Summary of Worthington Enterprises (WOR) FY Conference Call Company Overview - Worthington Enterprises separated from its steel business in December 2023, positioning itself as a leader in building and consumer products [2][8] - The company emphasizes a "people first" culture with profit-sharing incentives for all employees [4][6] - Worthington operates in niche markets, aiming for leadership positions rather than competing in larger markets [7][8] Financial Performance - For FY 2025, Worthington reported revenues of $1.2 billion and EBITDA of $263 million, achieving an EBITDA margin of just under 23% [52][53] - The company targets long-term growth of 6% to 8%, with a goal of reaching 24% EBITDA margins over time [53][54] - Year-over-year improvement was noted from FY 2024 to FY 2025, with positive momentum heading into FY 2026 [12] Impact of COVID-19 - The pandemic initially boosted demand for home improvement products as consumers engaged in repair and remodel projects [11] - Demand patterns have since stabilized and normalized post-COVID, allowing the company to streamline operations and capture efficiencies [11][12] Joint Ventures - Worthington has significant joint ventures with Wave and Clark Dietrich, which contribute to its building products segment [13][14] - Wave generated over $100 million in free cash flow last year, while Clark Dietrich contributed around $40 million [16] - Both JVs benefit from growth in sectors such as data centers, healthcare, and education [19] Consumer Business Segments - The consumer business is divided into three segments: tools, outdoor living, and celebrations, with key brands including Coleman and Balloon Time [21][22] - The company is focused on optimizing margins and introducing innovative products to drive growth [22][38] M&A Strategy - Worthington is actively seeking acquisitions in niche markets with leadership positions and sustainable competitive advantages [41][42] - The M&A environment has been slow due to uncertainty, but there is pent-up demand for acquisitions [40][41] - The recent acquisition of Elgin enhances Worthington's exposure to the HVAC market [45][46] Tariffs and Market Conditions - Approximately 80% of Worthington's products are sourced and sold domestically, which mitigates the impact of tariffs [32][33] - The company views tariffs as potentially neutral to positive, as they can create a level playing field against foreign competitors [34] Consumer Sentiment - The current consumer sentiment is cautious, with inflation impacting spending habits [56][57] - The company believes that a healthy consumer is essential for growth, and products may see increased demand as consumers opt for DIY projects over travel [58] Conclusion - Worthington Enterprises is positioned for growth through its focus on niche markets, strong joint ventures, and a commitment to innovation and operational efficiency [8][12][38] - The company remains optimistic about future opportunities despite current market uncertainties and consumer caution [58][59]

Financial Data and Key Metrics Changes - In Q4, the company reported a revenue increase of 14% year-over-year, excluding the deconsolidation of SCS, and an 8% increase when excluding both SCS and revenues at Bradesco [5] - Gross margin improved to 29.3% from 24.8% year-over-year, while adjusted EBITDA margin rose to 26.8% from 19.8% [5][16] - Adjusted earnings from continuing operations were $1.06 per share, up from $0.74 per share in the prior year quarter [15] Business Line Data and Key Metrics Changes - Consumer Products Q4 net sales were $126 million, essentially flat compared to the prior year, with adjusted EBITDA of $21 million and a margin of 16.6%, up from 13.6% [20] - Building Products Q4 net sales grew 25% year-over-year to $192 million, with adjusted EBITDA of $71 million, representing a margin of 37% compared to 33.6% in the prior year [21][22] Market Data and Key Metrics Changes - The company noted that volumes in the consumer segment remain closely tied to point of sale activity, with cautious consumer behavior impacting overall demand [20] - The building products segment experienced a strong seasonal quarter, with volumes up 19% both sequentially and year-over-year [21] Company Strategy and Development Direction - The company continues to leverage its business system focusing on innovation, transformation, and M&A to drive growth [5][8] - The recent acquisition of LG Manufacturing is seen as a strategic fit that complements the existing building products business and is expected to enhance margins and cash flows [9][50] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future growth, citing ongoing tariff and economic uncertainties but emphasizing a strong focus on customer care and operational efficiency [12][44] - The company aims to achieve a gross margin over 30% and maintain SG&A as a percentage of sales at 20% or less in the coming years [29] Other Important Information - The company announced a quarterly dividend increase of 12% to $0.19 per share, reflecting strong earnings and a commitment to returning capital to shareholders [19] - Free cash flow for the full fiscal year totaled $159 million, representing a 103% conversion rate relative to adjusted net earnings [18] Q&A Session Summary Question: Can you break down margin growth? - Management indicated that half of the margin expansion was due to the deconsolidation of SES, with the rest driven by volume growth and product mix improvements [26][27] Question: What were the drivers for Wave's contributions? - Contributions were attributed to a mix of volume demand, project timing, and pricing, with steady performance expected moving forward [30][32] Question: What are the expectations for organic growth? - Management noted that while visibility is limited due to macroeconomic factors, they remain cautiously optimistic about organic growth in both consumer and building products [44][49] Question: How does the company approach pricing amid input cost inflation? - The company is actively working on price risk mitigation strategies and hedging to manage input cost volatility, particularly in steel [59] Question: What are the objectives for the next year? - Management emphasized a focus on long-term growth, investing in culture, automation, and strategic M&A while navigating economic uncertainties [99]

Financial Data and Key Metrics Changes - In Q4 2025, the company reported a revenue increase of 14% year-over-year, excluding the deconsolidation of SCS, and an 8% increase when excluding both SCS and revenues at Bradesco [6][15] - Gross margin improved to 29.3% from 24.8% year-over-year, while adjusted EBITDA margin rose to 26.8% from 19.8% [6][17] - Adjusted earnings from continuing operations were $1.06 per share, up from $0.74 per share in the prior year quarter [16] Business Line Data and Key Metrics Changes - Consumer Products segment reported Q4 net sales of $126 million, essentially flat compared to the prior year, with adjusted EBITDA of $21 million and a margin of 16.6% [21] - Building Products segment saw Q4 net sales grow 25% year-over-year to $192 million, with adjusted EBITDA of $71 million and a margin of 37% [22][23] Market Data and Key Metrics Changes - The company noted that volumes in the Building Products segment were up 19% both sequentially and year-over-year, indicating strong seasonal demand [22] - The consumer environment remains cautious, but the company believes its market-leading brands position it well for long-term growth as conditions normalize [21] Company Strategy and Development Direction - The company continues to leverage its business system focusing on innovation, transformation, and strategic M&A to drive growth [6][10] - The recent acquisition of LG Manufacturing is seen as a strategic fit that complements the existing building products business and is expected to enhance margins and cash flows [10][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for long-term growth despite current tariff and economic uncertainties [13][50] - The focus remains on optimizing operations and investing in future growth opportunities while managing through economic challenges [13][99] Other Important Information - The company announced a quarterly dividend increase of 12% to $0.19 per share, reflecting strong earnings and a commitment to returning capital to shareholders [20][66] - Free cash flow for the full fiscal year totaled $159 million, representing a 103% conversion rate relative to adjusted net earnings [19] Q&A Session Summary Question: Margin growth breakdown - Management indicated that half of the margin expansion was due to the deconsolidation of SES, with the rest driven by volume growth and product mix improvements [28][30] Question: Wave contributions - Contributions from Wave were attributed to a mix of volume demand and pricing, with steady performance expected moving forward [32][34] Question: Regasco revenue and EBITDA contributions - Regasco contributed approximately $16.5 million in revenue and about $2 million in EBITDA during the quarter [43] Question: Steel input costs and pricing - Management noted that steel prices have fluctuated, but efforts are in place to mitigate price risks and manage costs effectively [61] Question: Elgin acquisition details - The acquisition of Elgin is expected to create synergies in operational efficiency and customer overlap, with a focus on improving margins [51][82] Question: Tariff impacts on building products - Management acknowledged the challenges posed by tariffs but emphasized the company's strong domestic manufacturing position and ability to respond to market demands [88][92]

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]