Worthington Industries, Inc. Q4 FY2026 earnings call

### Full Year 2026 Core Performance - Delivered 20% total full year sales growth, with 9% organic sales growth, and 12% adjusted EBITDA growth to $296 million - Generated $170 million in full year free cash flow, representing a 102% conversion rate relative to adjusted net earnings - Reduced SG&A as a percentage of sales by 200 basis points full year, and 150 basis points in Q4 - Completed acquisitions of Elgin and LSI, with integration proceeding on schedule; both acquisitions strengthen the company's building envelope capabilities and expand customer solution offerings - Maintains a conservative leverage position with net debt-to-trailing adjusted EBITDA of less than 1x, and has $500 million in undrawn revolving credit for growth flexibility

### Innovation and Organic Growth Initiatives - ASME water tanks for liquid-cooled data centers continue to build momentum, with $13 million in shipments during fiscal 2026, and at least that amount expected to ship in Q1 2027; the company is investing in additional capacity to support this emerging multi-year growth platform - The new Balloon Time Mini product secured placement in a majority of Walmart stores, driving ongoing momentum in the celebrations business, demonstrating successful innovation in mature consumer markets - New product pipeline for fiscal 2027 is robust, with launches scheduled for later in the year

### Operational Transformation - Leverages automation and AI-enabled technologies to drive productivity and operating leverage across the business - Building on successful efficiency initiatives in the water business, the company launched a similar 8020 improvement program for the camping gas and torch business - Facility modernization projects are ongoing, with approximately $16 million in remaining spend expected to be completed by mid-fiscal 2027, after which capital expenditures will return to normalized levels

### Workplace and Culture Recognition - Named a top workplace in Central Ohio for the 14th consecutive year, and recognized as one of America's most charitable and most patriotic companies, reflecting the company's commitment to its people and communities

1. Building Products: Q4 fiscal 2026 net sales grew 28% year-over-year to $245 million, driven by $44 million in acquisition contributions; organic growth was 5% after excluding acquisitions. Q4 adjusted EBITDA was $69 million (27.9% adjusted EBITDA margin), down slightly from $71 million in the prior year quarter. Full fiscal 2026 adjusted EBITDA increased 13% to $240 million, despite a $19 million decline in equity earnings from Clark Dietrich. Wholly owned Building Products businesses delivered 62% adjusted EBITDA growth to $100 million for the full year, with adjusted EBITDA margin expanding 220 basis points to 11.7%. This segment contributed 66% of total Q4 net sales.

2. Consumer Products: Q4 fiscal 2026 net sales were essentially flat year-over-year at $126 million, as higher average selling prices offset lower volumes. Q4 adjusted EBITDA grew to $24 million from $21 million in the prior year quarter, with adjusted EBITDA margin expanding to 19.2% from 16.6%. This improvement came from gross margin expansion and lower SG&A expenses. Full year 2026 results included 4% sales growth and 10% EBITDA growth for the segment. This segment contributed 34% of total Q4 net sales.

• The company expects the A2L refrigerant transition-related demand headwinds (which created difficult year-over-year comparisons in Q4) will persist for the next couple of quarters, with the magnitude of these headwinds moderating by Q2 fiscal 2027 • The long-term adjusted EBITDA margin target for wholly owned Building Products remains 12-13%, which management expects to achieve and sustain over the coming years • Management expects Clark Dietrich's current low equity earnings level is a trough, with upside potential as end market conditions improve, while the business remains well-positioned with strong operational efficiency • The data center liquid cooling tank opportunity is expected to grow significantly from current levels over multiple years, as the industry transitions from air cooling to liquid cooling for next-generation infrastructure

• The company faces ongoing inflationary input cost pressures for commodities including steel, aluminum and brass, as well as freight and diesel, across its product portfolio • Demand for Clark Dietrich's products is currently impacted by challenging end market conditions, leading to lower near-term equity earnings contributions • The steel market is currently tight with extended lead times and rising prices, creating near-term operational challenges, though the company views this as a potential competitive opportunity to gain share • Macroeconomic uncertainty in the U.S. economy, tariffs, global conflicts, and ongoing supply chain disruptions create near-term demand and cost volatility • Data center revenue opportunity has a multi-quarter lag from project announcement to revenue realization, creating uncertainty around near-term growth trajectories

Q: Building products organic growth slowed to 5% in Q4 after mid-teens growth in the prior three quarters, driven by tough A2L refrigerant transition comps. Will these tough comps continue through the next year, and what is the impact of this dynamic? A: The Q4 headwind was a comparison issue after very strong A2L inventory-building demand in the prior year quarter, with an estimated $5 million EBITDA impact. It is not a sign of underlying business weakness: A2L adoption remains strong, and growing installed base will support future service and repair demand. These comparison headwinds will continue for the next couple of quarters, with magnitude moderating by Q2 fiscal 2027. All other value streams in building products delivered year-over-year growth in the quarter.

Q: Wholly owned building products hit ~11.7% adjusted EBITDA margin for the full year, just below the long-term 12-13% target. Is this target still achievable in the next few quarters/years? A: We are very pleased with the 220 basis point margin expansion delivered this year, driven in part by incremental strategic acquisitions that improved the segment's earnings profile. We still stand by our 12-13% long-term margin target, and we expect to reach and sustain this target over the coming years, with potential for further upside after that.

Q: Can you share more color on the data center market opportunity, which business segments have the most upside, and what is the size of this opportunity? A: Nearly all of our business lines participate in data center construction, as data centers are commercial buildings, but the most distinct high-growth opportunity is our ASME water tanks for liquid cooling systems. We shipped $13 million of these tanks in fiscal 2026 and expect at least that in Q1 2027. There is a 2-year lag between data center project announcement and revenue realization, so the opportunity is a multi-year growth market as the industry transitions to liquid cooling. We partner with other manufacturers to limit our capital exposure while scaling, and we are now moving from just fulfilling orders to participating in project design, positioning us as a leading long-term solution provider.

Q: The stock price has declined over recent quarters. What do you think the market is missing about Worthington's value? A: As a relatively new independent public company, Worthington is not the most straightforward business to model. We delivered strong full year 2026 results with significant margin expansion, free cash flow, and diversification of our earnings base, and we are well-positioned to benefit when end markets recover. We believe the underlying value and earnings power of the business is not fully reflected in the current stock price.