its spin-off [7][10]. Strategic Positioning - Worthington Steel's vertically integrated model, strong balance sheet, and recent acquisition of the Sitem Group contribute to its ongoing transformation efforts [10]. - The company continues to focus on dividend continuity and steady margin improvement, which are key factors for fundamentals-driven investors to monitor [10].

Group 1 - The German metals company is currently in discussions with Worthington Steel [1] - It remains uncertain whether an official offer will be made [1]

Core Viewpoint - Worthington Steel, Inc. is currently in negotiations with Klöckner & Co SE regarding a potential voluntary public takeover offer, but no investment decision has been made and discussions may not lead to a transaction [1] Company Summary - Worthington Steel, Inc. is a metals processor that collaborates with customers to deliver solutions [1]

Core Points - Worthington Steel, Inc. has been awarded the 2026 Military Friendly® Employer Gold designation, highlighting its commitment to hiring veterans and supporting military personnel [1] Company Summary - Worthington Steel, Inc. is recognized for its efforts in creating a military-friendly workplace, which is reflected in the Gold designation for 2026 [1]

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) [Forward-Looking Statements Overview](index=4&type=section&id=Forward-Looking%20Statements%20Overview) This section identifies forward-looking statements in the Form 10-Q, covering future financial performance, operational strategies, and market conditions - Forward-looking statements are identified by specific words/phrases (e.g., 'believe,' 'expect,' 'anticipate') and cover future **financial performance**, **operational strategies**, **growth**, **profitability**, and **market conditions**[8](index=8&type=chunk) - Statements also include **anticipated benefits** from the **Separation** of Worthington Enterprises, Inc.'s steel processing business into Worthington Steel as a stand-alone company on December 1, 2023[8](index=8&type=chunk) [Risks and Uncertainties](index=5&type=section&id=Risks%20and%20Uncertainties) Forward-looking statements are subject to inherent risks and uncertainties, including market conditions, commodity prices, supply chain, and regulatory factors - Actual results may differ materially due to risks such as **public health emergencies**, **regulatory approvals** for the Separation, **financial market conditions** (inflation, interest rates, recession), and the **ability of financial institutions to provide capital**[9](index=9&type=chunk) - Other significant risks include **changing commodity prices and supply**, **product demand and pricing**, changes in product mix, volatility in raw material availability and quality, **supply chain constraints**, **critical equipment failures**, and **financial difficulties of customers or suppliers**[9](index=9&type=chunk) - The Company also faces risks from **international business operations** (economic/political instability, currency exchange rates), **tariffs and trade restrictions**, **inflation**, **interest rate increases**, **impairment of assets**, **competitive pressures**, **environmental regulations**, judicial rulings, healthcare/tax law changes, **cybersecurity**, and the **cyclical nature of the steel industry**[11](index=11&type=chunk) [Part I. Financial Information](index=7&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents Worthington Steel's unaudited consolidated financial statements for Q1 fiscal 2026, including balance sheets, earnings, comprehensive income, cash flows, and equity [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (August 31, 2025 vs. May 31, 2025) | Metric | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :----------------------------------- | :------------------------- | :-------------------- | :---------------- | | Total Assets | $2,243.3 | $1,961.8 | +$281.5 | | Total Current Assets | $1,148.5 | $1,048.5 | +$100.0 | | Cash and cash equivalents | $78.3 | $38.0 | +$40.3 | | Receivables, net | $490.3 | $438.7 | +$51.6 | | Total Inventories | $478.5 | $422.0 | +$56.5 | | Total Liabilities | $912.4 | $763.9 | +$148.5 | | Total Current Liabilities | $693.6 | $631.5 | +$62.1 | | Total Debt (Short-term + Long-term) | $233.4 | $151.5 | +$81.9 | | Total Equity | $1,233.2 | $1,197.9 | +$35.3 | | Redeemable noncontrolling interest | $97.7 | $- | +$97.7 | [Consolidated Statements of Earnings](index=9&type=section&id=Consolidated%20Statements%20of%20Earnings) Consolidated Statements of Earnings Highlights (Three Months Ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 (Millions) | August 31, 2024 (Millions) | Change (Millions) | YoY Change (%) | | :------------------------------------------ | :------------------------- | :------------------------- | :---------------- | :------------- | | Net sales | $872.9 | $834.0 | +$38.9 | +4.7% | | Gross margin | $115.2 | $100.4 | +$14.8 | +14.7% | | Operating income | $48.3 | $43.4 | +$4.9 | +11.3% | | Earnings before income taxes | $52.0 | $36.2 | +$15.8 | +43.6% | | Net earnings attributable to Worthington Steel | $36.8 | $28.4 | +$8.4 | +29.6% | | Basic EPS attributable to Worthington Steel shareholders | $0.73 | $0.57 | +$0.16 | +28.1% | | Diluted EPS attributable to Worthington Steel shareholders | $0.72 | $0.56 | +$0.16 | +28.6% | [Consolidated Statements of Comprehensive Income](index=10&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income Highlights (Three Months Ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 (Millions) | August 31, 2024 (Millions) | Change (Millions) | | :------------------------------------------ | :------------------------- | :------------------------- | :---------------- | | Net earnings attributable to Worthington Steel | $36.8 | $28.4 | +$8.4 | | Other comprehensive income | $1.1 | $2.2 | -$1.1 | | Comprehensive income attributable to Worthington Steel | $37.9 | $30.6 | +$7.3 | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Three Months Ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 (Millions) | August 31, 2024 (Millions) | Change (Millions) | | :------------------------------------------ | :------------------------- | :------------------------- | :---------------- | | Net cash (used in) provided by operating activities | $(6.3) | $54.6 | -$60.9 | | Net cash used in investing activities | $(29.6) | $(21.5) | -$8.1 | | Net cash provided by (used in) financing activities | $21.0 | $(37.3) | +$58.3 | | Decrease in cash, cash equivalents and restricted cash | $(14.6) | $(4.2) | -$10.4 | | Cash, cash equivalents, and restricted cash at end of period | $78.3 | $36.0 | +$42.3 | [Consolidated Statements of Equity and Mezzanine Equity](index=12&type=section&id=Consolidated%20Statements%20of%20Equity%20and%20Mezzanine%20Equity) Consolidated Statements of Equity and Mezzanine Equity Highlights (August 31, 2025 vs. May 31, 2025) | Metric | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :------------------------------------------ | :------------------------- | :-------------------- | :---------------- | | Total Shareholders' equity – controlling interest | $1,104.9 | $1,074.1 | +$30.8 | | Retained Earnings | $192.5 | $164.2 | +$28.3 | | Accumulated other comprehensive loss, net | $(2.9) | $(4.0) | +$1.1 | | Redeemable noncontrolling interest | $97.7 | $- | +$97.7 | | Total equity | $1,233.2 | $1,197.9 | +$35.3 | [Note 1 – Description of Business and Basis of Presentation](index=13&type=section&id=Note%201%20%E2%80%93%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Worthington Steel is a **value-added steel processor** in North America, holding **market-leading positions** in **carbon flat-rolled steel**, **tailor welded blanks**, and **electrical steel laminations**[30](index=30&type=chunk) - On December 1, 2023, Worthington Steel completed its **spin-off** from Worthington Enterprises, Inc. to become a **stand-alone publicly traded company**[31](index=31&type=chunk) - On June 3, 2025, the Company acquired a **52% controlling interest** in S.I.T.E.M. S.p.A. (Sitem Group), whose results are included in consolidated financial statements with a one-month reporting lag[33](index=33&type=chunk) Concentration of Net Sales by End Market (Three Months Ended August 31) | End Market | August 31, 2025 (%) | August 31, 2024 (%) | | :------------------------- | :------------------ | :------------------ | | Automotive | 56% | 51% | | Detroit Three Automakers | 35% | 32% | | Largest Automotive Customers: | | | | Customer A | 13% | 13% | | Customer B | 15% | 13% | [Note 2 – Revenue Recognition](index=16&type=section&id=Note%202%20%E2%80%93%20Revenue%20Recognition) - Revenue is recognized upon transfer of control of goods or services, reflecting the expected consideration. The Company generates revenue from processing steel to customer specifications (**direct sales**) and toll processing customer-owned material (**fee-for-service**)[49](index=49&type=chunk)[5

Company Overview - Worthington Steel, Inc. is a relatively new independent company in the metals industry, having been spun off from Worthington Industries to focus more directly on steel processing [1] Investment Focus - The analysis primarily targets small- to mid-cap companies, which are often overlooked by many investors, while also occasionally reviewing large-cap names to provide a broader perspective on equity markets [1]

First Quarter Fiscal 2026 Results Overview [First Quarter Highlights](index=1&type=section&id=First%20Quarter%20Highlights) Worthington Steel reported a strong start to fiscal 2026, achieving year-over-year volume growth despite a soft market, attributed to disciplined execution and the integration of the Sitem team - Worthington Steel achieved **year-over-year volume growth** in a soft market, driven by disciplined execution and a transformation mindset[3](index=3&type=chunk) - The company welcomed the Sitem team into the Worthington Steel family during the quarter, positioning for long-term growth[3](index=3&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) The first quarter of fiscal 2026 saw significant financial improvements, including a 5% increase in net sales, a 11.3% rise in operating income, and a 29.6% increase in net earnings attributable to Worthington Steel, alongside a declared quarterly dividend of $0.16 per share | Metric | 1Q 2026 | 1Q 2025 | | :------------------------------------------------ | :------ | :------ | | Volume (tons) | 928,866 | 994,093 | | Net sales (in millions) | $872.9 | $834.0 | | Operating income (in millions) | $48.3 | $43.4 | | Net earnings attributable to Worthington Steel (in millions) | $36.8 | $28.4 | | Adjusted EBIT (Non-GAAP) (in millions) | $54.9 | $39.4 | | Equity in net income of unconsolidated affiliate (in millions) | $6.4 | $1.3 | | Net earnings per diluted share attributable to Worthington Steel shareholders | $0.72 | $0.56 | | Adjusted net earnings per diluted share attributable to Worthington Steel shareholders (Non-GAAP) | $0.77 | $0.56 | - Net sales increased **5% to $872.9 million** from $834.0 million[5](index=5&type=chunk) - A quarterly dividend of **$0.16 per share** was declared, payable on December 26, 2025[5](index=5&type=chunk) Detailed Quarterly Financial Performance [Net Sales and Volume Analysis](index=2&type=section&id=Net%20Sales%20and%20Volume%20Analysis) Net sales for Q1 FY26 increased by 5% to $872.9 million, driven by higher direct volumes and selling prices, partially offset by decreased toll volumes and selling prices | Metric | 1Q 2026 | 1Q 2025 | Change (YoY) | | :----------------------- | :------ | :------ | :----------- | | Net sales (in millions) | $872.9 | $834.0 | +5% | | Direct tons sold | +6% | - | - | | Sitem Group contribution to direct tons | ~1% | - | - | | Toll volumes | -22% | - | - | | Direct selling prices | +1% | - | - | | Toll selling prices | -3% | - | - | | Direct vs. Toll mix | 63% to 37% | 56% to 44% | Shift towards direct | - The increase in net sales was primarily driven by higher direct volumes and slightly higher average direct selling prices[6](index=6&type=chunk) - Lower toll volumes were mainly due to softening demand from mill customers and the closure of a toll processing facility in Cleveland, Ohio[6](index=6&type=chunk) [Gross Margin Analysis](index=2&type=section&id=Gross%20Margin%20Analysis) Gross margin increased by $14.8 million to $115.2 million, primarily due to improved direct spreads and higher direct volumes, despite lower toll margins | Metric | 1Q 2026 | 1Q 2025 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Gross margin (in millions) | $115.2 | $100.4 | +$14.8 | | Direct spreads impact (in millions) | +$23.0 | - | - | | Inventory holding gain (in millions) | $5.6 | -$16.6 (loss) | +$22.2 (favorable change) | | Higher direct volumes impact (in millions) | +$4.6 | - | - | | Toll margins impact (in millions) | -$11.0 | - | - | - Direct spreads were favorably impacted by a **$22.2 million change** from an estimated inventory holding loss in the prior year to an estimated gain in the current quarter[7](index=7&type=chunk) [Operating Income Analysis](index=2&type=section&id=Operating%20Income%20Analysis) Operating income rose by $4.9 million to $48.3 million, driven by gross margin improvement and restructuring gains, partially offset by increased SG&A expenses | Metric | 1Q 2026 | 1Q 2025 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Operating income (in millions) | $48.3 | $43.4 | +$4.9 | | Gross margin increase impact (in millions) | +$14.8 | - | - | | Restructuring and other (income), net (in millions) | +$1.0 | - | - | | SG&A expense (in millions) | $67.9 | $57.0 | +$10.9 | | Sitem Group SG&A contribution (in millions) | $7.9 | - | - | | Acquisition completion bonus (in millions) | $4.6 | - | - | - The **$10.9 million increase in SG&A expense** was primarily due to the Sitem Group acquisition, which included a one-time bonus of $4.6 million paid to key individuals[8](index=8&type=chunk) [Net Earnings and EPS (GAAP & Adjusted)](index=2&type=section&id=Net%20Earnings%20and%20EPS%20(GAAP%20%26%20Adjusted)) Net earnings attributable to Worthington Steel increased to $36.8 million, with diluted EPS rising to $0.72, and adjusted figures also showing significant growth | Metric | 1Q 2026 | 1Q 2025 | Change (YoY) | | :------------------------------------------------ | :------ | :------ | :----------- | | Net earnings attributable to Worthington Steel (in millions) | $36.8 | $28.4 | +$8.4 | | Net earnings per diluted share (GAAP) | $0.72 | $0.56 | +$0.16 | | Adjusted net earnings attributable to Worthington Steel (in millions) | $38.9 | $28.4 | +$10.5 | | Adjusted net earnings per diluted share | $0.77 | $0.56 | +$0.21 | - Fiscal 2026 first quarter adjusted results exclude a **$0.01 per diluted share adjustment** for a deemed dividend, a **$0.04 per diluted share acquisition completion bonus expense**, and a **$0.01 per diluted share deferred tax asset adjustment**, offset by a $0.01 per diluted share gain on asset sale[10](index=10&type=chunk) Financial Position and Cash Flow [Balance Sheet Overview](index=2&type=section&id=Balance%20Sheet%20Overview) As of August 31, 2025, the Company reported $78.3 million in cash, $233.4 million in total debt, and a net debt of $155.1 million, with Sitem Group consolidated | Metric | August 31, 2025 (in millions) | | :-------------------------- | :---------------------------- | | Cash and cash equivalents | $78.3 | | Total debt | $233.4 | | Net debt | $155.1 | - The Sitem Group joint venture is consolidated within the Company's financial statements, and mezzanine equity was recorded on the consolidated balance sheet[13](index=13&type=chunk) [Cash Flow Activities](index=2&type=section&id=Cash%20Flow%20Activities) Net cash used in operating activities was $5.0 million, a shift from the prior year, with increased capital investment and negative free cash flow of $34.4 million | Metric | 1Q 2026 (in millions) | 1Q 2025 (in millions) | | :-------------------------------------- | :-------------------- | :-------------------- | | Net cash (used in) provided by operating activities | $(5.0) | $54.6 | | Investment in property, plant and equipment | $29.4 | $21.5 | | Acquisitions, net of cash acquired | $1.6 | - | | Free cash flow | $(34.4) | $33.1 | [Capital Allocation and Dividends](index=2&type=section&id=Capital%20Allocation%20and%20Dividends) The Board of Directors declared a quarterly dividend of $0.16 per common share, maintaining consistency with the previous year | Metric | 1Q 2026 | 1Q 2025 | | :-------------------------- | :------ | :------ | | Cash dividends declared per share | $0.16 | $0.16 | Company Information [About Worthington Steel](index=3&type=section&id=About%20Worthington%20Steel) Worthington Steel is a market-leading metals processor providing value-added solutions across 37 facilities in seven states and 10 countries, employing approximately 6,000 people - Worthington Steel is a metals processor providing highly technical and customized solutions in carbon flat-roll steel processing, electrical steel laminations, and tailor welded solutions[16](index=16&type=chunk) - The company operates **37 facilities** in seven states and 10 countries, with approximately **6,000 employees**[17](index=17&type=chunk) - Worthington Steel's purpose is to generate positive returns by providing trusted and innovative solutions for customers, creating opportunities for employees, and strengthening communities, following a people-first philosophy and commitment to sustainability[17](index=17&type=chunk) Legal and Forward-Looking Statements [Safe Harbor Statement](index=3&type=section&id=Safe%20Harbor%20Statement) This section outlines forward-looking statements, emphasizing inherent risks and uncertainties that could cause actual results to differ materially from projections, advising against undue reliance - Forward-looking statements reflect current expectations and are subject to risks and uncertainties that could cause actual results to differ materially[18](index=18&type=chunk)[19](index=19&type=chunk) - Risk factors include conditions in financial markets, tariffs, product demand and pricing, raw material volatility, supply chain constraints, and the impact of acquisitions and economic conditions[19](index=19&type=chunk)[20](index=20&type=chunk) - The company disclaims any obligation to update forward-looking statements, except as required by applicable law[21](index=21&type=chunk) Consolidated Financial Statements [Consolidated Statements of Earnings](index=5&type=section&id=Consolidated%20Statements%20of%20Earnings) The consolidated statements of earnings show year-over-year increases in net sales, gross margin, and net earnings attributable to Worthington Steel for Q1 FY26 | | Three Months Ended August 31, | | :------------------------------------------------ | :------ | :------ | | | 2025 | 2024 | | Net sales | $872.9 | $834.0 | | Cost of goods sold | 757.7 | 733.6 | | Gross margin | 115.2 | 100.4 | | Selling, general and administrative expense | 67.9 | 57.0 | | Restructuring and other (income), net | (1.0) | - | | Operating income | 48.3 | 43.4 | | Miscellaneous income (expense), net | 0.2 | (5.9) | | Interest expense, net | (2.9) | (2.6) | | Equity in net income of unconsolidated affiliate | 6.4 | 1.3 | | Earnings before income taxes | 52.0 | 36.2 | | Income tax expense | 13.4 | 4.0 | | Net earnings | 38.6 | 32.2 | | Net earnings attributable to noncontrolling interests | 1.8 | 3.8 | | Net earnings attributable to Worthington Steel | $36.8 | $28.4 | | Deemed dividend of redeemable noncontrolling interest | (0.5) | - | | Net earnings attributable to Worthington Steel shareholders | $36.3 | $28.4 | | Basic Earnings per share attributable to Worthington Steel shareholders | $0.73 | $0.57 | | Diluted Earnings per share attributable to Worthington Steel shareholders | $0.72 | $0.56 | | Cash dividends declared per share | $0.16 | $0.16 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show an increase in total assets and liabilities, with the introduction of mezzanine equity due to the Sitem Group acquisition | Assets | August 31, 2025 (in millions) | May 31, 2025 (in millions) | | :------------------------------------------------ | :---------------------------- | :--------------------------- | | Cash and cash equivalents | $78.3 | $38.0 | | Total current assets | 1,148.5 | 1,048.5 | | Investment in unconsolidated affiliate | 133.0 | 126.6 | | Goodwill | 101.7 | 79.6 | | Other intangible assets, net | 90.0 | 67.9 | | Total property, plant and equipment, net | 656.0 | 548.2 | | Total assets | $2,243.3 | $1,961.8 | | Liabilities, Mezzanine Equity, and Equity | August 31, 2025 (in millions) | May 31, 2025 (in millions) | | :------------------------------------------------ | :---------------------------- | :--------------------------- | | Total current liabilities | $693.6 | $631.5 | | Total liabilities | 912.4 | 763.9 | | Total mezzanine equity | 97.7 | - | | Total Shareholders' equity - controlling interest | 1,104.9 | 1,074.1 | | Total equity | 1,233.2 | 1,197.9 | | Total liabilities, mezzanine equity, and equity | $2,243.3 | $1,961.8 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows indicate a shift to net cash used in operating activities, increased investing cash usage, and an overall decrease in cash and cash equivalents | | Three Months Ended August 31, | | :------------------------------------------------ | :------ | :------ | | | 2025 | 2024 | | Net cash (used in) provided by operating activities | $(5.0) | $54.6 | | Net cash used in investing activities | $(30.9) | $(21.5) | | Net cash provided by (used in) financing activities | $21.0 | $(37.3) | | Decrease in cash, cash equivalents, and restricted cash | $(14.6) | $(4.2) | | Cash, cash equivalents, and restricted cash at end of period | $78.3 | $36.0 | Non-GAAP Financial Measures / Supplemental Data [Non-GAAP Definitions and Purpose](index=9&type=section&id=Non-GAAP%20Definitions%20and%20Purpose) Worthington Steel uses non-GAAP measures like adjusted operating income and free cash flow to provide additional perspective on ongoing operations and facilitate performance evaluation - The Company reports non-GAAP financial measures including adjusted operating income, adjusted EBIT, adjusted EBITDA, free cash flow, and net debt[31](index=31&type=chunk) - These non-GAAP measures exclude items not reflective of ongoing operations, such as impairment and restructuring charges, to provide useful information for evaluating performance, planning, and compensation[32](index=32&type=chunk) [Reconciliation of Adjusted Net Earnings and EPS](index=9&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Earnings%20and%20EPS) This section reconciles GAAP to adjusted net earnings and diluted EPS for Q1 FY26 and Q1 FY25, detailing specific adjustments for non-recurring items | | Three Months Ended August 31, 2025 | | :------------------------------------------------ | :------ | :------ | :------ | :------ | | | Operating Income | Earnings Before Income Taxes | Income Tax Expense (Benefit) | Net Earnings Attributable to Worthington Steel | Net Earnings per Diluted Share Attributable to Worthington Steel shareholders | | GAAP | $48.3 | $52.0 | $13.4 | $36.8 | $0.72 | | Deemed dividend of redeemable noncontrolling interest | - | - | - | - | 0.01 | | Restructuring and other (income), net | (1.0) | (1.0) | (0.1) | (0.5) | (0.01) | | Acquisition completion bonus payment | 4.6 | 4.6 | 0.6 | 1.8 | 0.04 | | Deferred tax asset adjustment | - | - | (0.8) | 0.8 | 0.01 | | Non-GAAP | $51.9 | $55.6 | $13.1 | $38.9 | $0.77 | | | Three Months Ended August 31, 2024 | | :------------------------------------------------ | :------ | :------ | :------ | :------ | | | Operating Income | Earnings Before Income Taxes | Income Tax Expense (Benefit) | Net Earnings Attributable to Worthington Steel | Net Earnings per Diluted Share Attributable to Worthington Steel shareholders | | GAAP | $43.4 | $36.2 | $4.0 | $28.4 | $0.56 | | Tax indemnification adjustment | - | - | 4.4 | - | - | | Non-GAAP | $43.4 | $40.6 | $8.4 | $28.4 | $0.56 | - Key adjustments for fiscal 2026 include a deemed dividend of redeemable noncontrolling interest, restructuring income, an acquisition completion bonus payment, and a deferred tax asset adjustment[34](index=34&type=chunk) [Reconciliation of EBIT, Adjusted EBIT, and Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20EBIT,%20Adjusted%20EBIT,%20and%20Adjusted%20EBITDA) This section reconciles GAAP net earnings to EBIT, Adjusted EBIT, and Adjusted EBITDA for Q1 FY26 and Q1 FY25, highlighting the impact of interest, taxes, depreciation, amortization, and specific non-recurring items | (In millions, except volume) | Three Months Ended August 31, | | :-------------------------------- | :------ | :------ | | | 2025 | 2024 | | Volume (tons) | 928,866 | 994,093 | | Net sales | $872.9 | $834.0 | | Net earnings attributable to Worthington Steel | $36.8 | $28.4 | | Interest expense, net | 2.9 | 2.6 | | Income tax expense | 13.4 | 4.0 | | EBIT | 53.1 | 35.0 | | Restructuring and other (income), net | (0.6) | - | | Tax indemnification adjustment | - | 4.4 | | Acquisition completion bonus payment | 2.4 | - | | Adjusted EBIT | 54.9 | 39.4 | | Depreciation and amortization | 20.3 | 16.2 | | Adjusted EBITDA | $75.2 | $55.6 | | Net earnings margin | 4.2% | 3.4% | | Adjusted EBIT margin | 6.3% | 4.7% | | Adjusted EBITDA margin | 8.6% | 6.7% | - Adjusted EBIT increased to **$54.9 million** in Q1 FY26 from $39.4 million in Q1 FY25, with Adjusted EBIT margin improving from **4.7% to 6.3%**[37](index=37&type=chunk) - Adjusted EBITDA rose to **$75.2 million** in Q1 FY26 from $55.6 million in Q1 FY25, with Adjusted EBITDA margin increasing from **6.7% to 8.6%**[37](index=37&type=chunk) [Reconciliation of Free Cash Flow](index=11&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) This section provides a reconciliation of net cash provided by operating activities to free cash flow for the past five fiscal quarters, illustrating the company's ability to generate cash beyond operational and capital expenditure needs | | First Quarter 2026 | Fourth Quarter 2025 | Third Quarter 2025 | Second Quarter 2025 | First Quarter 2025 | | :------------------------------------------ | :----------------- | :------------------ | :----------------- | :------------------ | :----------------- | | Net cash (used in) provided by operating activities | $(5.0) | $53.9 | $53.8 | $68.0 | $54.6 | | Investment in property, plant and equipment | (29.4) | (45.5) | (28.6) | (34.8) | (21.5) | | Free cash flow | $(34.4) | $8.4 | $25.2 | $33.2 | $33.1 | | Trailing 12 months free cash flow | $32.4 | - | - | - | - | - Free cash flow was **negative $34.4 million** in Q1 FY26, compared to positive $33.1 million in Q1 FY25[44](index=44&type=chunk) [Reconciliation of Net Debt](index=11&type=section&id=Reconciliation%20of%20Net%20Debt) This section reconciles total debt to net debt as of August 31, 2025, by subtracting cash and cash equivalents from the aggregate of short-term borrowings, current maturities of long-term debt, and long-term debt | | August 31, 2025 (in millions) | | :-------------------------------- | :---------------------------- | | Short-term borrowings | $160.0 | | Current maturities of long-term debt | 30.3 | | Long-term debt | 43.1 | | Total debt | $233.4 | | Less: cash and cash equivalents | (78.3) | | Net debt | $155.1 | - As of August 31, 2025, Worthington Steel reported a **net debt position of $155.1 million**[45](index=45&type=chunk)

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2026 was $75.2 million, with earnings per share at $0.72, and net sales reached $872.9 million, reflecting a year-over-year increase [4][13][19] - Earnings increased from $28.4 million or $0.56 per share in the prior year quarter to $36.8 million or $0.72 per share in the current quarter [13][19] - Adjusted EBIT rose to $54.9 million, up $15.5 million from $39.4 million in the prior year quarter, primarily due to higher gross margin and increased equity earnings [16][17] Business Line Data and Key Metrics Changes - Automotive shipments increased by 17% year-over-year, with shipments to the Detroit Three OEMs up nearly 13%, while production for these OEMs grew approximately 5% [21][22] - Direct sales volume constituted 63% of the mix in the current quarter, up from 56% in the prior year quarter, with direct sales volume increasing by 6% [20][21] - Toll processing volumes decreased by 22% year-over-year, attributed to market conditions and the closure of the Worthington Samuel Coil Processing facility [23][24] Market Data and Key Metrics Changes - Market pricing for hot rolled coil peaked at $950 per ton in March but has since decreased to approximately $800 per ton due to softer market demand [18] - The agricultural market faced challenges, with volumes down nearly 50% compared to the prior year quarter, while construction market shipments fell modestly by 3% [22] - The energy and container markets saw modest increases, contrasting with declines in the construction and heavy truck markets [22] Company Strategy and Development Direction - The company is focused on electrical steel investments and margin-accretive growth, with production in Canada expected to start in early 2026 [7][8] - The expansion of the facility in Mexico will begin production soon, supplying electrical steel laminations for hybrid and electric vehicles [8] - The integration of AI into operations aims to enhance productivity and customer outcomes, with several AI-driven pilots underway [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the automotive market, anticipating continued growth despite market uncertainties [6][32] - The company is positioned to capitalize on opportunities arising from supply chain shifts and customer complexities [6][7] - Management noted that the macro environment remains mixed, with limited visibility in several sectors expected to persist [5][6] Other Important Information - The company reported a cash flow from operations outflow of $5 million and a free cash flow outflow of $34 million, impacted by increases in working capital [24][25] - A quarterly dividend of $0.16 per share was announced, payable on December 26, 2025 [24] Q&A Session Summary Question: Can you provide more details on the Sedum transaction and mezzanine financing structure? - The Sedum acquisition cost $60 million in cash, financed using ABL, with the minority interest classified as mezzanine equity due to foreign currency considerations [30][31] Question: What are the future opportunities in the automotive sector? - Management is cautiously optimistic about the automotive market, expecting to gain further market share and positive momentum in 2026 [32] Question: How does the company manage the impact of Section 232 tariffs on electrical steel laminations? - Management indicated minimal impact from tariffs, as customers are willing to pay, and a significant portion of the customer base is USMCA compliant [35] Question: Will the closure of the Worthington Samuel facility impact supply? - Management confirmed no anticipated disruptions in supply chains due to strong relationships with multiple mill sources [38] Question: What is the outlook for volumes in fiscal Q2? - Management expects normal seasonal trends, with Q2 typically 3% to 4% below Q1, and no significant demand triggers anticipated [42]