Q4 2025 Worthington Steel Inc Earnings Call

Operator: Good morning and welcome to Worthington Steel's fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.

Good morning, and welcome to Worthington Steel fourth quarter, 'twenty 25 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time simply press Star then the number one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star and the number one on your telephone keypad.

Melissa Dykstra: I will now turn the call over to Melissa Dykstra, Vice President of Corporate Communications and Investor Relations. Please go ahead. Thank you, Operator.

I will now turn the call over to Melissa Dykstra, Vice President of corporate Communications and Investor Relations. Please go ahead.

Melissa Dykstra: Thank you operator, good morning, and welcome to Worthington steel fourth quarter fiscal year, 'twenty 25 earnings call on our call today, we have Jeff Gilmore Worthington steel, President and Chief Executive Officer, and Tim Adams, Vice President and Chief Financial Officer, before we begin I'd like to remind everyone that certain statements may.

Geoffrey Gilmore: Good morning and welcome to Worthington Steel's fourth quarter fiscal year 2025 earnings call.

Melissa Dykstra: On our call today, we have Geoff Gilmore, Worthington Steel's President and Chief Executive Officer, and Tim Adams, Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ from those suggested.

Melissa Dykstra: Today are forward looking within the meaning of the 1995 private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ from those suggested we issued our earnings release yesterday. After the market close please refer to it for more detail on the factors that could cause actual result.

Melissa Dykstra: We issued our earnings release yesterday after the market closed. Please refer to it for more detail on the factors that could cause actual results to differ materially.

Melissa Dykstra: To differ materially.

Melissa Dykstra: Unless noted as reported, today's discussion will reference non-GAAP financial measures which adjust for certain items included in our GAAP results and which are presented on a standalone basis. You can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliations within our earnings release.

Melissa Dykstra: Unless noted as reported today's discussion, we will reference non-GAAP financial measures, which adjust for certain items included in our GAAP results and which are presented on a standalone basis, you can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliations within our earnings release today's call is being recorded.

Melissa Dykstra: Today's call is being recorded and a replay will be available later today on WorthingtonSteel.com.

Speaker Change: And a replay will be available later, Sam Worthington steel Dot com now I will turn it over to Jeff Gilmore. Good morning. Thank you for joining US first I want to thank our incredible Worthington steel team once again demonstrated resilience flexibility and an unwavering commitment to safety and serving our customer.

Geoffrey Gilmore: Now I'll turn it over to Geoff Gilmore. Good morning. Thank you for joining us. First, I want to thank our incredible Worthington Steel team. Once again, they demonstrated resilience, flexibility, and an unwavering commitment to safety and serving our customers. In the fourth quarter, we generated adjusted EBITDA of $87 million compared with $86.5 million in the prior year quarter. Earnings per share were $1.10 compared to $1.06 in the same period last year. While the macroeconomic environment remained mixed, Worthington Steel employees stayed focused on execution and we made important strategic progress.

Speaker Change: In the fourth quarter, we generated adjusted EBITDA of $87 million compared with $86 $5 billion in the prior year quarter.

Speaker Change: Earnings per share were $1 10.

Speaker Change: Compared to $1 <unk> in the same period last year.

Speaker Change: While the macroeconomic environment remained mix Worthington steel employees stayed focused on execution and we made important strategic progress.

Geoffrey Gilmore: Let me begin with a look at what we saw across our end market. and Automotive are volume-strengthened in the fourth quarter. We continue to gain market share in the overall automotive market, and I commend our commercial teams and everyone involved for their commitment to fulfilling the needs of our automotive customers. The construction markets we serve, which include fencing, culvert, and metal buildings, were down slightly year-over-year. We saw an uptick in heavy truck because we have gained some share in that market. The agricultural market, however, continues to face pressure. Energy demand and the need for transformer cores continue to grow as the world relies more and more on artificial intelligence and electrified vehicles.

Speaker Change: Let me begin with a look at what we saw across our end markets and automotive our volume strength into the fourth quarter. We continued to gain market share in the overall automotive market and I commend our commercial teams and everyone involved for their commitment to fulfilling the needs of our automotive customers.

Speaker Change: The construction markets, we serve which includes benzene Colbert and metal buildings were down slightly year over year, we saw an uptick in heavy truck because we have gained some share in that market.

Speaker Change: The agricultural market, however continues to face pressure.

Speaker Change: Energy demand and the need for transformer cores continued to grow as the world relies more and more on artificial intelligence and electrified vehicles.

Geoffrey Gilmore: Transformer core growth is also fueled by the need to replace aging electrical infrastructure as more than half of the transformers in use today reach the end of their useful life.

Speaker Change: Transformer core growth is also fueled by the need to replace aging electrical infrastructure as more than half of the transformers in use today reached the end of their useful life.

Geoffrey Gilmore: Now let's talk about the progress we're making on our long-term strategy. We continue to execute against a roadmap that's built on three pillars. focus investments in the rapidly growing electrical steel market, margin accretive growth using a strong commercial focus combined with strategic cap backs and acquisitions, and base business improvements to improve margins, reduce working capital, and to add incremental capacity through our transformation.

Speaker Change: Now, let's talk about the progress, we're making on our long term strategy.

Speaker Change: We continued to execute against our roadmap that's built on three pillars focus investments in the rapidly growing electrical steel market.

Speaker Change: Margin accretive growth using a strong commercial focus combined with strategic Capex and acquisitions and base business improvements to improve margins reduce working capital and to add incremental capacity through our transformation.

Geoffrey Gilmore: starting with our capital investment. We continue to progress on our electrical steel expansions in Mexico and Canada. Testing is underway on the five presses in Mexico, and we are preparing for initial production later this calendar year. Electrified vehicle adoption continues to make gains globally, with current estimates projecting that hybrids and BEVs will make up more than two-thirds of global market share by 2030. Our Canada to Transformer core expansion project remains on track to begin production in early calendar year 2026. The transformer market in the U.S. is expected to double over the next 10 years to meet the growing demand for electrification.

Speaker Change: Starting with our capital investments, we continue to progress on our electrical steel expansions in Mexico and Canada.

Speaker Change: Testing is underway on the five presses in Mexico, and we are preparing for initial production later this calendar year.

Speaker Change: Electrified vehicle adoption continues to make gains globally with current estimates projecting that hybrids and evs will make up more than two thirds of global market share by 2030.

Speaker Change: Our candidate transformer core expansion project remains on track to begin production in early calendar year 2026.

Speaker Change: Transformer market in the U S.

Speaker Change: It is expected to double over the next 10 years to meet the growing demand for electrification.

Geoffrey Gilmore: On the acquisition front, I'm pleased to share that we closed on our acquisition of a 52% ownership stake in Sedum on June 3rd. Sedum is a European electrical steel lamination manufacturer and electric motor die casting. This move marks a significant step in enhancing our position in the European electric motor lamination market and strengthening our ability to support global automotives and industrial motor customers. SEDM brings strong technical capabilities and expertise in tooling and automation systems for electric motor laminations that will benefit our electrical steel operations globally. Beyond those capabilities, what truly excites us is the cultural fit.

Speaker Change: On the acquisition front I am pleased to share that we closed on our acquisition of a 52% ownership stake in Sweden on June 3rd Sedum, It's a European electrical steel elimination manufacturer and electric motor die casting expert.

Speaker Change: This move marks a significant step in enhancing our position in the European electric motor lamination market and strengthening our ability to support global automotive and industrial motor customers.

Speaker Change: <unk> brings strong technical capabilities and expertise in tooling and automation systems for electric motor Laminations that will benefit our electrical steel operations globally.

Geoffrey Gilmore: Their people-first values mirror our own Worthington philosophy. We are thrilled to welcome the SEEDM team into the Worthington family.

Geoffrey Gilmore: From a commercial perspective, we continue pursuing growth opportunities in select markets, and our team continues to gain market share, fill open capacity, and exceed customer expectations. Our team deserves high praise for their ability to collaborate with our suppliers and customers this quarter as they manage through potential supply chain disruptions due to the idling of several mill locations. They worked hard to ensure an uninterrupted supply for our customers.

Speaker Change: Our team deserves high praise for their ability to collaborate with our suppliers and customers this quarter as they manage through potential supply chain disruptions due to the idling of several mill locations. They worked hard to ensure an uninterrupted supply for our customers.

Geoffrey Gilmore: This quarter, Worthington Steel was named a 2024 Supplier of the Year by General Motors, marking our fourth time in the past five years achieving this distinction. and we were recognized as a partner level supplier in the John Deere Achieving Excellence Program for the 13th consecutive year. Deere and Company's highest supplier rate. These awards validate our commitment to quality, innovation, and service for our customers.

Speaker Change: This quarter Worthington steel was named a 2020 for supplier of the year by General Motors, marking our fourth time in the past five years, achieving this distinction.

Speaker Change: And we were recognized as a partner level supplier in the John Deere, achieving excellence program for the 13th consecutive year DRAM companies highest supplier ratings.

Speaker Change: These awards validate our commitment to quality innovation and service for our customers.

Geoffrey Gilmore: Now looking at continuous improvement to our base business, which we call transformation. Looking for ways to get better is part of our DNA. Across the company, teams are reducing change over time, optimizing working capital, improving safety, and streamlining operations.

Speaker Change: Looking for ways to get better as part of our DNA across the company teams are reducing changeover times, optimizing working capital and improving safety and streamlining operations.

Geoffrey Gilmore: We have added another tool to our transformation tool belt, artificial intelligence. We kicked off our AI journey in earnest this quarter, and we see AI as a force multiplier that will elevate our work. AI will become an expectation at Worthington Steel, and we believe it will help us be more productive, improve quality, and unlock new value for our customers. Together, these actions strengthen our competitive advantage and give us a clear path to margin expansion, high returns on capital, and long-term value creation. I'm pleased with how well our team is executing on our strategy, despite some headwinds.

Speaker Change: <unk> added another tool to our transformation tool belt artificial intelligence.

Speaker Change: We kicked off our AI journey in earnest this quarter and we see AI as a force multiplier that will elevate our work.

Speaker Change: <unk> will become an expectation at Worthington steel and we believe that will help us be more productive improve quality and unlock new value for our customers.

Speaker Change: Together these actions strengthen our competitive advantage and gives us a clear path to margin expansion high returns on capital and long term value creation I'm.

Speaker Change: Im pleased with how well our team is executing on our strategy. Despite some headwinds we are focused on what we can control what we can improve and what we can do to serve our customers all with an eye towards safety.

Geoffrey Gilmore: We are focused on what we can control, what we can improve, and what we can do to serve our customers, all with an eye toward safety.

Geoffrey Gilmore: On the governance front, we announced yesterday the addition of Mark Davis to our Board of Directors. Mark brings an extensive background in finance, mergers and acquisitions, and corporate governance. He will be a tremendous asset to Worthington Steel as we continue to grow.

Speaker Change: On the governance front, we announced yesterday. The addition of Mark Davis to our board of directors.

Speaker Change: Mark brings an extensive background in finance mergers and acquisitions and corporate governance, he will be a tremendous asset to Worthington steel as we continued to grow.

Geoffrey Gilmore: As I conclude my remarks, I want to reiterate the cautious optimism we mentioned last quarter. We still sense a bit of uncertainty around policy and the overall macroeconomy, but our team continues to find ways to win. We are improving our processes and gaining market share. We are embracing AI to unlock even more potential in our business. And I firmly believe we have the right strategy, strong customer relationships, and most importantly, the right people.

Speaker Change: As I conclude my remarks, I want to reiterate that cautious optimism, we mentioned last quarter, we still sense a bit of uncertainty around policy and the overall macro economy, but our team continues to find ways to win we are improving our processes and gaining market share we are embracing.

Speaker Change: AI to unlock even more potential in our business and I firmly believe we have the right strategy strong customer relationships and most importantly, the right people.

Geoffrey Gilmore: Although we have only been a standalone company for 18 months, we are celebrating 70 years of heritage this year. And for me, that means celebrating the people who fuel our momentum. Our employees are the true strength behind Worthington Steel. Together, we are building the most innovative, customer focused and efficient steel processor in North America and beyond. One that's purpose built for the next 70 years.

Speaker Change: Although we have only been a standalone company for 18 months. We are celebrating 70 years of heritage. This year and for me that means celebrating the people who fuel our momentum our employees are the true strength behind Worthington steel together, we are building the most innovative customer focused.

Timothy Adams: Now I'll turn it over to Tim Adams to walk through the finances. Thank you, Geoff, and good morning, everyone. For the fourth quarter, we are reporting earnings of $55.7 million or $1.10 per share, as compared with earnings of $53.2 million or $1.06 per share in the prior year quarter.

Speaker Change: Now I'll turn it over to Tim Adams to walk through the financials. Thank you, Jeff and good morning, everyone for the fourth quarter, we are reporting earnings of $55 $7 million or $1 10 per share as compared with earnings of $53 $2 million or $1 <unk> per share in the prior year quarter there were.

Timothy Adams: There were several unique items that impacted our quarterly results. First, the current quarter results include $1.7 million or $0.01 per share of pre-tax restructuring charges related to two discrete items. The first was $800,000 of severance expense associated with our previously announced closure of Worthington Samuel Coil Processing's toll pickling facility in Cleveland. Production at the Cleveland Pickling Facility effectively ended in May. The second discreet item was a restructuring expense of $900,000 associated with the previously announced early retirement program at our Taylor Welded blank joint. Additionally, in the current quarter, we recognized a $4 million gain in miscellaneous income associated with a currency hedge on the CEDM purchase.

Speaker Change: <unk> closure of Worthington, Samuel coil processing toll pickling facility in Cleveland.

Speaker Change: Production at the Cleveland Pickling facility effectively ended in May.

Speaker Change: The second discrete item was a restructuring expense of $900000 associated with the previously announced early retirement program at our tailor welded blank joint venture. Additionally, in the current quarter, we recognized a $4 million gain and miscellaneous income associated with a currency hedge on the CDM purchase.

Speaker Change: Price.

Timothy Adams: Finally, the prior year quarter results included recognition of the final unfavorable tax court ruling related to a Temple pre-acquisition matter for which we were indemnified by the former owner's The net impact to earnings is zero. However, we recognize $2.8 million of miscellaneous income related to the indemnity receivable and an additional $2.8 million of taxes. Excluding these unique items, we generated earnings of $1.05 per share in the current quarter compared with $1.06 per share in the prior year. In the fourth quarter, we had estimated pre-tax inventory holding gains of $20.8 million, or $0.31 per share, compared to estimated pre-tax inventory holding losses of $3.4 million, or $0.05 per share, in the prior year quarter.

Speaker Change: Finally, the prior year quarter results included recognition of the final unfavorable tax court ruling related to a temple pre acquisition matter for which we are indemnified by the former owners of temple.

Speaker Change: The net impact to earnings is zero. However, we recognized $2 $8 million of miscellaneous income related to the indemnity receivable and an additional $2 $8 million of tax expense. Excluding these unique items, we generated earnings of $1 <unk> per share in the current quarter compared with $1 <unk>.

Speaker Change: <unk> per share in the prior year quarter.

Speaker Change: In the fourth quarter, we had estimated pretax inventory holding gains of $28 million or <unk> 31 per share compared to estimated pre tax inventory holding losses of $3 4 million or <unk> <unk> per share in the prior year quarter, a favorable pre tax swing of $24 2 million or <unk> 36.

Timothy Adams: A favorable pre-tax swing of $24.2 million, or $0.36 per share. In the fourth quarter, we reported adjusted EBIT of $70.1 million, which was down $300,000 from the prior year quarter adjusted EBIT of $70.4 million. This decrease in adjusted EBIT is primarily due to lower gross margin and lower equity earnings at Servia Cero, partially offset by a year-over-year decrease in SG&A. Gross margin was $4 million lower than the prior year quarter, primarily due to unfavorable tolling margins offset by increased direct sales. Total processing margins were down $8.1 million, impacted by lower toll volumes and an unfavorable toll process.

Speaker Change: <unk> per share in.

Speaker Change: In the fourth quarter, we reported adjusted EBIT of $70 1 million, which was down $300000 from the prior year quarter, adjusted EBIT of $74 million.

Speaker Change: This decrease in adjusted EBIT is primarily due to lower gross margin and lower equity earnings at Serbia zero, partially offset by a year over year decrease in SG&A expense grew.

Timothy Adams: Direct Volume was flat year-over-year. While direct spreads were up $3.4 million, primarily due to the impact of year-over-year pre-tax inventory hoarding. Direct spreads, excluding the impact of estimated holding gains, were down primarily due to a shift in direct product mix to lower value-added products and market compression in the spread between hot-rolled products and higher value-added For more information visit www.FEMA.gov SG&A decreased $4.8 million over the prior year, fourth quarter, primarily due to a $3.3 million decrease in compensation and benefit. as well as Lower Bad Denny. In the prior year, we recognized $1.7 million of bad debt expense due to an isolated matter as compared with $100,000 of income in the current Equity Earnings from Serviacero decreased due to lower direct volumes and spreads as well as the impact of exchange rates.

Speaker Change: Direct volume was flat year over year, while direct spreads were up $3 $4 million, primarily due to the impact of year over year pretax inventory holding gains direct spreads excluding the impact of estimated holding gains were down primarily due to a shift in direct product mix to lower value added product.

Speaker Change: And market compression in the spread between hot rolled products and higher value added products SG&A decreased $4 $8 million over the prior year fourth quarter, primarily due to a $3 $3 million decrease in compensation and benefit costs as well as lower bad debt expense in the prior year.

Timothy Adams: Next, I will provide some perspective on our market and our shipment. The market pricing for Hot Wheel Coil began the calendar year at just under $700. Once steel tariffs of 25% were implemented, the price of hot roll jumped to $950 per ton in March and April, but dropped back to approximately $850 per ton. With the recent announcement of 50% tariffs on imported steel, we may see additional upward pressure on steel. Given that many of our contracts use lagging index based pricing mechanisms, we expect to generate inventory holding gains in the first quarter of fiscal 2020.

Speaker Change: One steel tariffs of 25% were implemented the price of hot rolled jumped to $950 per ton in March and April but dropped back to approximately $850 per ton in June with.

Speaker Change: With the recent announcement of 50% tariffs on imported steel we may see additional upward pressure on steel prices.

Speaker Change: Given that many of our contracts use lagging index based pricing mechanisms, we expect to generate inventory holding gains in the first quarter of fiscal 2026, we estimate those gains could be approximately $5 million to $10 million as compared with the $28 million of estimated holding gains in the fourth quarter of <unk>.

Timothy Adams: We estimate those gains could be approximately $5 to $10 million dollars as compared with the $20.8 million dollars of estimated holding gains in the fourth quarter of 2020. Net sales in the quarter were $833 million, down $78 million, or 9% from the prior year quarter, primarily due to lower direct selling prices and, to a lesser extent, lower toll volumes and an unfavorable toll process. We shipped approximately 982,000 tons during the quarter, which was down 5% compared with the previous quarter. Direct sales volume made up 60% of our mix in the current year quarter as compared with 58% in the prior year.

Speaker Change: 25.

Speaker Change: Net sales in the quarter were $833 million down $78 million or 9% from the prior year quarter, primarily due to lower direct selling prices and to a lesser extent lower toll volumes and an unfavorable toll processing mix, we shipped approximately 982000 tons.

Speaker Change: During the quarter, which was down 5% compared with the prior year quarter.

Speaker Change: <unk> sales volume made up 60% of our mix in the current year quarter as compared with 58% in the prior year quarter.

Timothy Adams: Direct sale volume was flat compared with the prior year quarter, and we experienced pluses and minuses across various markets as customers continued to navigate uncertainty during the quarter. Automotive was a bright spot during the current quarter. Our shipments to the automotive market were up 5% compared to the prior year quarter. As we noted in prior quarters, we have one share in the automotive market. The new programs have begun to ship and we expect to show incremental volume from the new programs over the next few quarters. This additional automotive volume more than offset the continued year-over-year challenges faced by one of our Detroit 3 OEM companies.

Speaker Change: Direct sale volume was flat compared with the prior year quarter, and we experienced pluses and minuses across various markets as customers continue to navigate uncertainty during the quarter.

Speaker Change: Automotive was a bright spot during the current quarter, our shipments to the automotive market were up 5% compared to the prior year quarter. As we noted in prior quarters. We have won share in the automotive market. The new programs have begun to ship and we expect to show incremental volume from the new programs over the next few quarters.

Speaker Change: This additional automotive volume more than offset the continued year over year challenges faced by one of our Detroit three OEM customers. We continue to be optimistic the OEM is making progress towards optimizing their commercial strategy, leading to a more normal build schedule later in calendar 2025.

Timothy Adams: continue to be optimistic the OEM is making progress towards optimizing their commercial strategy leading to a more normal build schedule later in calendar 2025. Similar to last quarter, our year-over-year shipments to the remaining D3 grew despite a small drop in OEM unit production. Our teams continue to work collaboratively with our automotive customers to deliver mutually beneficial solutions. We look forward to expanding our long-term relationships with our automotive customers. We also saw volume increases in the heavy truck market due to market share gains, despite an apparent slowdown in the truck and trailer. These results reflect our successful execution in targeted markets, particularly where we pursue a strategy to support key customers.

Speaker Change: Similar to last quarter, our year over year shipments to the remaining <unk> grew despite a small drop in OEM unit production.

Speaker Change: Our teams continue to work collaboratively with our automotive customers to deliver mutually beneficial solutions, we look forward to expanding our long term relationships with our automotive customers.

Speaker Change: We also saw volume increases in the heavy truck market due to market share gains despite an apparent slowdown in the truck and trailer market. These results reflect our successful execution in targeted markets, particularly where we pursued a strategy to support key customers.

Timothy Adams: Volume increases in the automotive and heavy truck markets were offset by reductions in the construction and ag markets. Construction volume was down 5% year over year, but consistent with historic fourth quarter levels. Our ag volumes were down 40% compared with the prior year quarter, primarily due to the expected softness in the agricultural equipment market, as well as increased competition in the grain bin sector, resulting in spread compression. While tariffs have introduced additional uncertainty and competition has intensified in the ag market, we responded with strategic pricing discipline and remain well-positioned to adapt quickly as conditions change.

Speaker Change: Volume increases in the automotive and heavy truck markets were offset by reductions in the construction and AG markets construction volume was down 5% year over year, but consistent with historic fourth quarter levels.

Speaker Change: Our AG volumes were down 40% compared with the prior year quarter, primarily due to the expected softness in the agricultural equipment market as well as increased competition in the green been sector, resulting in spread compression while tariffs have introduced additional uncertainty and competition has intensified in the AG market. We responded with.

Timothy Adams: Toll processing tons were down 11% year-over-year for several reasons. First, we saw slowness in some automotive tolling programs that our platform Second, we began to show a reduction in volume associated with the wind down of Worthington Samuel Coil Processing's Toll Pickling Facility in Cleveland, which we idled in Q4. Finally, we were impacted by several customer For example, one customer changed the program from toll processing to direct sale, while another customer elected to resource a toll processing program to capture freight. When end market demand picks up, we expect our toll processing volumes to However, as we discussed last quarter, we expect to see a decrease of approximately 100,000 annual total processing times, primarily as a result of the WSCP consolidation from Cleveland to Twin Cities.

Speaker Change: Toll processing tons were down 11% year over year for several reasons first we saw slowness in some automotive tolling programs that are platform specific.

Speaker Change: Second we began to show a reduction in volume associated with the wind down of warning can Samuel coil processing toll pickling facility in Cleveland, which we idled in Q4.

Speaker Change: When end market demand picks up we expect our toll processing volumes to increase however, as we discussed last quarter, we expect to see a decrease of approximately 100000 annual toll processing tons, primarily as a result of dws CP consolidation from Cleveland to twinsburg.

Timothy Adams: Turning to cash flows and the balance sheet, cash flow from operations was $54 million and free cash flow was $8 million. During the quarter, we spent $46 million on capital expenditures related to a variety of projects, including the previously announced electrical steel expansion. In addition, we purchased a building for our Columbus, Ohio headquarters and expect to move into the building next summer when renovations are complete. Capital Expenditures for Fiscal 2025 totaled $130.4 million, and we expect CapEx for Fiscal 2026 to be approximately $100 million. Our disciplined capital investments are aligned with long-term priorities, particularly in electrical steel and maintaining our key equipment in market-ready condition to support growth and customer needs, even in uncertain markets.

Speaker Change: Turning to cash flows and the balance sheet cash flow from operations was $54 million and free cash flow was $8 million.

Speaker Change: During the quarter, we spent $46 million on capital expenditures related to a variety of projects, including the previously announced electrical steel expansions. In addition, we purchased a building for our Columbus, Ohio headquarters and expect to move into the building next summer when renovations are complete.

Speaker Change: Capital expenditures for fiscal 2025 totaled $134 million and we expect capex for fiscal 2026 to be approximately $100 million.

Speaker Change: Our disciplined capital investments are aligned with long term priorities, particularly in electrical steel and maintaining our key equipment and market ready condition to support growth and customer needs even in uncertain markets on a trailing 12 month basis, we generated $100 million of free cash flow.

Timothy Adams: On a trailing 12-month basis, we generated $100 million of free cash. Wednesday, we announced a quarterly dividend of $0.16 per share, payable on September 26, 2021. We ended the quarter with $38 million of cash, and our outstanding debt as of May 31st was $152 million, resulting in net debt of $114 million. The increase in net debt over the third quarter of fiscal 2025 is primarily the result of our funding of the CETM acquisition, with the funds held in restricted cash as of May 31.

Speaker Change: Wednesday, we announced a quarterly dividend of <unk> 16 per share payable on September 26, 2025, we ended the quarter with $38 million of cash and our outstanding debt as of May 31 was $152 million, resulting in net debt of $114 million the increase in net debt.

Timothy Adams: We closed on the Sedum acquisition on June 3rd, acquiring a 52% controlling ownership tax. With this addition, we broaden our electrical steel capabilities and customer base in Europe. Seedum will be consolidated in our results going forward. Integration is already underway with joint teams identifying commercial and operational synergies. We are confident the integration is progressing as planned and you see them as a natural extension of our electrification growth.

Speaker Change: We closed on the <unk> acquisition on June 3rd acquiring a 52% controlling ownership interest with this addition, we broadened our electrical steel capabilities and customer base in Europe, <unk> will be consolidated in our results going forward.

Speaker Change: Integration is already underway with joint teams identify and commercial and operational synergies. We are confident the integration is progressing as planned and you see them as a natural extension of our electrification growth strategy.

Timothy Adams: Thank you to both the Sedum and Worthington teams for their hard work to finalize the transition.

Speaker Change: Thank you to both the <unk> and Worthington teams for their hard work to finalize the transaction finally, I would like to say, thank you to everyone at Worthington steel for making safety their highest priority at every facility and for driving results in a dynamic market with.

Timothy Adams: Finally, I would like to say thank you to everyone at Worthington Steel for making safety the highest priority at every facility and for driving results in a dynamic market.

Timothy Adams: With a strong balance sheet, a focused strategy, and an agile team, Worthington Steel is well equipped to create value and act decisively as opportunities arise.

Speaker Change: With a strong balance sheet, a focus strategy in an agile team Worthington steel is well equipped to create value and act decisively as opportunities arise I want to thank our entire team for their hard work during our first full year as an independent company and for their dedication to our philosophy and our shareholders.

Timothy Adams: I want to thank our entire team for their hard work during our first full year as an independent company and for their dedication to our philosophy and our share.

Operator: At this point, we would be happy to take your questions. At this time, if you'd like to ask a question, press star followed by the number one on your telephone keypad.

Speaker Change: At this point, we would be happy to take your questions.

Speaker Change: At this time, if you'd like to ask a question press star followed by the number one on your telephone keypad. Our first question comes from the line of Samuel Mckinney with Keybanc capital markets. Please go ahead.

Samuel Mckinney: Our first question comes from the line of Samuel McKinney with KeyBank Capital Markets. Please go ahead. Hey, good morning and congrats on the great quarter.

Samuel Mckinney: Hey, good morning, and congrats on a great quarter.

Timothy Adams: Thanks, Sam. But starting on fourth quarter gross margin up nearly 350 basis points quarter on quarter and it was the best figure you guys have posted in two years. Talk us through how you achieved the richer mix of direct tons and stronger metal spreads despite the macro headwinds that you're still facing in some key end markets.

Speaker Change: Starting on fourth quarter gross margin up nearly 350 basis points quarter on quarter and it was the best figure you guys have posted in two years talk us through how you achieved the richer mix of direct tons and stronger metal spreads. Despite the macro headwinds that you're still facing in some key end markets.

Timothy Adams: Well, hey, Sam, this is Tim. Let's parse that a little bit. So fourth quarter in terms of volume is typically our strongest quarter, right? So when you look year over year, we were fairly flat on volume, but quarter over quarter, we were up quite a bit, right? And I think that that's an indication of, you know, the market is solid across a lot, right? It's not hugely up or hugely down, but solid across a lot of industries. I think when it comes to the spreads or the gross margin, I think you have to back out inventory holding gains and losses.

Tim Adams: Well this is Tim let's parse that a little bit so.

Tim Adams: Histories.

Tim Adams: I think when it comes to the the spreads or the gross margin I think you have to back out inventory holding gains and losses. So once you do that I think what you saw with spread compression in both quarters Q3, and Q4 because of product mix, we had a richer product mix in Q3 versus Q4.

Timothy Adams: So once you do that, I think what you saw was spread compression in both quarters, Q3 and Q4, because of product mix. We had a richer product mix in Q3 versus Q4, and year over year, we had a richer product mix in the prior year. I think the other thing you're seeing there is you're seeing compression on market spreads from just a high value add versus hot roll. So hot dip to hot roll spread or cold roll to hot roll spread. So you're seeing some compression there.

Speaker Change: Sure and year over year, we had arrived richer product mix in the prior year like the other same thing Youre seeing there is youre seeing compression on market spreads from a just a high value add versus hot roll, So hot dip to hot roll spread or cold roll too hot roll spreads so youre seeing some compression there.

Timothy Adams: Well, thanks, Tim. And that that leads into my next question, which is that galvanized spread, like you said, still relatively compressed with demand, still cautious on tariff uncertainty interest rates. And how do you view that market as we move into fiscal year 26? Yeah, cautiously optimistic. You'll hear that a lot, unfortunately, Sam, but look, we're in a period where there's not a lot of clarity with the tariffs. Because of the tariffs and not having a lot of clarity, you're not seeing much movement on interest rates either. So demand has been a bit muted across several markets that use a lot of galvanized.

Tim Adams: Well, thanks, Tim and that leads into my next question, which is the galvanized spreads like you said still relatively compressed with demand still cautious on tariff uncertainty interest rates, how do you view that market as we move into fiscal year 'twenty six.

Tim Adams: Yes, Im cautiously optimistic youll hear that a lot. Unfortunately, Sam but look we're in a period, where there is not a lot of clarity with the tariffs because of the tariffs and not having a lot of clarity youre not seeing much movement on interest rates either so.

Tim Adams: Demand has been a bit muted across several markets that use a lot of galvanized at the same time.

Timothy Adams: At the same time, there's been four and a half million tons of galvanized capacity that's been added over the last several years. And you had quite a bit of imports coming in. So that's certainly compressed that spread you're referring to between hot rolled and galvanized. And it just creates a more competitive environment. I think we're working through that. And why I'm cautiously optimistic, we'll begin to see improvements there. And it's really a couple things, I think. When we put the 25% tariff in place, that didn't have a very significant impact on market pricing or on imports.

Tim Adams: There has been four 5 million tons of galvanized capacity that's been.

Tim Adams: Added over the last several years and you had quite a bit of of imports coming in so that's certainly compressed that spread youre, referring to between hot rolled and galvanized and it just creates a more.

Tim Adams: When we put the 25% tariffs in place that didn't have a very significant impact on market pricing or on on imports raising that to 50, certainly well at the same time a lot of anti dumping.

Timothy Adams: Raising that to 50% certainly will. At the same time, a lot of anti-dumping cases that have been pushed through, and that's going to limit the amount of galvanized coming in as well. So just those things alone, you'll start to see that spread recover. And then as we work through the tariffs, and I believe firmly we will, but We're not going to see any significant movement on interest rate cuts until that's done. But as we move through that, you certainly are going to start to see demand pick up. You got the big, beautiful bill coming behind it.

Tim Adams: Cases that had been pushed through and that's going to limit the amount of galvanized coming in as well. So just those things alone youll start to see that spread recover and then as we work through the tariffs and I believe firmly we will.

Tim Adams: We're not going to see any significant movement on interest rate cuts until that's done but as we move through that certainly are going to start to see demand pick up you got a big beautiful bill coming behind it and so there is money to be spent things will pick up and that certainly will help drive that spread as well.

Timothy Adams: And so there's money to be spent, things will pick up. And that certainly will help drive that spread as well.

Tim Adams: <unk>.

Jeff Gilmore: Okay. Thanks, Jeff and then last one for me I know.

Samuel Mckinney: Okay, thanks, Geoff. And then last one for me.

Geoffrey Gilmore: I know throughout the course of fiscal year 25, you guys dealt with some destocking from the automotive OEMs. With the understanding that they're probably not going to build up a huge amount of inventory anytime soon, I mean, how can you guys continue to be successful in that end market? I know you noted the new market share win. Yeah, good question, Sam. Fortunately, and not a surprise, we clearly are watching forecasts closely historical forecasts, we get great information on build rates, we have sales and operation planning meetings. And so to your point, we didn't see or feel any type of significant pull ahead this quarter.

Tim Adams: Throughout the course of fiscal year 'twenty five you guys dealt with some destocking from the automotive Oems.

Speaker Change: With the understanding that theyre, probably not going to build up a huge amount of inventory anytime soon I mean, how can you guys continue to be successful in that end market. I know you noted the new market share wins.

Speaker Change: Yeah. Good question Sam.

Speaker Change: Fortunately and not a surprise, we clearly are watching forecast closely historical forecasts.

Speaker Change: We get great information on build rates, we have sales and operation planning meetings.

Tim Adams: <unk>.

Geoffrey Gilmore: And the reality is, if you look at the Detroit three, is the easiest example I can get, you know, whether it be Ford or GM, or Stellantis, this is all published publicly, build rates were down quite a bit. And we were down less than less than half. And why we performed well this quarter, as far as volume goes, specifically in that market, which was up 5% automotive, is market share gains. Our team, again, I gave them high praise in my comments, we've been talking about this over the last few quarters, we picked up significant market share in automotive, and we will continue over the next few quarters to see that additional market share trickle in.

Tim Adams: This quarter and the reality is if you look at the Detroit three as the example, I can get.

Tim Adams: There it would be.

Tim Adams: Ford or GM Millers to Lantus is all published publicly bill.

Tim Adams: We were down less than less than half and.

Tim Adams: Why we performed well this quarter as far as volume would go specifically in that market, which was up 5% automotive.

Tim Adams: As market share gains our team again I gave him a high praise in my comments, we've been talking about this over the last few quarters, we picked up significant market share.

Tim Adams: In automotive and we will continue over the next few quarters to see that additional market share.

Tim Adams: Trickle in.

Geoffrey Gilmore: And, you know, we had also mentioned, one of our larger customers was was struggling a little bit, they were late on several launches. And they were not nearly as aggressive as others on pricing and incentives, and it costs market share. We saw a bit of a rebound here last month, from that customer. And, you know, so far into this month, I think, again, cautiously optimistic there, it's going to continue to progress, but it's going to take a few quarters, but that's why our volume was very strong, specifically to automotive. And, you know, in addition, again, you know, not necessarily this quarter, but as you look out in the future, that specific OEM buys the most of our value added products.

Speaker Change: Was was struggling a little bit they were late on several launches.

Tim Adams: And they were not nearly as aggressive as others on pricing and incentives and it costs market share we.

Tim Adams: We saw a bit of a rebound here last month from that customer and <unk>.

Tim Adams: So far into this month.

Tim Adams: I think again cautiously optimistic there it's going to continue to progress.

Tim Adams: But it's going to take a few quarters, but that's why our volume was very strong specifically.

Tim Adams: Automotive in addition, again not necessarily this quarter, but as you look out in the future that specific OEM buys the most of our value added products and the tier ones, we support that by a significant amount of value added products.

Samuel Mckinney: And the tier ones we support that buy a significant amount of value added products support that specific customer. So, Tim talks about mix, you know, we're cautiously optimistic as we start moving into second and third quarter, along with the volume, we can start seeing a more favorable product mix. I don't anticipate a great deal that right now. Again, that'll trickle in over the quarters to come, Sam. Okay, great. Thanks, Geoff. You've got it.

Tim Adams: Support.

Tim Adams: That specific customer so Tim talks about mix, we're cautiously optimistic as we start moving into second and third quarter.

Speaker Change: Along with the volume we can start seeing a more favorable product mix.

Speaker Change: Anticipate a great deal of that right right now again that will trickle in over the quarters to come Sam.

Samuel Mckinsey: Okay, great. Thanks, Jeff.

Jeff Gilmore: You got it.

John Tumazos: Our next question comes from the line of John Tumazos with John Tumazos, Very Independent Research. Please go ahead. Thank you for taking my question. Could you describe the competitive dynamics in the tailor-welded blanks business? Who else makes them besides Arso or Middle? are there. Trading companies in that business. I'm surprised that you have to take early retirement. Yeah, John, so interesting market. There are several players globally, not several players in North America. Obviously, there is ArcelorMittal, Taylor Blank. and then there's Worthington Steel with Taylor Welded blank. and it's not an area where the trading partners would play.

Speaker Change: Our next question comes from the line of John Tumazos with John Tumazos very independent research. Please go ahead.

John Tumazos: Thank you for taking my question.

John Tumazos: Could you describe.

John Tumazos: Competitive dynamics and material are welded blanks business.

Tim Adams:

Tim Adams: Who else makes them besides ours or middle.

Tim Adams: Are there.

Tim Adams: Trading companies in that business.

Tim Adams: Surprise to you have to take early retirement center.

John Tumazos: Yes, John so.

John Tumazos: Interesting market.

John Tumazos: There are several players globally.

John Tumazos: Not several players and North America, obviously, there is our slower middle tailored blanks.

John Tumazos: And then there's worthington steel with tailor welded blanks.

John Tumazos: And it's not an area where their trading partners would play.

Geoffrey Gilmore: You're familiar with this business. It is highly technical, so the barriers of entry are high, which is why I don't think you've seen a significant amount of players in North America. That business is truly specific to part consolidation and light weighting. We've seen significant growth at Taylor Welded Blanks, really specifically over the last five years. I would tell you AMTB has seen the same with significant focus on light weighting over the last 10 years. You're just continuing to see more and of those specialized parts going into the body and wipe. The future is bright for both AMTB and I think, well not think, I know for TWB as well.

John Tumazos: Familiar with this business.

John Tumazos: It is highly technical so the barriers of entry are are high which is why I don't think you've seen a significant amount of players.

John Tumazos: In North America.

John Tumazos: That business is truly specific two part consolidation.

John Tumazos: In light weighting.

Geoffrey Gilmore: And we've seen significant growth at tailor welded blanks really specifically over the last five years I would tell you of MTBE has has seen the same with significant focus on light weighting over the last 10 years.

John Tumazos: You're just continuing to see more and more of those specialized parts.

John Tumazos: Going into the body in white.

John Tumazos: And on.

John Tumazos: Bright for both <unk> and I think at all.

Tim Adams: Not think I know for TWD as well with ultra high strength steels, and specifically press hardened steels.

Geoffrey Gilmore: With ultra high strength steels and specifically press hardened steels, those parts are becoming more sought after. AMTB was able to work with their research and development team on a process to adjoin high strength parts. You recall, we mentioned three months ago that we reached a licensing agreement with them for what's called the ablation process. That's what's used to weld press-hardened steel together. So, you know, OEMs certainly want more than one player. We knew that. AMTB knew that. So it's a wonderful opportunity for us both to pursue competitively. Why that's growing? If you look at the nature of that product, John, and again, I talk about it being highly technical, this press-hardened steel is heated up to temperatures that make it much more formidable.

Tim Adams: Those parts are becoming more sought after and AAM TB was able to work with their research and development team on a process to enjoying high strength parts.

Tim Adams: You recall, we mentioned three months ago that we reached a licensing agreement with them for what's called the ablation process. That's what's used.

Tim Adams: So world.

Tim Adams: Press hardened steel together.

Tim Adams: So.

Speaker Change: The Oems certainly want more than one player we knew that <unk> knew that.

Tim Adams: So it's a wonderful opportunity for for us both to pursue competitively.

Tim Adams: Why that's growing.

John Tumazos: If you look at the nature of that product John.

Tim Adams: Again, I talked about it being highly technical this press hardened steel.

Tim Adams: That make it much more formidable.

Geoffrey Gilmore: And then when it goes through the actual hot stamping, it retains its strength. And why that's important, you're able to take what's several parts today and now create one, and one that's lighter. And so there's savings on the weight that the customer's buying, freight that they're paying, and scrap. And then when it gets to the assembly line, it takes out significant costs for the automotive company because you're assembling one part versus what was several parts. And it's a critical component, and this is probably the most important. There's huge safety concerns. It's a critical part of the body in white.

Tim Adams: And then when it goes through the actual hot stamping it retains its strength and why that's important you are able to take what several parts today and now create one and one that's lighter and so there is savings on the way that the customer.

Tim Adams: Buying.

Geoffrey Gilmore: <unk> that their pain and scrap and then once it gets to the Assembly line.

Tim Adams: It takes out significant cost for the automotive company because theres some win one part versus what it was several parts and it's a critical component and this is probably the most important there is huge safety concerns such it's a critical part of the body in white and what it will do is.

John Tumazos: And what it will do is it protects the passenger and the battery if there's to be any type of crash. And then further, because of the light weighting, you're taking out significant miles per gallon in the vehicle. So a lot less emissions if it's an internal combustion engine. If it's hybrid or battery electric, obviously range is important, and lighter weight will increase range. But that's why those products are becoming so popular. So if the products you're growing, why are you sitting out your people? I didn't understand that, John. Could you repeat that for me, please?

Tim Adams: It protects the passenger and the battery.

Tim Adams: If there is to be any type of crash and then further because of the light weighting you are taking out some significant.

Tim Adams: Significant miles per gallon.

Tim Adams: And the vehicles, so a lot less emissions if it's an internal combustion engine, if it's hybrid or battery electric obviously range is important and lighter weight will increase range, but thats why those products are becoming so popular.

Tim Adams: Since the products are growing.

Tim Adams: <unk>.

Tim Adams: Cool.

Tim Adams: I didn't understand that Jack could you repeat that for me. Please.

Geoffrey Gilmore: You described how the products are growing. So then why were you taking early retirement? TWB PWB took early retirements simply because we've made a couple significant acquisitions in there. And, John, part of your assumptions making any acquisitions is SG&A. You know our philosophy, and we try to stick to our philosophy. That's never something that we want to cut too deep into. We like to embrace the companies that we buy. It takes time, John, to identify top talent. And rather than going in and with a you know, impulsive risk, or putting a family in stress. This is a way to go about doing that that much more aligns with our with our philosophy.

Tim Adams: You described how the products are growing.

Tim Adams: So then why were you taking early returns.

Tim Adams: TWD.

Tim Adams: GWB took.

Tim Adams: Early retirements.

Tim Adams: Simply because we've made a couple of significant acquisitions in there.

Tim Adams: <unk>.

Speaker Change: John part of the part part of your assumptions, making any acquisitions is is SG&A you know our philosophy.

Tim Adams: And we tried to stick to our philosophy that is never something that we want to cut too deep into we'd like to embrace the companies that we buy it it takes time John to identify.

Tim Adams: Top talent and rather than going in and.

Tim Adams: With us.

Tim Adams: Impulsive risks.

Tim Adams: Or.

Tim Adams: Putting our family and stress.

Tim Adams: This is a way to go about doing that much more aligns with our with our philosophy and as this grows again, we just got the license John We just put our first ablation line in so certainly there will be that opportunity for the business to grow and as it grew.

Geoffrey Gilmore: And as this grows, again, we just got the license, John, we just put our first ablation line in. So certainly, there will be that opportunity for the business to grow. And as it grows, and we need to scale up, we won't have a problem doing so.

Tim Adams: Rose and we need to scale up we won't have a problem doing so.

Geoffrey Gilmore: I will now turn the call back over to Geoff Gilmore, President and CEO, for any closing remarks. First, again, I want to thank our team for an exceptional job. I could not be more proud of all of them. We are exceeding my expectations, which are high for myself and the team. And truly appreciate everybody that's been listening in today and asking questions and showing interest in Worthington Steel. We had an exceptional quarter. Again, I want to continue to use cautiously optimistic, but our base business has never been stronger. And as we work through some of the headwinds that we've faced, we are well positioned to take advantage of any opportunity in the growth that's coming.

Tim Adams: I will now turn the call back over to Jeff Gilmore, President and CEO for any closing remarks.

Jeff Gilmore: First again want to thank our team for an exceptional job.

Tim Adams: <unk> quarter.

Tim Adams: Again, I want to continue to use cautiously optimistic, but our base business has never been stronger and as we work through some of the headwinds that we faced.

Tim Adams: Our well positioned to take advantage of any opportunity and the growth that's coming thank you.

Geoffrey Gilmore: Thank you.

Operator: And that concludes our call today. Thank you all for joining. You may now disconnect.

Tim Adams: And that concludes our call today. Thank you all for joining you may now disconnect.

Tim Adams: [music].

Tim Adams: Yes.

Tim Adams: Okay.

Tim Adams: [music].