Worthington Enterprises (NYSE:WOR) Q2 2026 Earnings Call December 17, 2025 08:30 AM ET Company ParticipantsColin Souza - Vp & CFOJoseph Hayek - President & CEOMarcus Rogier - Treasurer and Investor Relations OfficerKathryn Thompson - Founding Partner & CEODaniel Moore - Partner & Director of ResearchConference Call ParticipantsSusan Maklari - Senior Equity Research AnalystWalt Liptak - Md & Senior Equity AnalystBrian McNamara - Md & Senior AnalystOperatorGood morning and welcome to the Worthington Enterpris ...

Financial Data and Key Metrics Changes - The company reported a revenue increase of over 19% year-over-year in Q2, with adjusted EBITDA growing by 8% year-over-year, reaching $60 million [4][5][16] - Adjusted earnings per share rose to $0.65, up from $0.60 in the prior year quarter [14] - The adjusted EBITDA margin improved to 18.5% compared to 20% a year ago [5][16] Business Line Data and Key Metrics Changes - In the consumer products segment, net sales increased by 3% to $120 million, with adjusted EBITDA remaining flat at $15 million [20] - The building products segment saw a 32% year-over-year growth in net sales to $208 million, driven by higher volumes and contributions from the Elgen acquisition [21] - Excluding Elgen, building products net sales grew by 16% year-over-year, reflecting strength across multiple categories [21] Market Data and Key Metrics Changes - The company noted cautious consumer sentiment and muted construction activity impacting market conditions, but still managed to gain market share [12] - The performance of joint ventures was highlighted, with WAVE contributing $26 million in equity earnings, while ClarkDietrich's earnings were lower due to a challenging market environment [22] Company Strategy and Development Direction - The company aims to optimize its business through organic growth and strategic acquisitions, with a focus on increasing margins [5][6] - The planned acquisition of LSI, a leader in metal roofing components, is expected to enhance the company's position in engineered building systems and create long-term shareholder value [6][11] - The company continues to leverage the Worthington Business System, focusing on innovation, transformation, and M&A to maximize success [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment and positioning for long-term growth despite challenges in the housing market and construction activity [12][13] - The company is optimistic about growth prospects in the back half of the fiscal year, particularly in consumer products and building products [20][21] Other Important Information - The company declared a quarterly dividend of $0.19 per share, payable in March 2026 [19] - The acquisition of LSI is expected to close in January 2026 and will be funded primarily with cash on hand [19][11] Q&A Session Summary Question: Can you expand on the strategy for growth from the acquisition of LSI? - Management highlighted the complementary nature of acquisitions and the focus on leveraging manufacturing expertise and innovation to create value [26][27] Question: What are the opportunities involved in data centers? - Management noted that several segments, including WAVE and ClarkDietrich, provide products for data centers, indicating a meaningful growth opportunity [31][33] Question: What drives the healthy margin profile of LSI? - Management indicated that LSI's business is driven by resilient retrofit demand and strong customer relationships, contributing to its high margins [39][40] Question: How much of the building products growth is due to pricing versus volume? - Management stated that the growth was primarily driven by volume, with a focus on gaining market share through innovation [42][44] Question: What is the outlook for ClarkDietrich? - Management expects no worse than flat sequential performance moving forward, with a focus on cost-saving initiatives [46][47] Question: How does the company plan to balance capital allocation? - Management expressed a balanced approach to capital structure, considering strategic M&A and returns to shareholders while maintaining growth [50]

Summary of Worthington Enterprises FY Conference Call Company Overview - **Company Name**: Worthington Enterprises (NYSE: WOR) - **Industry**: Building Products and Consumer Products - **Separation**: Worthington Enterprises was formed on December 1, 2023, following the spinoff of Worthington Steel from Worthington Industries, which has been operational since June 1955 [2][3] Financial Performance - **Sales**: $1.2 billion for the last 12 months ending August 2025 - **Adjusted EBITDA**: $280 million, representing a 20% increase from the previous year [3][21] - **EBITDA Margin**: 23% with strong free cash flow conversion [21][28] - **Liquidity**: Approximately $667 million available through revolving credit and cash [25] Business Segments Building Products - **Revenue Contribution**: 58% of total revenues, approximately $700 million with $229 million in EBITDA [9] - **Key Value Streams**: - Heating and Cooking: Large propane tanks, gas grill cylinders - Cooling and Construction: Refrigerant tanks and adhesive tanks - Water Systems: Buffer tanks for well systems - Systems and Components: HVAC components from recent acquisition of Elgin Manufacturing [10][11][12] Consumer Products - **Revenue Contribution**: $500 million with a 16% EBITDA margin [13] - **Key Products**: Tools, Burns-O-Matic torches, Coleman Camping Gas Cylinders, and Balloon Time products [13][14] Strategic Focus - **Cultural Philosophy**: Emphasis on a culture rooted in the golden rule, prioritizing safety and performance-based incentives [5][6] - **Innovation and M&A**: Continuous investment in innovation and strategic acquisitions to enhance market position and product offerings [19][20] - **Long-term Goals**: Targeting 6%-8% sales growth and 24% EBITDA margins over time, with a focus on improving gross margins above 30% [40] Market Dynamics - **Challenges**: The consumer market is facing pressure due to high interest rates and reduced housing turnover, impacting overall business performance [24][32] - **Joint Ventures**: Worthington has significant joint ventures, including Wave (50/50 with Armstrong World Industries) and ClarkDietrich (25% owned), which contribute to its market presence [4][12] Future Outlook - **Growth Strategy**: Focus on optimizing current businesses, organic growth, and M&A to drive future performance [18][20] - **Market Recovery**: Anticipation of recovery in heating and cooling markets, with expectations for ClarkDietrich to improve as commercial construction trends upward [24][42] Additional Insights - **Competitive Advantage**: Being the only domestic manufacturer in certain product categories allows for differentiation in the market [22] - **CapEx Plans**: Elevated capital expenditures for facility modernization, with expectations to trend down post-project completion [26][28] This summary encapsulates the key points discussed during the Worthington Enterprises FY Conference Call, highlighting the company's financial performance, strategic focus, market dynamics, and future outlook.

Financial Data and Key Metrics Changes - The company reported GAAP earnings from continuing operations of $0.79 per share, up from $0.44 in the prior year quarter, reflecting strong earnings growth [20] - Adjusted EBITDA for the quarter was $74 million, an increase from $67 million in Q3 of last year, with an adjusted EBITDA margin of over 24% compared to 21% last year [24] - Consolidated net sales for the quarter were $305 million, a 3.9% decrease from $317 million in the prior year quarter, primarily due to the deconsolidation of the former Sustainable Energy Solutions segment [22][23] Business Line Data and Key Metrics Changes - Consumer Products net sales grew 5% year-over-year to $140 million, with adjusted EBITDA of $29 million and a margin of 20.5% [29] - Building Products Q3 net sales grew 11% year-over-year to $165 million, with adjusted EBITDA of $53 million and a margin of 32% [32] - The decline in equity earnings from joint ventures, particularly ClarkDietrich, negatively impacted overall performance, contributing $9 million in equity earnings for the quarter [34][36] Market Data and Key Metrics Changes - The company experienced improved demand as it returned to more seasonally normal trends across its value streams, contributing to revenue growth [10] - The Building Products team demonstrated resilience in navigating current market conditions, with a focus on heating, cooling, construction, and water infrastructure [36] Company Strategy and Development Direction - The company continues to leverage the Worthington Business System, focusing on innovation, transformation, and M&A as growth drivers [10][18] - Investments in automation and facility modernization are ongoing, with a commitment to enhancing operational efficiency [15][25] - The company aims to maintain a strong balance sheet and liquidity to pursue growth through acquisitions, targeting market-leading businesses [18][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating cost pressures related to tariffs and supply chain issues, highlighting a proactive approach to managing costs [41][42] - The company remains optimistic about future demand, particularly in the Consumer Products segment, despite ongoing macroeconomic uncertainty [31][132] - Management emphasized the importance of maintaining strong relationships with retail partners to ensure product availability and meet customer needs [131] Other Important Information - The company declared a quarterly dividend of $0.17 per share payable in June 2025 [29] - Free cash flow totaled $144 million on a trailing 12-month basis, representing a 104% free cash flow conversion rate relative to adjusted net earnings [27] Q&A Session Summary Question: How are tariffs being navigated in today's market? - Management indicated that they are well-positioned as a domestic manufacturer and have diversified sourcing capabilities to manage cost increases, with pending price increases announced on many products [41][45] Question: What are the contributing factors for progress in the core product's EBITDA margin? - Management noted a positive mix shift and return to seasonally normal demand levels, with the wholly-owned business margin improving significantly [50][51] Question: Can you provide an update on the M&A pipeline? - Management stated that the M&A pipeline remains healthy, with ongoing assessments of opportunities despite macroeconomic uncertainty [92] Question: What is the outlook for free cash flow conversion? - Management expressed a target to sustain free cash flow conversion rates above 100%, despite ongoing capital expenditures for facility modernization [75] Question: How much did new product initiatives contribute to growth this quarter? - Management clarified that new product initiatives did not significantly contribute to the current quarter's growth but are expected to drive future revenue and margin improvements [82][85]