Worthington Industries, Inc. Q4 FY2025 earnings call

• People and Culture: Named Top Workplace in central Ohio for the 13th consecutive year. Partnered with the U.S. Army to integrate veterans into the workforce. - Business Performance: Q4 revenue was up 14% from the prior year (excluding deconsolidation of SES) and 8% (excluding SES and Ragasco). Gross margin was 29.3% versus 24.8% prior year, and adjusted EBITDA margin was 26.8% versus 19.8% prior year. - Innovation: Success of Balloon Time Mini, partnership with CVS for Balloon Time products; HALO Griddles recognized by publications; PowerCore cylinder part of 3M innovation. - Transformation: Productivity improvements via automation; water business embracing 80/20 thinking. - M&A: Acquired Elgen Manufacturing, a leader in HVAC components and structural framing for commercial buildings, complementing the Building Products business.

Building Products: In Q4, net sales grew 25% year-over-year to $192 million, driven by higher overall volumes and contributions from the Ragasco acquisition. Adjusted EBITDA for the quarter was $71 million, representing 37% of sales. Consumer Products: Q4 net sales were $126 million, essentially flat compared to the prior year quarter, with a slight increase in volume. Adjusted EBITDA was $21 million with a 16.6% margin. Ragasco contributed approximately $16.5 million in revenue and $2 million in EBITDA to the Building Products business in the quarter.

• Facility modernization projects: Majority of remaining ~$40 million to be spent in fiscal '26, with completion anticipated in early fiscal '27. - Dividend: Board declared a 12% increase in quarterly dividend to $0.19 per share. - Long-term outlook: Confident in long-term growth leveraging culture, business system, and balance sheet despite macro uncertainty, focusing on executing strategy.

• Tariff and Economic Uncertainty: Impacting business operations and growth projections. - M&A Pipeline: Softness in the M&A market affecting potential deals. - ClarkDietrich Exposure: Exposed to commercial construction challenges and higher interest rates, with near-term performance seen as an aberration.

Q: Break down margin growth, what is onetime and company-specific initiatives?

A: In Q4, half the 450-basis-point margin expansion was from deconsolidation of SES, and the balance from volume growth and gross mix in Building Products. Company-specific initiatives include optimizing businesses and aiming for gross margin over 30% and SG&A below 20% of sales.

Q: Drivers for WAVE and ClarkDietrich performance?

A: WAVE has a mix of volume, market sectors like health care, education; ClarkDietrich is more exposed to commercial construction and higher interest rates, with Q4 performance seen as an aberration near term.

Q: Ragasco contribution and organic growth outlook?

A: Ragasco contributed ~$16.5 million in revenue and ~$2 million in EBITDA to Building Products in the quarter. Cautious on organic growth due to macro uncertainty, but focused on executing strategy for potential growth.

Q: Steel input costs and modernization benefits?

A: Hedging steel costs to mitigate volatility. Facility modernization in Columbus and Wisconsin; benefits from Columbus start to show, Wisconsin benefits to manifest later in fiscal '27.

Q: M&A and capital allocation?

A: Balanced approach, M&A pipeline active, with acquisition of Elgen as a strategic fit. Dividend increase reflects balanced approach between M&A and shareholder return.

Q: Tariffs and Building Products market share?

A: Domestic manufacturing helps, but tariff impact hard to quantify; growth in Building Products related to niche market leadership and tight supply chain.