Q4 2025 Worthington Enterprises Inc Earnings Call

Operator: Good morning and welcome to the Worthington Enterprises fourth quarter fiscal 2025 earnings conference call. All participants will be able to listen only until the question and answer session of the call. This conference is being recorded at the request of Worthington Enterprises.

Good morning, and welcome to the Worthington Enterprises fourth quarter fiscal 2025 earnings conference call, all participants will be able to listen only until the question and answer session of the call. This conference is being recorded at the request of Worthington enterprises. If anyone objects. You may disconnect at this time I'd now like to introduce Marcus Ross.

Operator: If anyone objects, you may disconnect at this time.

Marcus Rogier: I'd now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin. Thank you, Rob. Good morning, everyone. And thank you for joining us for Worthington Enterprises' fourth quarter fiscal 2025 earnings call.

Rajiv: <unk> Treasurer, and Investor Relations Officer, Mr. Rajiv you may begin.

Speaker Change: Thank you, Rob and good morning, everyone and thank you for joining us for Wilmington, Enterprises' fourth quarter fiscal 2025 earnings.

Marcus Rogier: On the call today are Joe Hayek, our President and Chief Executive Officer, and Colin Souza, our Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made during today's call are forward-looking in the nature and subject to risk and uncertainty that could cause actual results to differ materially from those expressed or implied. For more information on these risks and uncertainties, please refer to our earnings release issued yesterday after the market closed, which is available on the investor relations section of our website.

Speaker Change: On the call today are Joe Hayek.

Collins: Our president and Chief Executive Officer, and Collins, our Chief Financial Officer.

Rajiv: Before I begin I'd like to remind everyone that certain statements made during today's call are forward looking in nature and subject to risks and uncertainties that could cause.

Rajiv: <unk> actual results to differ materially from those expressed or implied.

For more information on these risks and uncertainties. Please refer to our earnings release issued yesterday after the market.

Rajiv: Which is available on the Investor Relations section of our website.

Marcus Rogier: Additionally, our remarks today will include references to non-GAAP financial Reconciliations of these measures to the most correctly comparable gap metrics can also be found in the earnings.

Additionally, our remarks today will include references to non-GAAP financial measures.

Considerations of these measures to the most directly comparable GAAP measures can also be found in the earnings.

Joe Hayek: And with that, I'll turn the call over to Joe for opening remarks. Thank you, Marcus. Good morning, everyone.

Joe: With that I'll turn the call over to Joe.

Joe: Yes.

Joe: Thank you Marcus and good morning, everyone.

Joe Hayek: Welcome to Worthington Enterprises Fiscal 2025 4th Quarter Earnings Call. It's been a great fiscal 2025 for us on several fronts. We're exceptionally proud of and grateful for our people who continue to work safely, taking care of each other and our customers. We're a people-first company, and our culture powers our success. So to all of my colleagues, thank you. In the quarter, we delivered year-over-year and sequential growth in revenue, adjusted EBITDA, and earnings per share. Driven by great work across our teams in building products and consumer products, our revenue in Q4 was up 14% from last year, excluding the deconsolidation of SES, and was up 8% excluding both SES and revenues at Gragasco.

Speaker Change: Good morning to the enterprises fiscal 2025 fourth quarter earnings call.

Joe: Fiscal 2025 for us on several fronts.

Joe: We're exceptionally proud of.

Joe: And grateful for our people, who continue to work safely taking care of each other and our customers.

Joe: People first company and our culture powers our success.

All of my colleagues. Thank you.

Joe: In the quarter, we delivered year over year and sequential growth in revenue adjusted EBITDA and earnings per share driven by great work across our teams and building products in consumer products revenue in Q4 was up 14% from last year, excluding the deconsolidation of FCS and was up 8% excluding both SCS.

Joe: And revenues for Gaslog.

Joe Hayek: Gross margin was 29.3% versus 24.8%. And adjusted EBITDA margin in the quarter was 26.8% versus 19.8% in Q4 a year ago. Our results in Q4 reflect our strategy and action. We are delivering on the commitments we make to each other and to our customers every day as we optimize our current businesses and grow Worthington. And we continue to leverage the Worthington business system and its three growth drivers, innovation, transformation, and M&A to maximize both our near and long-term success. On the innovation front, we've made great strides. The success of our new Balloon Time Mini has created opportunities for us in new channels, and we recently began partnering with CVS.

Joe: Gross margin was 29, 3% versus 24, 8%.

Joe: Adjusted EBITDA margin in the quarter was 26, 8% versus 19, 8% in Q4 a year ago.

Our results in Q4 reflect our strategy and actions we are delivering on the commitments, we make to each other and to our customers every day as we optimize our truck businesses and grow where and.

Joe: And we continue to leverage the Worthington business system and its three growth drivers innovation transformation and M&A and maximize both our near and long term success.

Joe: On the innovation front, we've made great strides this year.

Joe: Some of our new balloon time, many has created opportunities for us in new channels, and we recently began partnering with Cvs.

Joe Hayek: You'll soon be able to buy our suite of Balloon Time products in their stores nationwide. Halo griddles continue to receive accolades from various publications, and in Q4, Men's Journal and CNET both named Halo as among the best griddles of 2025. Finally, our PowerCore cylinder was part of a solution 3M leveraged to develop their 3M FastBond water-based adhesives, which in April won the Adhesives and Sealants Council's 2025 Innovation Award. Our teams continue to focus on productivity improvements across our network by leveraging transformation. These efficiency gains, driven by automation and technology, continue to contribute to our success.

Joe: So you'll be able to buy our suite of balloon time products in their stores nationwide.

Joe: Hello, Griddle and continue to receive accolades from various publications and in Q4 men's journal and CNET, both named Halo, that's about the best rentals in 2025.

Joe: Finally, our power four cylinder was part of a solution <unk> leverage to develop there are three SaaS, Bob water based achievements, which in April on the adhesives and Sealants Council's 2025 Innovation Award.

Joe: Our teams continue to focus on productivity improvements across our network by leveraging transformation.

Joe: Specialty gains driven by automation and technology continued to contribute to our success.

Joe Hayek: Our team in the water business has made good progress as they embrace 80-20 as a way of thinking differently. While it's early, we're confident that 8020 will have a positive impact on that business and eventually across more of our values. Strategic M&A that leverages our core capabilities is the third vital leg of the Worthington business system that powers our growth. Last week, we were in New Jersey with our new colleagues at LG Manufacturing, announcing that... Elgin is a leader in HVAC components and structural framing for commercial buildings and is a strong strategic and cultural fit that complements our existing building products business.

Joe: Our team in the water business has made good progress as they break 80 20 as a wave.

Joe: While it's early we're confident that 80 20 will have a positive impact on that business and eventually across more of our value streams.

Joe: Strategic M&A that Leverages, our core capabilities as a third vital leg of the Waddington business system that powers our growth.

Joe: Last week, we were in New Jersey, with our new colleagues at Elgin manufacturing announcing that acquisition.

Joe: <unk> is a leader in HVAC components and structural framing for commercial buildings and has a strong strategic and cultural fit that complements our existing building products business.

Joe Hayek: It's a great example of how we apply our investment criteria to identify and acquire companies with leading positions in niche markets that we believe will be accretive to our margins and cash flow. The Elgin team has much to be proud of. Above and beyond their over $115 million in LTM revenue and $13 million in adjusted EBITDA, they're positioned for growth. And we think we can help them accelerate that. All forms of coiled steel, something with which we have deep experience. Their processes, go-to-market strategies, and end markets mirror ours, creating meaningful opportunities for synergies and growth.

Joe: A great example of how we apply our investment criteria to identify and acquire companies with leading positions in niche markets that we believe will be accretive to our margins and cash flows.

Joe: The Hudson team has much to be proud of.

Joe: Beyond that over $115 million in LTM revenue and $13 million and adjusted EBITDA that are positioned for growth and we think we can help them accelerate that growth.

Joe: Oh, Oh forms coiled steel something with which we have deep experience the processes go to market strategy and markets mirror ours, creating meaningful opportunities for synergies and growth. We are thrilled to welcome their 250 employees to Worthington and look forward to their contribution to our collective success.

Joe Hayek: We are thrilled to welcome their 250 employees to Worthington and look forward to their contribution to our collective's For 70 years, we have championed the idea that people are our most important asset.

Joe: Seven years, we have championed the idea that people are our most important asset.

Joe Hayek: That conviction makes it particularly gratifying for us in Q4 to have been named the top workplace in Central Ohio for the 13th consecutive year and in our first year as Worthington Enterprises.

Joe: That condition makes it particularly gratifying for us in Q4 to have been named the top workplace in central Ohio, the 13th consecutive year and in our first year as Worthington enterprises.

Joe Hayek: In the quarter, we also announced the U.S. Army Partnership for Your Success at our facility in Wisconsin. We're very proud to be part of this unique program, partnering with the U.S. Army as they integrate veterans into the workforce after their service to our country. Our powerful, people-first, performance-based culture continues to serve us exceptionally well. And we leverage that strength every day as we focus on both the near-term and the long-term. executing our strategies in managing tariff and economic uncertainty and on our long-term growth aspirations and performance.

Joe: In the quarter, we also announced the U S Army partnership for your success at our facility in Wisconsin, We're very.

Joe: That would be part of this unique program partnering with the U S Army as they integrate veterans into the workforce after their service to our country.

Joe: Our powerful people first performance based culture continues to serve us exceptionally well and we leverage that strength everyday as we focus on both the near term.

Joe: Executing our strategy and managing tariffs and economic uncertainty and on our long term growth aspirations disappointments.

Joe Hayek: While we're happy to be here today discussing our Q4 results, we are constantly thinking about and investing in our future. Leveraging our culture, the Worthington business system, and our strong balance sheet, we believe we are very well positioned going forward. Our focus is on our people, our customers, our value propositions, and the opportunities we have to continue to improve everyday life by elevating spaces and experiences. which will ultimately enable us to create long-term value for shareholders.

Joe: But we're happy to be here today discussing our Q4 results, we are constantly thinking about and investing in our future.

Joe: Leveraging our culture, where they send business system and our strong balance sheet. We believe we are very well positioned going forward.

Joe: Our focus is on our people our customers our value proposition and the opportunities we have to continue to improve everyday life by elevating spaces and experience.

Joe: Which will ultimately enable us for great long term value for shareholders.

Colin Souza: We'll now turn the call over to Colin, who will take you through some details related to our financial performance in the court. Thank you, Joe, and good morning, everyone. We delivered strong financial results in Q4 to close out our fiscal year, even with a few unique items impacting comparability. On a gap basis, we reported earnings from continuing operations of $0.08 per share compared to a loss of $0.64 per share in the prior year quarters. Our quarterly results included the following unique items. A negative impact from net pre-tax restructuring, impairment, and other one-time charges of $61 million, or $0.98 per share.

Joe: We will now turn the call over to Paula who will take you through some details related to our financial performance in the quarter.

Paula: Thank you Joe and good morning, everyone. We delivered strong financial results in Q4 to close out our fiscal year, even with a few unique items impacting comparability on.

Joe: On a GAAP basis, we reported earnings from continuing operations of <unk> <unk> per share compared to a loss of 64 cents per share in the prior year quarter.

Joe: Our quarterly results included the following unique items in.

Joe: The negative impact from net pretax restructuring impairment and other one time charges of $61 million.

Joe: Or <unk> 98 per share. These charges were primarily related to a noncash impairment associated with our general tools and instruments business or GTI and consumer product along with a noncash impairment charge related to our equity investment in a sustainable energy solutions joint venture and related investments.

Colin Souza: These charges were primarily related to a non-cash impairment associated with our general tools and instruments business, or GTI, and consumer products, along with a non-cash impairment charge related to our equity investment in the Sustainable Energy Solutions joint venture and related investments. Both GTI and FES represent relatively small portions of our overall business, and these actions reflect updated long-term assumptions for these assets, inclusive of the changing tariff landscape. The prior year quarter included pre-tax charges of $74 million, or $1.38 per share, primarily related to the deconsolidation of SES. Excluding these items, adjusted earnings from continuing operations was $1.06 per share, marking another strong quarter for us at Worthington Enterprises.

Joe: Both GCI in Fps represent relatively small portions of our overall business and these actions reflect updated long term assumptions for these asset inclusive of the changing tariff landscape.

Joe: The prior year quarter included pre tax charges of $74 million for $1 38 per share primarily related to the deconsolidation of Ses.

Joe: Excluding these items adjusted earnings from continuing operations was $1.06 per share marking another strong quarter for us with Worthington enterprises.

Colin Souza: This compares to adjusted earnings from continuing operations of $0.74 per share in the prior year quarter. Consolidated net sales for the quarter were $318 million, essentially flat compared to the prior year period. This reflects the deconsolidation of our former sustainable energy solution segment, which contributed $40 million in sales last year. Excluding SES in both periods, net sales grew nearly 14%, driven by higher overall volumes and contributions from the Ragasco acquisition. Gross profit increased significantly to $93 million, up from $79 million in the prior year quarter. We're collecting an approximately 450 basis point expansion in gross margin to 29.3%, consistent with the levels we reported in Q3.

Joe: This compares to adjusted earnings from continuing operations was <unk> 74 per share in the prior year quarter.

Joe: Consolidated net sales for the quarter were $318 million essentially flat compared to the prior year period.

Joe: This reflects the deconsolidation of our former sustainable energy solutions segment, which contributed $40 million in sales last year, excluding FCS in both period net sales grew nearly 14% driven by higher overall volumes and contributions from the <unk> acquisition.

Joe: Gross profit increased significantly to $93 million up from $79 million in the prior year quarter, reflecting an approximately 450 basis point expansion in gross margin to 29, 3% consistent with the levels we reported in Q3.

Colin Souza: The adjusted EBITDA for the quarter was $85 million, up from $63 million in Q4 of last year, and sequentially higher from $74 million in Q3. adjusted EBITDA margin was 26.8% from 19.8% last year. For the full fiscal year, Adjusted EBITDA was $263 million, with a TTM Adjusted EBITDA margin of 22.8%. The second half of our fiscal year tends to be seasonally stronger, and this year follows that pattern, suggesting a return to normalized seasonal trends. We've been adding capacity in our heating, cooling, construction, and celebrations product lines in response to our customers, who have, in some cases, seen significant increases in demand and value at domestic manufacturing partners.

Joe: Adjusted EBITDA for the quarter was $85 million.

Joe: Up from $63 million in Q4 of last year and sequentially higher from $74 million in Q3.

Joe: Adjusted EBITDA margin was 26, 8% up from 19, 8% last year for.

Joe: For the full fiscal year, adjusted EBITDA was $263 million with a TTM adjusted EBITDA margin of 22, 8%.

Joe: The second half of our fiscal year tends to be seasonally stronger than this year, followed that pattern, suggesting a return to normalized seasonal trends.

Joe: We've been adding capacity in our heating cooling and construction and collaborations product lines in response to our customers who are in some cases seen significant increases in demand and value of domestic manufacturing partner.

Colin Souza: Turning to our cash flow and capital allocation, we continue to invest in our operations while maintaining a disciplined and balanced approach. During the quarter, we invested $13 million in capital expenditures, including $8 million related to our facility modernization project. We also return capital to shareholders paying $8 million in dividends and repurchasing 200,000 shares of our Comet stock for $10 million at an average price of $49.16 per share. Our joint ventures generated $41 million in dividends during the quarter, representing a 95% cash conversion rate on equity income. For the full fiscal year, we invested approximately $51 million in CapEx, including $25 million related to our facility modernization project.

Joe: Turning to our cash flow and capital allocation, we continue to invest in our operations, while maintaining a disciplined and balanced approach.

Joe: During the quarter, we invested $13 million in capital expenditures, including $8 million related to our facility modernization projects.

Joe: We also returned capital to shareholders paying an $8 million in dividends and repurchasing 200000 shares of our Aman stock for $10 million at an average price of $49 16 per share.

Joe: Our joint ventures generated $41 million in dividends during the quarter, representing a 95% cash conversion rate on equity income.

Joe: For the full fiscal year, we invested approximately $51 million in capex, including $25 million related to our facility modernization projects.

Colin Souza: We have approximately $40 million remaining to spend on these projects, and we expect the majority of this to be spent over fiscal year 26, with completion anticipated in early fiscal year 27. Cash flow from operations for the quarter was $62 million, and free cash flow was $49 million. For the full fiscal year, free cash flow totaled $159 million, representing a 103% free cash flow conversion rate relative to our adjusted net earnings. Turning to our balance sheet and liquidity, we closed the quarter with $303 million in long-term funded debt during an average interest rate of 3.6%, along with $250 million in cash.

Joe: We have approximately $40 million remaining to spend on the project and we expect the majority of this to be spent over fiscal year 2006 with completion anticipated in early fiscal year 2007.

Joe: Cash flow from operations for the quarter was $62 million and free cash flow was $49 million for the.

Joe: Full fiscal year free cash flow totaled $159 million, representing a 103% free cash flow conversion rate relative to our adjusted net earnings.

Joe: Turning to our balance sheet and liquidity, we closed the quarter with $303 million in long term funded debt bearing an average interest rate of three 6% along with $250 million in cash.

Colin Souza: Subsequent to quarter end, in mid-June, we used approximately $93 million of that cash to complete the recently announced acquisition of Elgin Manufacturing. Our leverage remains extremely low with ample liquidity supported by a $500 million undrawn bank credit facility. Net debt at quarter end was $53 million, resulting in a net debt-to-trillion adjusted EBITDA leverage ratio of less than a quarter term.

Joe: Subsequent to quarter end in mid June we used approximately $93 million of that cash to complete the recently announced acquisition of Elgin manufacturing.

Joe: Our leverage remained extremely low with ample liquidity supported by a $500 million Undrawn bank credit facility.

Joe: Net debt at quarter end was $53 million, resulting in a net debt to trailing adjusted EBITDA leverage ratio of less than a quarter turn.

Colin Souza: Yesterday, our Board of Directors declared an quarterly dividend of $0.19 per share, an increase of $0.02, or 12%, relative to the dividend paid last quarter, payable in September 2025. We are very pleased to continue rewarding shareholders as we deliver strong earnings while prioritizing and investing in long-term growth.

Joe: Yesterday, our board of directors declared a quarterly dividend of <unk> 19 per share an increase of <unk> or 12% relative to the dividend paid last quarter payable in September 2025.

Joe: We are very pleased to continue rewarding shareholders as we delivered strong earnings while prioritizing and investing in long term growth.

Colin Souza: I will now briefly walk through our segment performance where both businesses delivered excellent results to close out the fiscal year. In consumer products, Q4 net sales were $126 million, essentially flat compared to the prior year quarter, with a slight increase in volume. The adjusted EBITDA was $21 million with a 16.6% margin, up from $17 million and 13.6% in Q4 last year. The improvement was driven by lower SG&A expenses and a more favorable product. The consumer team continued to execute well in Q4, delivering higher profitability despite uncertainty in the broader consumer environment. As we have seen throughout the year, volumes remain closely tied to point-of-sale activity, and while consumers remain cautious, our market-leading brands and strong retail partnerships position us well.

Joe: I will now briefly walk through our segment performance, where both businesses delivered excellent results to close out the fiscal year.

Joe: And consumer products Q4, net sales were $126 million essentially flat compared to the prior year quarter with a slight increase in volume.

Joe: Adjusted EBITDA was $21 million with a 16, 6% margin up from $17 million of 13, 6% in Q4 of last year.

Joe: The improvement was driven by lower SG&A expenses, and a more favorable product mix.

Joe: The consumer team continued to execute well in Q4, delivering higher profitability despite uncertainty in the broader consumer environment.

Joe: We have seen throughout the year volumes remain closely tied to point of sale activity and while consumers remain cautious our market, leading brands and strong retail partnerships position us well.

Colin Souza: Our products remain highly relevant and valued by consumers as they elevate everyday experiences around outdoor living, celebrations, and home improvement. With a solid foundation in place, we believe we are poised for long-term growth as market conditions normalize and consumer confidence in repair and remodel activity improves.

Joe: Our products remain highly relevant and valued by consumers as they elevate everyday experiences around outdoor living celebrations and home improvement.

Joe: With a solid foundation in place. We believe we are poised for long term growth as market conditions, normalize and consumer confidence and repair and remodel activity improves.

Colin Souza: In building product, Q4 net sales grew 25% year-over-year to $192 million, up from $154 million in the prior year quarter. This growth was driven by higher overall volumes, along with the contributions from the Ragasso acquisition completed in Q1. Q4 is typically our strongest seasonal quarter for building products, and this year was no exception, with volumes up 19% both sequentially and year-over-year. The adjusted EBITDA for the quarter was $71 million, 37% of sales, compared to $62 million and 33.6% in the prior year quarter. The year-over-year increase in adjusted EBITDA was driven by volume growth and a combined $6 million increase in equity income from WAVE and Part B.

Joe: And building product Q4, net sales grew 25% year over year to $192 million.

Joe: From $154 million in the prior year quarter.

Joe: This growth was driven by higher overall volumes along with the contributions from the <unk> acquisition completed in Q1.

Joe: Q4 is typically our strongest seasonal quarter for building products next year was no exception with volumes up 19%, both sequentially and year over year.

Joe: Adjusted EBITDA for the quarter was $71 million, 37% of sales compared to $52 million 33, 6% in the prior year quarter.

Joe: The year over year increase in adjusted EBITDA was driven by volume growth and a combined $6 million increase in equity income from wave and part feature.

Colin Souza: Wave delivered another solid performance, while Clark Dietrich continues to navigate a mixed-demand environment and competitive pressures exceptionally well. Overall, the building products team had a strong finish to the fiscal year and continues to win with customers by providing reliable service, product innovation, and value-added solutions. Our portfolio of market-leading products and solutions support critical building systems and components that elevate the spaces where people live, work, and gather. As we look ahead, we remain confident in the long-term outlook for our building products business, and the recent addition of LG Manufacturing strengthens our offerings and further supports our growth strategy.

Joe: We have delivered another solid performance, while our feature continues to navigate a mixed demand environment and competitive pressures exceptionally well.

Joe: Overall, the building products team had a strong finish to the fiscal year and continues to win with customers by providing reliable service product innovation and value added solutions.

Joe: Our portfolio of market, leading products and solutions to support critical building systems and components that elevate the spaces, where people live work and Gary as.

Joe: As we look ahead, we remain confident in the long term outlook for our building products business and the recent addition of algae manufacturing strengthens our offerings and further supports our growth strategy.

Operator: At this point, we're happy to take any questions.

Joe: At this point, we're happy to take any questions.

Operator: Thank you.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Joe: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad you raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.

Kathryn Thompson: And your first question comes from the line of Kathryn Thompson from Thompson Research Group. Your line is open. Hi, thank you for taking my questions today. For the reported...

Speaker Change: And your first question comes from the line of Kathryn Thompson from Thompson Research Group. Your line is open.

Joe: Yeah.

Kathryn Thompson: Hi, Thank you for taking my questions today.

Joe: Good morning, 40 reported good morning.

Kathryn Thompson: Good morning. The theme of this quarter is pretty similar to the prior quarter, which was a pretty solid margin expansion for your wholly owned margins. Part of this, we acknowledge, is lapping some easier comps, but also a large portion is company initiatives.

Joe: Hi.

Joe: The theme this quarter is pretty similar to the prior quarter, which is pretty pretty solid margin expansion.

Joe: For your wholly owned margins. So part of this is that we acknowledge is lapping some easier comps, but also a large portion is company initiatives can you break down our.

Colin Souza: Can you break down or break out what margin growth is, what is it more one-time, and how much of it is more company specific initiatives? Yeah, thanks, Kathryn. So, as you said, right, good, good gross margin expansion in the quarter, 450 basis points. Similar to last quarter, we did have in Q4 last year, we completed the transaction for our SES business, so deconsolidated that from our financials. That led to roughly half of the 450 basis point margin expansion in the quarter. And then the balance of that was really driven by, in the wholly owned building products business, significant volume growth, which translated to good conversion costs and good product mix improvements as that business and the end markets there really returned to seasonally normal demand patterns.

Joe: A breakout what margin growth is what is it more one time and how much of it is more a company specific initiatives.

Joe: Yeah. Thanks, Catherine so I need to add Brian good good gross margin expansion in the quarter 450 basis points.

Joe: Similar to last quarter, we did have in Q4 last year, we completed the transaction for our SCS business, So consolidated that from our financials.

Joe: That led to roughly half of the 450 basis point margin expansion in the quarter.

Joe: And then the balance of that was really driven by and the wholly owned building products business significant volume growth, which translated to good conversion cost.

Joe: And good product mix improvement as that business in the end markets. They are really return to seasonally normal demand pattern and in particular some of the higher margin products like the large format <unk>.

Colin Souza: In particular, some of the higher margin products, like the large format feeding tanks there. So, ultimately, those things combined led to the operating margin improvement.

Joe: So ultimately those those things combined led to the operating margin improvement and.

Joe Hayek: And this will be the last quarter for the SES black. Yeah, and Kathryn, Colin's absolutely right. You know, a couple of other things. And when you talk about, you know, company specific initiatives, you're absolutely right. And we've talked about this in the last couple of quarters. When you see gross margin go up by $14 million in SG&A, go down by $2 million year over year, that's not on accident. And our teams have been doing a fantastic job of optimizing our businesses and certainly growing our businesses, as Colin said, because our conversion costs come down.

Joe: This will be last quarter for the Ses blacks.

Catherine: And Catherine.

Joe: Karl is absolutely right and you have a couple of other things and then when you talk about.

Catherine: Company specific initiatives, you're absolutely right and we've talked about this in the last couple of quarters.

Catherine: When do you see gross margin go up by $14 million in SG&A go down by $2 million year over year that that's not an accident it and our teams have been doing a fantastic job of.

Catherine: Optimizing our businesses and certainly growing our businesses as Colin said is our conversion costs come down but.

Joe Hayek: You know, our goals over the next couple of years, which we've talked about, is to get gross margin over 30% and to have our SG&A as a percentage of sales at 20 or less. And so we're not there yet, and we know that we have work to do, but we feel like we have plans in place and people are really leaning in, and we're pretty convicted and excited about where we can go in the next couple of years.

Catherine: Our goals.

Joe: The next couple of years, which we've talked about is to get gross margin and over 30% and to have our SG&A as a percentage of sales at 20 or lapsed and so we're not there yet and we know that we have work to do but we feel like we have plans in place and people are really leaning in and we're pretty convicted and excited about where we can.

Joe: Go over the next couple of years.

Joe: Okay. That's.

Kathryn Thompson: I wanted to shift the wave, contributions were above $30 million this quarter, it's the first time we've seen that, can you talk about the drivers for timing of projects, price, or true uptake in volume demand, and is this level achievable going forward, or maybe help us to think about how to frame wave based on what you're seeing in the market right now. Thank you. Great question. It's a mix, Kathryn, of all the things that you mentioned, you know, a little bit on the volume side, certainly it's a great business and they do a really good job taking care of their customers and understanding it.

Joe: Thats helpful. I wanted to shift the waves and contributions were above $30 million. This quarter. It's the first time, we've seen that.

Joe: Can you talk about the drivers for this.

Joe: Timing of projects price.

Joe: Or a true uptake in volume demand.

Joe: And is this level.

Joe: <unk> going forward or maybe help us to think about how to frame weighed based on what youre seeing in the market right now thank you.

Kathryn Thompson: Yeah, Great question, it's a mix Catherine of all of those things that you mentioned.

Joe: Little bit on the volume side, and certainly it's a great business in <unk>.

Joe: A really good job of taking care of their customers and understanding.

Joe Hayek: Thank you. how customers can make more money using their products, and that allows them to generate returns that they're entitled to. But I would say from an end market perspective, they continue to see relative strengths in healthcare, education, transportation, retail is okay, office is still a little soft, obviously. Not a lot different than it would have when we were together in March. So more, I think, steady as she goes there. I think as the rest of the year lays out, that will have a lot to do with both Wave and Clark Dietrich and our businesses on the building product side.

Joe: Customers can make more money using their products and that allows them to generate returns that they're entitled to but I would say from an end market perspective, they continue to see relative strength in health care education transportation retails.

Joe: Okay office is still a little soft.

Joe: Hi.

Joe: Obviously not.

Speaker Change: Not a lot different than it would have been when we were together in March So Morris I think steady as she goes there I think as the rest of the year lays out that we'll have a lot to do with both wave and CT Dietrich and our businesses on the building products side. So.

Kathryn Thompson: So we'll get a little bit dependent on market, but we kind of feel like steady as she goes for Wave.

Speaker Change: We did a little bit depended on market, but we kind of feel like steady as she goes for with.

Joe Hayek: Okay, and tying into that for Clark Dietrich, which, you know, for that JV, I mean, that's very heavily tied to just traditional commercial construction. But you saw a nice uplift at $13 million, which is higher than the sub $10 million range you've had in the past few quarters. Is that a signaling that we've hit more of a trough, or is it more, and it has some demand, or is it more kind of like what we talked about with wave timing, price, true volume demand? Another very fair question. On Clark Dietrich... So, and what you point out is there are a couple of differences.

Speaker Change: Okay, and tying into that for heart data glitch.

Speaker Change: Is that J D.

Speaker Change: That's very heavily tied to just traditional commercial.

Speaker Change: Commercial construction.

Speaker Change: But you saw a nice uplift at $13 million.

Speaker Change: Which is higher than the sub $10 million range, you've had in the past few quarters.

Speaker Change: Is that signaling that were we to more of a trough that or is it more.

Speaker Change: And he has some demand or is it more kind of like what we talked about with Wayne timing price and volume demand.

Joe: Okay.

Joe: Another very fair question on Clark Dietrich.

Joe: What we.

Joe: And what do you point out is there are a couple of differences. It is much more new construction centric versus R&R on some of our core businesses.

Joe Hayek: It is much more new construction-centric versus R&R on some of our core businesses and on WAVE. So, it's a bit more exposed to higher interest rates, and it's a bit more exposed to that commercial construction, which is a bit more challenged.

Joe: So it's a bit more exposed to higher interest rates.

Joe: A bit more exposed to that commercial construction, which is a bit more challenged.

Joe Hayek: has been challenged and we think in the next several months will be more challenged and so we actually view Q4 for us as a reflection of Clark Dietrich being a market leader and having a great value proposition, but probably a little more of, at least in the near term, an aberration, and so we would look for Clark Dietrich to be in 2.1 at least, probably closer to flat with 2.1 of last year.

Joe: Has been a challenge and we think in the next several months will be more challenged and so we actually do.

Joe: Q4 for us as a reflection of course.

Joe: Our district, being a market leader and having a great value proposition, but probably a little more at least in the near term an aberration.

Joe: And so we would look for the future it could be in Q1 at least probably closer to flat with Q1 of last year.

Kathryn Thompson: Okay, great, I'll hop back in the queue.

Speaker Change: Okay, Great I'll hop back in the queue. Thanks, so much.

Operator: Thanks so much.

Daniel Moore: Your next question comes from a line of Daniel Moore from CJS Securities, your line is open. Thank you. Good morning, Joe, Colin, Marcus. Thanks for taking the questions.

Daniel Moore: Your next question comes from the line of Daniel Moore from CJS Securities. Your line is open.

Joe Hayek: Thank you and good morning, Joe calling Markus thanks for taking the questions for today.

Daniel Moore: If I missed it, forgive me, what were the revenue and EBITDA contributions from Rogasco in the quarter, if you break those out, and what are your expectations for organic, wholly owned? Top-line growth, you know, both consumer and building products for Q1 and the balance of the year. I know you don't like to give specific guidance, but, you know, just wondering if you expect to generate positive organic growth, you know, in fiscal 26, or are we thinking closer to flat, you know, given all the current macroeconomic conditions? Thanks, Dan.

Speaker Change: If I missed it forgive me what were the revenue and EBITDA contributions from <unk> in the quarter.

Speaker Change: If you break those out and what are your expectations for organic wholly owned.

Speaker Change: Topline growth, both consumer and building products for Q1, and the balance of the year I know you don't like to give specific guidance.

Speaker Change: But just wondering if you expect to generate positive organic growth in fiscal 'twenty six where we are.

Speaker Change: Taking closer to flat given all the current macro uncertainty.

Speaker Change: Thanks, Dan ill take the first part of your question in.

Colin Souza: I'll take the first part of your question, and then we'll attack the latter part. So, Onragasco, specifically, very, very happy with that acquisition. They continue to perform well. Within the quarter, they contributed roughly $16.5 million in revenue and a couple million dollars, roughly $2 million, and even to the building products business. So, it's adding to the year-over-year growth in building products, in addition to the base business is operating very well, as I mentioned earlier, where those end markets and products are returning to seasonally normal demand patterns there. So, very pleased with Onragasco so far and excited of what's to come as well.

Speaker Change: Then we'll attack.

Speaker Change: The latter part the honor of Gasco, specifically very very happy with that acquisition. They continued to perform well within the quarter. They contributed roughly $65 million in revenue and a couple million dollars roughly $2 million and EBITDA to the building products business.

Speaker Change: It's adding to the year over year growth in building products. In addition to the base business is operating very well as I mentioned earlier, where those those end markets. Our products are returning to seasonally normal demand patterns. There. So very pleased with with <unk>. So.

Speaker Change: So far and excited of what's to come as well.

Joe Hayek: Yeah, relative to Q1 and beyond. You're right, we don't talk a lot about sort of specific guidance. I would type back to The market outlook is not terribly different than it was in March, which is to say it's a little bit murky and you've got Unemployment relatively low. You've got interest rates stubbornly high. Consumer confidence is... Okay, getting better. You've got a lot of tariff uncertainty and and you continue to have a lot of things happening in the world and certainly in the economy for consumers and in building products that cause, I think, everybody to not have phenomenal visibility.

Speaker Change: Yes, Dan relative to Q1 and beyond.

Speaker Change: You're right, we talk a lot about sort of specific guidance I wouldn't tie.

Speaker Change: Tied back to.

Speaker Change: The market outlook.

Speaker Change: Is not terribly different than it was in March, which which is to say, it's a little bit Merck and <unk> gas.

Speaker Change: Unemployment relatively low you've got interest rates stubbornly high and consumer confidence is.

Speaker Change: Okay getting better you've got a lot of tariff uncertainty and you continue to.

Speaker Change: A lot of things happening in the world and certainly in the economy for our consumers and in building products.

Speaker Change: That.

Speaker Change: Cause I think everybody to not have phenomenal visibility when we were together in March a week and a half later was April.

Joe Hayek: When we were together in March, you know, a week and a half later was April 2nd. And, you know, all the tariff announcements and all the things that happened pursuant to that. We're sitting here chatting now, and in early July, there'll potentially be another set of data points that come out relative to what the trade policy and the tariff environment is likely to look like. And so...

Speaker Change: All of that tariff announcements and all the things that happened pursuant to that.

Speaker Change: We're sitting here chatting now in early July.

Speaker Change: Potentially be.

Speaker Change: The other set of data points that come out relative to what the trade policy in the tariff environment is likely to look like and so.

Joe Hayek: What we're focused on is really taking care of our customers. And I look at maybe the next few months as a reflection of the last quarter. And when we think about the quarter. I would say maybe take consumer and building products, but consumer, we held CERF in Q4. If you remember last year, Q3 was a very strong quarter for the consumer business because of some of the storms and the weather phenomenons that were there, and then Q4 wasn't as good as we hoped it was going to be. In this year, 2025, it was another excellent Q3, and Q4 was significantly better.

Speaker Change: We're focused on is really taking care of our customers and I look at maybe the next few months as a reflection of the last quarter and when we think about the quarter.

Speaker Change: I would say, maybe take consumer and building products, but.

Speaker Change: Consumer while we held serve is in Q4, if you remember last year Q3 was a very strong quarter for the consumer business because of some of the storms and the weather phenomenon that were there and then Q4.

Speaker Change: Wasn't as good as we hoped it was going to be.

Speaker Change: In this year in 2025. It was another excellent Q3, and Q4 was significantly better there are two things going on there we have gotten better at supporting our retailers and making sure that that demand for our products is.

Joe Hayek: There are two things going on there. We've gotten better at supporting our retailers and making sure that that demand for product is met with consistent supply, and our helium business has also showed a really good improvement, in part because some of the things that we've been doing with our new products and with our supply chain, but also remember the party city bankruptcy and those stores closing has created more demand for our customers that are selling our products, and we're happy to support them. We think that's going to continue to take place and be incremental. On the building product side, there's probably a little more visibility in the next several months based on some of the trends that we've seen in our cooling and construction business, in our heating business, and in our water business, and obviously we'll now have, certainly for a little bit of June, and then the fiscal 2026 inclusion of elegance results.

Speaker Change: Met with consistent supply.

Speaker Change: And our helium business as also showed.

Speaker Change: Really good improvement in part because some of the things that we've been doing with our new products and with our supply chain, but also remember the party city bankruptcy and those stores closing.

Speaker Change: <unk> created more demand for our customers.

Speaker Change: That are selling our products and we're happy to support them, we think thats going to kind of continue to take place and be incremental we're also building product side.

Speaker Change: Theres, probably a little more visibility in the next several months based on some of the trends that we've seen.

Speaker Change: Our claim construction business.

Speaker Change: Our heating business.

Speaker Change: And in our water business written at obviously, we'll now have.

Speaker Change: Certainly for a little bit of June and then the balance of fiscal 2026 inclusion of <unk> results.

Daniel Moore: So yeah, we feel good about all the things that we can control and are pretty cautiously optimistic, I would say, about what will unfold in the next six months, but a lot of that won't always be totally in our control. Understood. Appreciate it, Joe.

Speaker Change: So we feel good about all the things that we can control and are pretty cautiously optimistic I would say about what will unfold. The next six months, but a lot of that will always be totally in our control.

Speaker Change: Okay.

Speaker Change: Understood appreciate it Joe.

Joe Hayek: Maybe just provide a little bit more detail on Elgin, you know, how it came about, how their HVAC components fit into the rest of your wholly owned building products and any potential revenue or cost . Sure. As we mentioned, that acquisition is a great example of our strategy in action, Dan. They're a leader in a niche market. They roll form steel. We can help them with that. They purchase coils of steel. We'd like to think that we're pretty good at that. They have a good operational footprint. We think that we're pretty good at that and can be helpful there.

Speaker Change: Maybe just provide a little bit more detail on Elgin, how it came about how their HVAC components fit into the rest of your wholly owned building products and any potential revenue or cost synergies.

Speaker Change: Sure.

Speaker Change: As we mentioned yet that acquisition is a great example of our strategy and action that they're a leader in a niche market. They roll form steel, we can help them with that they purchased oils of steel we'd like to think that we're pretty good at that they have.

Speaker Change: Good operational footprint, we think that we're pretty good at that and can be helpful. There and they still attitude not in the exact same customers that we have but several overlapping customers and the same types of the customers, which is really building products distribution. So we think that creates meaningful opportunities for us.

Joe Hayek: They sell into not the exact same customers that we have, but several overlapping customers and the same types of customers, which is really building products distribution. We think that creates meaningful opportunities for us for synergies, both on the top line and on the efficiency side. We're one week in, so it's really hard to quantify anything right now, but we're pretty excited. We've got folks up there right now helping to get people more integrated into Worthington. Again, it's early, but we're optimistic and excited.

Speaker Change: For synergies both on the top line and on the efficiency side, we're one weekend.

Speaker Change: So it's really hard to quantify anything right now, but we're we're pretty excited and we've got.

Speaker Change: Looks up there right now helping to get people more integrated into Worthington. So again, it's early but we're optimistic and excited.

Joe Hayek: And just out of curiosity, the purchase price pretty attractive at, I think, around seven times EBITDA, anything, you know, anything with the word HVAC in it, generally trading at much higher levels. So just talk about maybe the customer base they serve, you know, and kind of growth outlook organically. Yeah, so it is, Dan, for Elgin in particular, their channels they're serving is primarily building products, distribution, but also contractors as well. And, you know, we've, through our M&A process, where we've talked about it before with you and others, just, we continue to have a pipeline of attractive areas and adjacencies and niche areas within building products and consumer products.

Speaker Change: And just out of curiosity the purchase price is pretty attractive.

Speaker Change: I think around seven times EBITDA.

Speaker Change: Anything you know anything with the word HVAC and it generally trading at much higher levels. So just talk about maybe the customer base they serve.

Speaker Change: You know in kind of growth outlook organically.

Speaker Change: It would be really helpful.

Dan: Yes. So it is Dan on for <unk> and in particular their channels Theyre, serving its primarily building products distribution, but also contractors as well.

Dan: And we've through our M&A process, where we've talked about it before with you and others just.

Dan: We continue to.

Dan: And a pipeline of attractive areas and adjacencies in niche areas within building products and consumer products and HVAC components, we identified as one of those attractive areas in the M&A markets are what they are a little softer than they've been historically.

Joe Hayek: And HVAC components, we identified as one of those attractive areas, and, you know, the M&A markets are what they are, a little softer than they've been historically, but we're able to, fortunately, get this transaction done and are excited to invest in this attractive niche area and excited, as Joe mentioned, of what's to come with that business and what we can do together.

Speaker Change: But we're able to fortunately get this transaction done and are excited to invest in this attractive niche area and excited and as Joe mentioned.

Speaker Change: Of what's to come with that business and what we can do together.

Operator: All right, very good. I'll switch back to the follow-ups.

Speaker Change: Alright, very good I'll circle back with follow ups. Thank you.

Susan Maklari: Thank you. Your next question comes from a line of Susan Maklari from Goldman Sachs. Your line is open. Thank you. Good morning, everyone. Good morning.

Greg: Thanks, Greg.

Speaker Change: Our next question comes from the line of Susan Mcclary from Goldman Sachs. Your line is open.

Susan Mcclary: Thank you good morning, everyone.

Susan Maklari: My first question is on steel. Can you talk a bit about what you're seeing in terms of input costs across the business and maybe how you're also approaching pricing relative to any inflation that you're seeing there, just given the softness that we are seeing across both the consumer and perhaps some of that building product space? Yeah, thanks, Susan. So just on the steel market in particular, it is a big input cost to our products, the steel market, as you've seen, there's a run up in pricing in April, and it's come back down and a little rain's found recently.

Susan Mcclary: My first question. Good morning. My first question is on steel can you talk a bit about what youre seeing in terms of input costs across the business and maybe how you are also approaching pricing relative to any inflation that you're seeing there just given the softness that we are seeing across both the consumer and perhaps.

Speaker Change: Some of that building product space.

Speaker Change: Yes, thanks, Susan So just on on the steel market in particular is a big input costs of our products.

Speaker Change: The steel market as you've seen there's a run up in pricing in April and it's come back down in the low range bound recently, but our teams are really working hard just around price risk mitigation, and we're hedging as necessary to support our customers and.

Colin Souza: But our teams are really working hard just around price risk mitigation, and we're hedging as necessary to support our customers and offer prices that are locked in. And ultimately, for us, it's about mitigating any volatility of those costs within our results. And we continue to do that. We've been working through that for a long time with our price mitigation and price risk teams. And we don't anticipate any volatility as a result of that coming through here. And then just on the price and mix piece, we've talked about it a little bit just around as our building products in particular is a good story around margin expansion in the wholly owned business with the increased volume there, we saw some good improvement from a conversion cost perspective that has trickled through the results as well.

Speaker Change: Our prices are locked in and ultimately for us it's about mitigating any volatility of those costs within our our results and.

Speaker Change: We continue to do that we've been working through that for a long time with our price mitigation and price risk teams and.

Speaker Change: We don't anticipate any any volatility as a result of that from a third year and then just on the.

Speaker Change: The price and mix piece.

Speaker Change: We've talked about it a little bit just around at our building products in particular is a good starting around margin expansion in the wholly owned business with the increased volume there. We saw some good improvement from a conversion cost perspective that has a trickle through the results as well.

Susan Maklari: Okay, that's helpful.

Speaker Change: Okay. That's helpful and then turning to the modernization effort. It's good to hear that that spend is coming through and it it seems like it's.

Colin Souza: And then turning to the modernization effort, it's good to hear that that spend is coming through and it seems like it's been a really good effort there. Can you talk about the benefits that we should expect as we look to fiscal 2026? Anything that you're especially focused on and how we should think about perhaps some of that flow through across the various segments? Sure, Susan. So some of that is in 26, but if you remember, there were two specific facilities. One is in Columbus and the other is in Wisconsin. You know, we spent $16, $17, $18 million over the last couple of years in our gas grill, aluminum forklift, and other refillable tanks here in Columbus, automating and really investing in that business to be able to increase throughput and ultimately increase our efficiencies.

Speaker Change: Being a really good effort. There can you talk about the benefits that we should expect as we look to fiscal 2026 anything that you are especially focused on and how we should think about perhaps some of that flow through across the various segments.

Speaker Change: Sure Susan so some of that is in 'twenty six but if you remember there were queues.

Speaker Change: Cystic facilities, one is in Columbus and the other is in Wisconsin, We spent.

Speaker Change: The 16th.

Speaker Change: <unk> 16, 17 $18 million over the last couple of years.

Speaker Change: Our.

Speaker Change: Cash thrill alumina other forklift and other refillable tanks here in Columbus, automating and really investing in that business to be able to increase throughput and ultimately.

Speaker Change: Increase our efficiencies.

Colin Souza: That's served us well and I think will serve our customers well since a lot of them have seen an increase in demands and as a domestic manufacturer our supply chain is pretty tight and so we talked about some of the things that we're able to do in cases of natural disasters and things like that. The other piece, which is really in the camping gas business and some of our torch businesses up in Wisconsin, you know, that will run through probably another 15 months from now and so the benefits from that won't really manifest themselves until maybe later in fiscal 2027.

Speaker Change: Served us well and I think we will serve our customers well since a lot of them have seen an increase in demand and as a domestic manufacturer or supply chain is pretty tight and so we've talked about some of the things that we're able to do in cases of natural disasters and things like that.

Speaker Change: The other piece, which is really in the camping gas business in some of our towards businesses up in Wisconsin that will.

Speaker Change: Run through probably another 15 months from now and so the benefits from that won't really manifest themselves until maybe later in fiscal 2027.

Operator: Okay.

Operator: And then just one last question.

Speaker Change: Okay and then just one last question you.

Operator: You mentioned in a response to a prior question that the M&A pipeline has perhaps softened a bit, just given the backdrop that we're in. Can you talk a bit more about capital allocation, how you're thinking about the potential for deals in this environment? And it was nice to see the dividend raise come through yesterday.

Speaker Change: And you mentioned in a.

Speaker Change: The response to prior question at the M&A pipeline has perhaps softened given the backdrop that we're in can you talk a bit more about capital allocation, how you're thinking about the potential for deals in this environment. It is nice to see the dividend raise come through yesterday any thoughts on how you're balancing M&A versus shareholder return.

Joe Hayek: Any thoughts on how you're balancing M&A versus shareholder return? Yeah, great, great question. And I'll maybe talk for 30 seconds and let Colin kind of go into some of his thoughts, but Capital allocation for us has long been balanced, and we're buying back shares, not super aggressively because we have a bias towards growth and not growth at any price. But, you know, as we just, as Dan just alluded to, we found an acquisition that we thought made a lot of sense for us and was a reasonable value. And so we increased our dividend by 12%.

Speaker Change: <unk>.

Speaker Change: Yes, Greg Great question, and I'll, maybe talk about.

Speaker Change: 30 seconds or.

Speaker Change: Let collin kind of go into some of his thoughts but.

Speaker Change: Capital allocation for us has all been balanced.

Speaker Change: We're buying back shares not.

Speaker Change: We're aggressively because we have a bias towards growth not growth at any price, but as we just as dangerous alluded to we found an acquisition that we thought made a lot of sense for us.

Speaker Change: It was a reasonable value and so are we.

Speaker Change: Increased our dividend by 12% the board of directors did that yesterday, and so we're still pretty committed to a balanced approach, but from an M&A pipeline perspective, I'll, let Colin give you his thoughts yes.

Colin Souza: The board of directors did that yesterday.

Colin Souza: And so we're still pretty committed to a balanced approach, but from an M&A pipeline perspective, I'll let Colin give you his thoughts. Yeah, so the M&A markets, I would say, are softer. Our pipeline, our process, what our team's focused on is really identifying targets, both could be private equity-owned, could be family-owned, private companies, and progressing those through the pipeline, having a number of conversations, and ultimately it takes a buyer and seller to come together to agree on something. And we were fortunate to get that, something done on Elgin Manufacturing. So, you know, we're continuing to focus there as a key part of our growth strategy.

Speaker Change: Isn't it the M&A markets I would say our software to our pipeline our process what our team's focus on is really identifying targets. Both it could be private equity one could be family owned private companies.

Speaker Change: And progressing those through the pipeline, having a number of conversations and ultimately it takes a buyer and seller to come together to agree on something and we were fortunate to get something done on <unk> manufacturing.

Speaker Change: So.

Speaker Change: We're continue to focus there is a key part of our growth strategy as Joe mentioned addressed the Allergan acquisition is our strategy in action.

Colin Souza: As Joe mentioned, the Elgin acquisition is our strategy in action and, you know, our capital allocation focus will definitely include M&A in the future. You know, with that being said, we do feel like we've got good free cash flow generation in the business, $159 million this year, this fiscal year, and are mindful as well about the facility modernization spend that we talked about earlier, which will be elevated from a CapEx standpoint here for the next 15 months or so.

Speaker Change: Our capital allocation.

Speaker Change: It will definitely include M&A in the future.

Speaker Change: With that being said, we do feel like we've got good free cash flow generation in the business of $159 million. This year this fiscal year and.

Speaker Change: Our mindful as well about the facility modernization spend that we talked about earlier, which will be elevated from a capex standpoint here for the next 18 months or so I mean, not a bottom.

Joe Hayek: Yeah, I mean, bottom line is that... Uncertainty with tariffs and interest rates and things like that tends to be a little chilling for the M&A market generally, but I would tell you that our teams are engaged in strategic conversations today, talking to folks and where it makes sense we'll continue to have those conversations and would look to continue to grow, certainly both organically but also through M&A. Yeah, okay.

Speaker Change: Bottom line is.

Speaker Change: Uncertainty with tariffs and interest rates and things like that tends to be a little showing for the M&A market generally but I.

Speaker Change: I would tell you that our teams are engaged in strategic conversations today.

Speaker Change: Talking to folks and where it makes sense, we will continue to have those conversations and would look to.

Speaker Change: Continue to grow certainly both organically, but also through evident.

Operator: Thank you for all the color. Good luck with everything. Thank you.

Speaker Change: Yeah. Okay. Thank you for all the color good luck with everything.

Speaker Change: Thank you.

Brian McNamara: Your next question comes from a line of Brian McNamara from Canaccord Genuity. Your line is open. Good morning, Brian. Hey, good morning, guys. Good morning, guys.

Speaker Change: Your next question comes from the line of Brian Macnamara from Canaccord Genuity. Your line is open.

Brian Macnamara: Good morning, Brian Good morning, guys. Good morning, guys. Congrats on the strong results.

Joe Hayek: Congrats on the strong results. So, I'm curious what you're seeing in the marketplace as it relates to tariffs, being a domestic manufacturer, presumably your advantage, but a lot has changed, as you mentioned, on China tariffs since your Q3 report in late March. What specifically are your China source competitors doing that you're observing? Are they running down inventories on hand? Have they already taken price on the shelf? Are they doing something else that would be helpful? I don't know if the answer to your question is yes, yes, yes, yes, and yes, but...

Brian Macnamara: So im curious what youre seeing in the marketplace as it relates to tariffs being a domestic manufacturer, presumably your advantage, but a lot of change that you mentioned on China tariffs. Since your Q3 report in late March what specifically are your China source competitors doing that you're observing are they running down inventories on hand have they already taken price on the shelf are they doing.

Brian Macnamara: Something else.

Brian Macnamara: Helpful. Thanks.

Brian Macnamara: [laughter].

Brian Macnamara: The answer to your question is yes, yes, yes, yes, and yes, but.

Joe Hayek: You know, related to tariffs, we first talked about this, I think, in December, and we talked about it again in March, and we will certainly It's appropriate to talk about it now, but It's been an interesting sort of six months as people continue to plan and continue to react and ultimately we'll have to continue to do those things. But yes, only seven or eight percent of our revenues are sourced from overseas, predominantly in Asia. You know, 80 percent of our ish of our revenue is source produced and sold in in North America and then another 12-13 percent looks like that only is in Europe.

Brian Macnamara: Related to tariffs, we first talked about this I think in December and we talked about it again in March and we will certainly.

Brian Macnamara: It's appropriate to talk about it now but.

Brian Macnamara: It's been an interesting one.

Brian Macnamara: Six months as people continue to plan and continued to react and ultimately we'll have to continue to do those things, but yes, only 7% or 8% of our revenues are sourced from overseas predominantly in Asia.

Brian Macnamara: 80% of our.

Joe Hayek: Each of our revenue is sourced produced and sold in North America, and then another 12% to 13% it looks like that only is in Europe and so on the businesses our tools businesses. So currently that's GTI.

Joe Hayek: And so on the businesses, our tools businesses, so currently that's GTI and that's level five and certainly Halo.

Brian Macnamara: Next level, five and certainly Halo.

Joe Hayek: Our Mitigation efforts along the way have included and will include asking our suppliers to help us trying to find cost savings everywhere we can when it's appropriate resourcing the locations where those products are made and if it's necessary it would include price increases and I think people have taken a variety of approaches and Some of those things are already in place, and others, I think people are still trying to... We're not going to suss out or ascertain what the longer term plan will be, and so we'll stay flexible and we'll stay kind of close with our customers.

Brian Macnamara: Sure.

Brian Macnamara: Mitigation efforts along the way have included and will include.

Brian Macnamara: Asking our suppliers to help us trying to find.

Brian Macnamara: Cost savings everywhere, we can.

Brian Macnamara: When it's appropriate resourcing those locations, where those products are made and if it's necessary. It will include price increases and I think people have taken a variety of approaches and.

Brian Macnamara: Some of those things are already in place and others I think people are still trying to.

Brian Macnamara: So if the outer ascertain what's the longer term plan will be and so we'll stay flexible.

Brian Macnamara: And we will stay close with our customers and one of the things about our products as they tend to be pretty differentiated and as you mentioned.

Joe Hayek: But one of the things about our products is they tend to be pretty differentiated. As you mentioned, as a domestic manufacturer, we've added capacity in a number of places to try and help our customers who are seeing increases in demand for theirs.

Brian Macnamara: Domestic manufacturer and we've added capacity in a number of places to try and help our customers who are seeing increases in demand for there. So.

Brian McNamara: So it's hard to give a really definitive answer because things could change next week or in a couple weeks relative to the trade environment, but we feel reasonably good about where we sit. And then secondly, on gross margins, obviously a big improvement in H2. I think you said Q3 is typically a little stronger than Q4, and they're kind of in line-ish. So like, is it reasonable to assume kind of 29 plus percent sustains next year? I know that I guess the medium-term target is 30. I'm just trying to figure out the nuances here.

Brian Macnamara: It's hard to give a really definitive answer because things could change next week or in a couple of weeks relative to the trade environment, but we feel reasonably good about where we sit.

Brian Macnamara: Yeah.

Brian Macnamara: Great and then secondly on gross margins, obviously, a big bigger.

Brian Macnamara: A bigger improvement in H. Two I think you said Q3 is typically a little stronger than Q4 and that there are kind of in line ish. So like.

Brian Macnamara: Is it reasonable to assume kind of 29 plus percent sustained next year I know that I guess the medium term target is 30, I'm just trying to figure out the nuances here I know I think H, one is typically a bit weaker than H to what Andy said.

Colin Souza: I know I think H1 is typically a bit weaker than H2, but any help there on the gross margin line for next year would be helpful. Yeah, thanks, Brian. So just, you know, on the margins, you know, we've had a couple quarters in a row here, 29%, and you're right, you know, Q3 and Q4 absolutely are seasonally stronger quarters here. And, you know, we're, we don't think things will revert to significantly less than that over time, but we're going to be working hard to get those up to 30%, as Joe talked about earlier. So that's all the initiatives in place here around whether it's price risk, whether it's conversion costs, and a lot of where we're investing as well in our, some of our facilities.

Brian Macnamara: Any help there on the gross margin line for next year would be helpful.

Brian Macnamara: Yeah. Thanks, Brian So just.

Brian Macnamara: On the margin we've had a couple of quarters in a row here of 29%.

Speaker Change: You are right Q3, and Q4 are absolutely are seasonally stronger quarters here.

Brian Macnamara: We're we don't think.

Brian Macnamara: Things will revert to <unk>.

Speaker Change: Significantly less than that over time, but we're going to be working hard to get those up to 30% as Joe talked about earlier. So that's all the initiatives in place here around whether it's price risk whether it's conversion cost.

Brian Macnamara: And a lot of where we're investing as well in our some of our facilities. So.

Colin Souza: So, you know, over the near term, right, medium term, we'll be working towards to get that higher as best we can.

Brian Macnamara: Over the near term right medium term, we'll be working towards to get that higher assessed in Canada.

Colin Souza: Okay, and then finally on Elgin, just three quick ones. One, in terms of modeling, any seasonality on revenues? Two, I think the trailing 12-month EBITDA margin was a bit south of 12%. Is there a path to get that to 20, just in line with your M&A framework? And if so, how do you get there?

Speaker Change: Okay, and then finally on Allergan, just three quick ones.

Speaker Change: In terms of modeling any seasonality on revenues.

Brian Macnamara: I think the trailing 12 month EBITDA margin was a bit south of 12% is there a path to get that to 20% just in line with your.

Brian Macnamara: Your M&A framework.

Colin Souza: And then three, is there any China sourcing there? So, the question is, Brian, on Elgin, you know, roughly $115 million in revenue, $13 million was their trailing EBITDA. You know, seasonally, the second half of the calendar year tends to be a little stronger for them and where they play, you know, from a margin standpoint. We feel, as Joe mentioned, this is attractive business for us to really deploy our business system, Worthington business system. And what we feel like we can bring to them is a lot of operational experience, know-how, efficiencies, some benefits from a purchasing standpoint, and price risk.

Brian Macnamara: And if so how do you get there and then three is there any China sourcing there.

Brian Macnamara: So good question, Brian on Allergan, roughly $850 million revenue 13 million was their trailing EBITDA.

Brian Macnamara: <unk> seen that seasonally the second half of the calendar year tends to be a little stronger for them and where they play.

Brian Macnamara: From a margin standpoint, we feel as Joe mentioned this is attractive business for us to really deploy our business system worthy business system and what we feel like we can bring to them. There's a lot of operational experience knowhow efficiencies Ben.

Brian Macnamara: <unk> from a purchasing standpoint and price risk.

Colin Souza: And then You know, complement that with, you know, where we play from a channel perspective and serving a number of areas across the building product space and in overlap with with customers. So, you know, that's on top of a strong leadership team and the cultural fit that they have. So we're excited to get to work together and we'll absolutely be focused on improving the margins there.

Brian Macnamara: And then.

Brian Macnamara: Sure.

Brian Macnamara: Complement that with where we play from a channel perspective, and serving a number of areas across the building product space.

Brian Macnamara: And overlap with with customers so.

Brian Macnamara: That's on top of a strong leadership team and the cultural fit that they have so we're excited to get to work together and we will absolutely be focused on improving the margins. There yes. They don't have any in sourcing from China yet.

Colin Souza: Yeah, they don't have any sourcing from China. Yeah.

Brian Macnamara: Yes.

Brian McNamara: Thanks a lot, guys. Best of luck. Thanks, Brian.

Brian Macnamara: Excellent alright, thanks, a lot guys best of luck.

Brian Macnamara: Thanks, Brian.

Operator: And again, if you'd like to ask a question, press star 1 in your telephone keypad.

Speaker Change: And again, if you'd like to ask a question press star one on your telephone keypad.

Walt Lipsack: Your next question comes from the line of Walt Lipsack from Seaport Research. Your line is open. Hey, thanks. Good morning, Joe and Colin. I'm Walter Liptak. Hey, great quarter. And I wanted to ask about building product.

Speaker Change: Our next question comes from the line of Walt Liptak from Seaport Research. Your line is open.

Walt Liptak: Hey, Thanks, Good morning, Joe and column.

Brian Macnamara: The tech but.

Speaker Change: Hey, great quarter, and I wanted to ask about.

Speaker Change: Building products.

Joe Hayek: And, you know, you've gone into some detail already about the tariff impact, but I wonder if we could talk a little bit kind of specifically about building products and any, you know, just your thoughts on how tariffs impacted pricing, supply, demand, you know, those kind of things. Yeah, we didn't really, it's very hard for us, Walt, to quantify any of that, because it continues to be a little bit of a moving target. I think the teams, certainly in consumer, but also in building products, have done a nice job. We're through the destocking and some of those phenomenons that we had to deal with, and we're seeing some real strength in our cooling and construction business, as a lot of those things are rolling out throughout the North American building products landscape.

Speaker Change: And you've gone into some detail already about the tariff impact but I.

Speaker Change: I Wonder if we could talk a little bit specifically about building products and any.

Speaker Change: Just your thoughts on how tariffs impacted.

Speaker Change: Pricing.

Speaker Change: Supply demand you know those kind of issues.

Speaker Change: Yes, we did really it's very hard for us to quantify any of that because it continues to be a.

Speaker Change: Little bit of a moving target, but I think the.

Brian Macnamara: The teams certainly a consumer but also in building products.

Brian Macnamara: As I have done a nice job we're through the Destocking in some of those phenomenons that we had to deal with and we're seeing some real strength in <unk>.

Brian Macnamara: Our cooling and construction business.

Brian Macnamara: A lot of those things are rolling out.

Brian Macnamara: Throughout the North American building products landscape and.

Joe Hayek: just done a really good job increasing volumes, which gets conversion costs lower and ultimately margins higher.

Brian Macnamara: Just done a really good job, increasing volumes, which guess conversion costs lower and ultimately margins higher.

Brian Macnamara: Okay.

Joe Hayek: Okay, great. And, you know, kind of along those lines, and, you know, I think you're talking about a little bit of this question here, but in building products, when you're preparing remarks, it sounded like you're gaining some market share, or is there a share opportunity? I wonder if you could talk about that. So, yeah. We're pretty focused. And as you know, we are zeroed in on having leadership in niche markets. And we do that effectively, you know, leveraging Worthington Business System, Innovation, Transformation, and M&A. But that gives us a seat at the table with our customers when they're thinking through things and when they're understanding their own markets.

Brian Macnamara: Okay great.

Speaker Change: And kind of along those lines and I think youre talking about a little bit. This question here, but and building products. It's about when you in your prepared remarks, it sounded like you're gaining some market share.

Speaker Change: Or is there a share opportunity I wonder if you could talk about that.

Brian Macnamara: So yes.

Brian Macnamara: We're pretty focused and as you know.

Brian Macnamara: We are zeroed in on adding leadership in niche markets.

Brian Macnamara: And we do that.

Brian Macnamara: Effectively leveraging.

Brian Macnamara: The business system innovation transformation, and M&A, but that gives us a seat at the table with our customers when they're thinking through things and when there.

Brian Macnamara: Understanding their own markets and we're trying really hard to work with them and understand their pain points and so in a couple of different areas.

Joe Hayek: And we're trying really hard to work with them and understand their pain points. And so in a couple of different areas, In, I think, on the heating and cooking side, but also on the refrigeration side and in the celebrations side, you know, there's been increases in demand from our customers. And so we've responded there. both investments we've historically made in and certainly adding capacity and adding shifts. Is some of that related to us being a domestic manufacturer? Certainly probable, but we can't really quantify it. Relative to tariffs, but some of it related to what we think we do pretty well and having a very tight supply chain very likely.

Brian Macnamara: Yes.

Brian Macnamara: I think on the heating and cooking side.

Brian Macnamara: Also on the refrigeration side and in the celebrations side, there's been some increases in demand from our customers and so we've responded there.

Brian Macnamara: Both the investments, we've historically made in and certainly adding capacity and adding shifts.

Brian Macnamara: Is some of that related to us being a domestic manufacturer.

Brian Macnamara: Certainly probable, but we can't really quantify it.

Brian Macnamara: <unk>.

Brian Macnamara: Relative to tariffs, but it's some of it related to what we think we do pretty well and having a great tight supply chain very likely.

Colin Souza: Okay, that sounds great. And then in your prepared remarks, also, Colin, I think you talked about consumer mix. Was that consumer mix the balloon time or is there some other consumer mix that was positive? Yeah, so good, good mix and balloon time. Yes, performing very well. Joe mentioned it earlier. We make inroads on new product development there with the mini tank as well as channel expansion that we're seeing there. So so absolutely with balloon time and the other products contributing well, as well. And, you know, demand is holding up similar to to what we saw last Okay, good.

Brian Macnamara: Okay that sounds great.

Speaker Change: And then in your prepared remarks honestly Collyn I think you talked about consumer mix.

Speaker Change: Was that consumer mix, the balloon time or is there some other consumer mix that was positive for you guys.

Speaker Change: Yes, it's a good mix and bulletin time, yes, performing very well Joe mentioned it earlier.

Speaker Change: We make inroads on new product development, there with the many tank as well as channel expansion.

Speaker Change: What we're seeing there so so absolutely believe on then.

Speaker Change: Other products contributing well as well and.

Speaker Change: Demand is holding up similar to what we saw last quarter.

Speaker Change: Okay. Good.

Joe Hayek: And, you know, you guys don't, you know, you gave some idea about the stability of the markets, but no guidance. I wonder, Joe, if you could help us just by talking about the year ahead, you know, as a new-ish CEO, you know, what are your objectives? What would you like to see happen over, you know, the next four So you're giving me one more chance to give guidance, huh? Well, OK. But don't give guidance, whatever you do. Whatever you do, don't give guidance. Just this season, we have a lot to be proud of. And I said it at the beginning of my remarks.

Speaker Change: And you guys. So you gave some idea about the stability of the market.

Speaker Change: But no guidance I Wonder Joe if you could help us just by talking about the.

Speaker Change: You're ahead new ish.

Speaker Change: CEO what are your objectives, what would you like to see happen.

Speaker Change: Over.

Speaker Change: The next four quarters.

Speaker Change: So youre, giving me one more chance to give guidance well okay.

Speaker Change: Okay.

Speaker Change: Whenever you do that just yet.

Speaker Change: This season, we have a lot to be proud of and I've said it at the beginning of my remarks, our culture is such a massive advantage for us and it leads to us.

Joe Hayek: Our culture is such a massive advantage for us. And it leads to us. being able to attract and retain the best and brightest for extended periods of time, and people just get better the more they're in a role. And we have so, you know, kind of many fantastic people that have been working hard on this, not just for the last 90 days, but for the last six months, and the last 12 months, and the last 18 months. And so, You know, when we think about what is possible for us, again, we're very happy to be talking about our Q4 results, but we've always had the luxury and a focus on thinking not just about the near term, but about the long term.

Speaker Change: Being able to attract and retain the best and brightest for extended periods of time and people just gets better the more they are in a role and we have so many fantastic people that have been working hard on this not just for the last 90 days, but for the last six.

Speaker Change: In the last 12 months in the last 18 months and so.

Speaker Change: And when we think about what is possible for US again, we're very happy to be talking about our Q4 results, but we've always had the luxury and a focus on thinking not just about the near term, but about the long term and so we continue to invest and silver.

Joe Hayek: And so we continue to invest, and so we're spending a lot of time, but when we talk about this with our people, we talk about why we win today, but then how we'll win tomorrow. So that's going to continue investments in connected culture and automation and AI and additional leadership in these niche markets, and it impacts whole strategic M&A. And so I think as we sit here today, we think we're really well positioned for the long term. We have to manage through some tariff uncertainty and some economic uncertainty, but our value propositions are really good.

Speaker Change: Spending a lot of time, when we talk about this with with our people we talk about why we win today with and how we'll win tomorrow. So that's been a continued investments in connected culture, and automation and AI and additional leadership in these niche markets.

Speaker Change: And impactful strategic M&A, and so I think as we sit here today.

Speaker Change: Think we're really well positioned for the long term, we have to manage through some tariff uncertainty in some economic uncertainty.

Speaker Change: But our value propositions are really good and if you think about going back to really our what our vision is to elevate spaces and experiences sometimes that's making.

Joe Hayek: And if you think about going back to really our vision, right, is to elevate spaces and experiences. Sometimes that's making a room or part of a building more comfortable or more aesthetically pleasing. giving somebody the ability to have that experience. And in a recession, sometimes it's harder for somebody to get on an airplane or stay in a hotel. And so they might want to be barbecuing or on a camping trip. And at other times, those spaces and experiences are in a time of need, where there's a natural disaster or a storm that creates hardships for somebody.

Speaker Change: A room or part of a building.

Speaker Change: More comfortable or more aesthetically pleasing other times.

Speaker Change: Giving somebody the ability to have that experience.

Speaker Change: And then a recession, sometimes it's harder for somebody to get on an airplane or stay in a hotel and so they might want to be Barbecueing art on a camping trip and in other times those spaces and experiences are in a time of need where there is a natural disaster or a storm that can create.

Speaker Change: Creates hardships for somebody in our products can be there to make them, maybe just a little better or a little less bad and so what I want us to accomplish what we all want us to accomplish is to continue to take care of our customers continue to work our strategies, which are really <unk>.

Joe Hayek: And our products can be there to make things maybe just a little better or a little less bad. And so what I want us to accomplish, what we all want us to accomplish, is to continue to take care of our customers, continue to work our strategies, which are really, really good. And ultimately, we do those things. And there might be some bumps in the road. But we see a lot of growth opportunities for us ahead. Our aspirations are kind of, we just talked about them a little bit ago.

Speaker Change: Really good.

Speaker Change: And ultimately we do those things and there might be some bumps in the road.

Speaker Change: But we see a lot of growth opportunities for US ahead, our aspirations are.

Speaker Change: We just talked about them a little bit ago, but we feel really good about what the future could look like for our teams.

Joe Hayek: But we feel really good about what the future can look like for our team.

Operator: Okay, great. Yeah, good luck in 2026. I hope you keep winning. Thank you.

Speaker Change: Okay, Great Yeah. Good luck in 2026, I hope you keep winning.

Speaker Change: Thank you.

Operator: And that concludes our question and answer session.

Speaker Change: And that concludes our question and answer session I will now turn the call back over to Joe Hayek for closing comments.

Joe Hayek: I will now turn the call back over to Joe Hayek for closing comments. Thank you everybody for joining us this morning. Have a wonderful Fourth of July holiday and a great summer. We'll look forward to speaking to everybody again soon.

Speaker Change: Thank you everybody for joining us this morning.

Speaker Change: Wonderful fourth of July holiday and a great summer, we look forward to speaking to everybody again soon.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].