Worthington Industries, Inc. Q2 FY2026 earnings call

• The company had strong Q2 performance with 19% revenue growth, adjusted EBITDA grew by 8%, and adjusted EBITDA margin improved to almost 23% from 20% a year ago. - Strategy to optimize business by growing organically and through strategic acquisitions while increasing margins. - Announced acquisition of LSI, a market leader in metal roofing components, which is expected to enhance position in engineered building systems. - Innovation in areas like large ASME water tanks for data centers, refurbishment of large-format propane tanks, and Balloon Time products in Costco. - Leveraging Worthington Business System with drivers: innovation, transformation, and M&A. - Completed divestiture of loss-making assets in SES JV, positioning the business better moving forward.

Consumer Products: Q2 net sales were $120 million, up 3% from the prior year quarter. Adjusted EBITDA was $15 million, flat with a 12.7% margin compared to 13.3% in Q2 last year. Building Products: Q2 net sales grew 32% year-over-year to $208 million, driven by higher volumes and the Elgen acquisition. Excluding Elgen, net sales were up 16% year-over-year. Adjusted EBITDA for the quarter was $53 million compared to $47 million in the prior year quarter with an adjusted EBITDA margin of 25.5%.

• Anticipates the acquisition of LSI to close in January 2026, which will be funded primarily with cash on hand and modest revolver borrowings, and is expected to be accretive to adjusted EBITDA margins, adjusted EPS, and free cash flows. - Board declared a quarterly dividend of $0.19 per share payable in March 2026. - Expect capital expenditures to return to normalized levels post-facility modernization projects, improving free cash flow conversion.

• Mixed market conditions including cautious consumers, muted construction activity, and sluggish housing market. - Intense competition in certain markets impacting margins, such as ClarkDietrich in new construction. - Tariff uncertainties and their impact on supply chains and pricing, though the company is working on mitigants like supplier cost offset, internal cost reduction, and pricing actions.

Q: Circle back on the acquisition of LSI and growth strategy.

A: M&A leverages Worthington Business System's complementary pillars. Transformation playbook applied to acquired companies, and innovation is a core part.

Q: Color on data center centric opportunities.

A: WAVE, ClarkDietrich, Elgen, and LSI all have exposure to data centers, with it being a faster-growing area within those businesses but less than 10% of sales.

Q: Margin profile of LSI.

A: LSI is a market leader in a resilient retrofit business with strong margins, EBITDA of $22 million and revenue of $51 million in the last 12 months.

Q: Building Products growth, pricing vs volume.

A: Building Products had strong growth due to volume, gaining share through innovation and manufacturing.

Q: ClarkDietrich contribution.

A: ClarkDietrich faced margin compression in a tough new construction environment, but mix shifted to larger projects and they expect no worse than flat sequential performance.

Q: Capital allocation post LSI.

A: Will continue to be balanced with bias toward growth, considering strategic M&A and returns of capital to shareholders.

Q: Consumer business momentum.

A: Consumer Products have innovation driving growth, with placements in Costco, Sherwin-Williams, etc., and resilient demand.

Q: SG&A and gross margin opportunities.

A: SG&A down 320 basis points, focusing on cost controls and technology, with goals to improve gross margin to 30% and SG&A to 20%.

Q: WAVE business outlook.

A: WAVE had strong performance, driven by repair and remodel activity in sectors like education, healthcare, etc., and well-positioned for future growth.

Q: Construction mix and seasonality.

A: Construction has mixed trends with new construction challenging but repair/remodel healthy, and seasonality not overly pronounced for ClarkDietrich.

Q: Gross margin ex Elgen and headcount impact.

A: Elgen impacted gross margin by 120 basis points, with headcount additions expected to show results in Q3 and beyond.

Q: Tariff impact and competitive pricing.

A: Tariffs are being mitigated through supplier offset, internal cost reduction, and pricing, with focus on adding value and gaining market share.