Q2 2026 Worthington Enterprises Inc Earnings Call

December 17, 2025

Speaker #2: For more information on these risks and causes, please refer to the earnings release issued yesterday, after the market closed. This is available on the Investor Relations section of our website.

Operator: Good morning and welcome to the Worthington Enterprises' second quarter fiscal 2026 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 Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin.

Speaker #2: Additionally, our remarks today will include references to non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures can also be found in the earnings release.

Speaker #2: Today's call is being recorded and will a replay be available later on our website at made WORTHINGTON ENTERPRISES, INC. . Com . With that , I'll turn over to the call Joe for opening .

Speaker #3: Marcus, and good morning everyone. Welcome to Wellington.

Marcus Rogier: Thank you, Regina. Good morning, everyone, and thank you for joining us for Worthington Enterprises' Q2 fiscal 2026 earnings call. 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 nature and subject to risk and uncertainties 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. This is available on the Investor Relations section of our website. Additionally, our remarks today will include references to non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures can also be found in the earnings release.

Speaker #3: Fiscal 2026 second quarter earnings call. We had a strong Q2, which is a credit to our continuing refining and executing our teams' strategies.

Speaker #3: Our company , our customers , you and our shareholders I . the In quarter , despite market conditions that continue to be we again mixed , delivered year over growth in year revenue strong , adjusted EBITDA and earnings per share .

Speaker #3: Our revenue in up over Q2 was 19% from last year . revenues from recently Excluding acquired Elgin , revenues increased by year . Our 10% year over adjusted EBITDA grew by 8% year over year , and in over months , our adjusted the last 12 EBITDA is now $284 million , up a year ago .

Marcus Rogier: Today's call is being recorded, and a replay will be made available later on our website at worthingtonenterprises.com. With that, I'll turn the call over to Joe for opening remarks.

Today's call is being recorded, and a replay will be made available later on our website at worthingtonenterprises.com. With that, I'll turn the call over to Joe for opening remarks.

Speaker #3: $49 million from where it was, despite a $15 million negative swing in our equity earnings from that same period. In the last 12 months, our adjusted EBITDA margin is now almost [X]% versus [Y]% a year ago.

Joe Hayek: Thank you, Marcus, and good morning, everyone. Welcome to Worthington Enterprises' fiscal 2026 second quarter earnings call. We had a strong Q2, which is a credit to our teams who continue refining and executing our strategies. I want to thank all of my colleagues for their efforts, focus, growth mindset, and for having an unwavering commitment to each other, our company, our customers, and our shareholders. In the quarter, despite market conditions that continue to be mixed, we again delivered strong year-over-year growth in revenue, adjusted EBITDA, and earnings per share. Our revenue in Q2 was up over 19% from last year. Excluding revenues from recently acquired Elgin, revenues increased by over 10% year-over-year.

Joseph Hayek: Thank you, Marcus, and good morning, everyone. Welcome to Worthington Enterprises' fiscal 2026 second quarter earnings call. We had a strong Q2, which is a credit to our teams who continue refining and executing our strategies. I want to thank all of my colleagues for their efforts, focus, growth mindset, and for having an unwavering commitment to each other, our company, our customers, and our shareholders. In the quarter, despite market conditions that continue to be mixed, we again delivered strong year-over-year growth in revenue, adjusted EBITDA, and earnings per share. Our revenue in Q2 was up over 19% from last year. Excluding revenues from recently acquired Elgin, revenues increased by over 10% year-over-year.

Speaker #3: This 20% a year performance gives us confidence that we are successfully navigating the current environment, gaining share, and positioning ourselves for long-term, outsized improved growth.

Speaker #3: Our strategy in markets is to optimize our business by growing both organically and through strategic acquisitions, while organically increasing our margins. We're making progress on each of these strategic pillars.

Speaker #3: We achieved 19% revenue growth in Q2, while our expenditures declined by 320 basis points as a percentage of sales, excluding We Elgin.

Speaker #3: We grew 10% and held SG&A flat. Our EBITDA grew by $4.3 million as we continued driving value for our customers through innovative products and solutions.

Joe Hayek: Our adjusted EBITDA grew by 8% year-over-year, and in the last 12 months, our adjusted EBITDA is now $284 million, up $49 million from where it was a year ago, despite a $15 million negative swing in our equity earnings from ClarkDietrich in that same period. In the last 12 months, our adjusted EBITDA margin is now almost 23% versus 20% a year ago. This strong performance gives us confidence that we are successfully navigating the current environment, gaining share, and positioning ourselves for long-term outsized growth when end markets improve. Our strategy is to optimize our business by growing both organically and through strategic acquisitions while increasing our margins. We're making progress on each of these strategic pillars. We achieved 19% revenue growth in Q2, while our SG&A expenditures declined by 320 basis points as a percentage of sales.

Our adjusted EBITDA grew by 8% year-over-year, and in the last 12 months, our adjusted EBITDA is now $284 million, up $49 million from where it was a year ago, despite a $15 million negative swing in our equity earnings from ClarkDietrich in that same period. In the last 12 months, our adjusted EBITDA margin is now almost 23% versus 20% a year ago. This strong performance gives us confidence that we are successfully navigating the current environment, gaining share, and positioning ourselves for long-term outsized growth when end markets improve. Our strategy is to optimize our business by growing both organically and through strategic acquisitions while increasing our margins. We're making progress on each of these strategic pillars. We achieved 19% revenue growth in Q2, while our SG&A expenditures declined by 320 basis points as a percentage of sales.

Speaker #3: We focus on acquiring companies with sustainable, niche advantages. Yesterday, we announced our planned acquisition of LSI, a leader in the market for metal roofing.

Speaker #3: LSI is a company with an outstanding components culture that we believe will enhance our position in engineered building systems, resilient and retrofit-driven revenue, and create long-term value for shareholders.

Speaker #3: share more I'll details on LSI a bit as we optimize and later grow . Worthington . We will continue to leverage the Worthington business system and its three growth drivers , innovation M&A , transformation , and to maximize both our near term and long success generated a lot of momentum with new launches and our product reputation with customers .

Speaker #3: To grow us, provide. For example, our large ASME innovation tanks that help cool data centers has led to opportunities and several increasing new orders.

Joe Hayek: Excluding Elgin, we grew revenues by 10% and held SG&A flat. Our EBITDA grew by $4.3 million as we continued driving value for our customers through innovative products and solutions. We continue to focus on acquiring companies in niche markets with sustainable competitive advantages. Yesterday, we announced our planned acquisition of LSI, a market leader in metal roofing components. LSI is a great company with an outstanding culture that we believe will enhance our position in engineered building systems, add resilient and retrofit-driven revenue, and create long-term value for shareholders. I'll share more details on LSI a bit later. As we optimize and grow Worthington, we will 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.

Excluding Elgin, we grew revenues by 10% and held SG&A flat. Our EBITDA grew by $4.3 million as we continued driving value for our customers through innovative products and solutions. We continue to focus on acquiring companies in niche markets with sustainable competitive advantages. Yesterday, we announced our planned acquisition of LSI, a market leader in metal roofing components. LSI is a great company with an outstanding culture that we believe will enhance our position in engineered building systems, add resilient and retrofit-driven revenue, and create long-term value for shareholders. I'll share more details on LSI a bit later. As we optimize and grow Worthington, we will 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.

Speaker #3: We're excited about the growth we have in this space forward going . We also prospects expanded our We've to recently capabilities refurbishment of large format propane tanks , an include the increasingly important service as our customers are our using hybrid portfolio of and utilizing a tanks as part of their and cost asset new refurbished strategies .

Speaker #3: In addition, the engine in innovation in our Celebrations business continues to drive additional placement with retailers, and you'll soon be able to buy our Time products in Costco stores, balloon nationwide.

Speaker #3: continue to Our teams AI in embrace their work and are transformation . Mindset provides a framework for how we consider , conceptualize , and implement tools that help transform our business .

Joe Hayek: We've generated a lot of momentum with new product launches, and our reputation with customers continues to provide us opportunities to grow. For example, our innovation around large ASME water tanks that help cool data centers has led to increasing opportunities and several new orders. We're excited about the growth prospects we have in this space going forward. We also recently expanded our capabilities to include the refurbishment of large-format propane tanks, an increasingly important service as our customers are utilizing a hybrid portfolio of new and refurbished tanks as part of their asset and cost management strategies. In addition, the innovation engine in our celebrations business continues to drive additional placement with retailers, and you'll soon be able to buy our Balloon Time products in Costco stores nationwide.

We've generated a lot of momentum with new product launches, and our reputation with customers continues to provide us opportunities to grow. For example, our innovation around large ASME water tanks that help cool data centers has led to increasing opportunities and several new orders. We're excited about the growth prospects we have in this space going forward. We also recently expanded our capabilities to include the refurbishment of large-format propane tanks, an increasingly important service as our customers are utilizing a hybrid portfolio of new and refurbished tanks as part of their asset and cost management strategies. In addition, the innovation engine in our celebrations business continues to drive additional placement with retailers, and you'll soon be able to buy our Balloon Time products in Costco stores nationwide.

Speaker #3: The 80/20 initiative in our water business has had a positive impact on how we approach that business, and our globally, and business making changes both operationally.

Speaker #3: As commercially, and as a result, we continued our integration of Elgin, which we acquired in June. Elgin's results in Q2 reflect our reset of those operations.

Speaker #3: Our focus on safety, the additions of new equipment, and attracting and retaining the best workforce possible temporarily limited our ability to ship to impacted demand, Elgin's, and in the quarter.

Speaker #3: And margins ultimately impacted consolidated gross margins . We now have the place that we think that will take business to new heights , and we our believe that our efforts team in investment for the long term position , Elgin exceptionally well to grow profitably , moving forward .

Speaker #3: I mentioned how excited we are about our planned acquisition of LSI earlier, and we're happy to provide a few more details about what we think is a great business that will enhance our position in engineered building systems.

Joe Hayek: Our teams continue to embrace AI in their work, and our transformation mindset provides a framework for how we consider, conceptualize, and implement tools that help transform our business. The 80/20 initiative in our water business has had a positive impact on how we approach that business and our business globally, and we're making changes both commercially and operationally as a result. We've continued our integration of Elgin, which we acquired in June. Elgin's results in Q2 reflect our reset of those operations. Our focus on safety, the additions of new equipment, and attracting and retaining the best workforce possible temporarily limited our ability to shift to demand, which impacted Elgin's revenues and margins in the quarter and ultimately impacted our consolidated gross margins.

Our teams continue to embrace AI in their work, and our transformation mindset provides a framework for how we consider, conceptualize, and implement tools that help transform our business. The 80/20 initiative in our water business has had a positive impact on how we approach that business and our business globally, and we're making changes both commercially and operationally as a result. We've continued our integration of Elgin, which we acquired in June. Elgin's results in Q2 reflect our reset of those operations. Our focus on safety, the additions of new equipment, and attracting and retaining the best workforce possible temporarily limited our ability to shift to demand, which impacted Elgin's revenues and margins in the quarter and ultimately impacted our consolidated gross margins.

Speaker #3: LSI is a us leading manufacturer of standing standing seam metal roofing clips , and components retrofit systems . It's a business we've known for some fully time and it aligns with our strategy of adding leaders in markets with niche margins attractive , resilient demand profiles , and core manufacturing competencies reflect our that own LSI products into are OEM engineered certified roof systems , creating meaningful requirements and high requalification switching costs .

Speaker #3: The business also benefits from long customer relationships, a standing reputation for quality and reliability, and a domestic footprint. Manufacturing LSI is a best-in-class operator in this category. We believe in this.

Joe Hayek: We now have the team in place that we think will take that business to new heights, and we believe that our efforts and investment for the long-term position Elgin exceptionally well to grow profitably moving forward. I mentioned how excited we are about our planned acquisition of LSI earlier, and we're happy to provide a few more details about what we think is a great business that will enhance our position in engineered building systems. LSI is a leading US manufacturer of standing seam metal roofing clips, components, and retrofit systems. It's a business we've known for some time, and it fully aligns with our strategy of adding leaders in niche markets with attractive margins, resilient demand profiles, and core manufacturing competencies that reflect our own. LSI's products are engineered into OEM-certified roof systems, creating meaningful requalification requirements and high switching costs.

We now have the team in place that we think will take that business to new heights, and we believe that our efforts and investment for the long-term position Elgin exceptionally well to grow profitably moving forward. I mentioned how excited we are about our planned acquisition of LSI earlier, and we're happy to provide a few more details about what we think is a great business that will enhance our position in engineered building systems. LSI is a leading US manufacturer of standing seam metal roofing clips, components, and retrofit systems. It's a business we've known for some time, and it fully aligns with our strategy of adding leaders in niche markets with attractive margins, resilient demand profiles, and core manufacturing competencies that reflect our own. LSI's products are engineered into OEM-certified roof systems, creating meaningful requalification requirements and high switching costs.

Speaker #3: The price is approximately $205 million. LSI has a strong financial profile, and in the purchase, the last 12 months ended September 30th reported adjusted EBITDA of approximately $22.4 million and net sales of $51.1 million.

Speaker #3: We expect LSI will be accretive to adjusted EBITDA our margins , adjusted EPs and free cash flows . The transaction is expected to close in January and we look of 2026 , welcoming the LSI team to does Worthington when it Cautious .

Speaker #3: consumers muted construction activity and a sluggish housing market can create challenging market conditions , but our people or talent , resilience and creativity are enabling us to the current navigate environment very well and gain share organically and leverage our as we grow strengths to make strategic acquisitions .

Joe Hayek: The business also benefits from long-standing customer relationships, its reputation for quality and reliability, and a domestic manufacturing footprint. We believe LSI is a best-in-class operator in this category. The purchase price is approximately $205 million. LSI has a strong financial profile, and in the last 12 months, ended 30 September, it reported adjusted EBITDA of approximately $22.4 million and net sales of $51.1 million. We expect LSI will be accretive to our adjusted EBITDA margins, adjusted EPS, and free cash flows. The transaction is expected to close in January 2026, and we look forward to welcoming the LSI team to Worthington when it does. Cautious consumers, muted construction activity, and a sluggish housing market can create challenging market conditions.

The business also benefits from long-standing customer relationships, its reputation for quality and reliability, and a domestic manufacturing footprint. We believe LSI is a best-in-class operator in this category. The purchase price is approximately $205 million. LSI has a strong financial profile, and in the last 12 months, ended 30 September, it reported adjusted EBITDA of approximately $22.4 million and net sales of $51.1 million. We expect LSI will be accretive to our adjusted EBITDA margins, adjusted EPS, and free cash flows. The transaction is expected to close in January 2026, and we look forward to welcoming the LSI team to Worthington when it does. Cautious consumers, muted construction activity, and a sluggish housing market can create challenging market conditions.

Speaker #3: Our most important asset is our people, and we're pleased that our team continues to be recognized by others. For instance, this month, we were recognized by Computerworld as one of the best places to work in IT for 2026. Newsweek again named us one of America's most responsible companies, and we're entering our country's America 250 celebration.

Speaker #3: We are honored to receive the Victory Gold Military Friendly designation for the 11th consecutive year, a rating we are very proud of. We're proud of our people and the work they continue to do, taking care of our customers and each other.

Speaker #3: We're executing and well entering 2026 , we're positioned to continue growing . Worthington and creating meaningful all of our stakeholders . I will now turn it over to Colin , who will details through some related to our value for performance in the financial quarter .

Joe Hayek: But our people, their talent, resilience, and creativity are enabling us to navigate the current environment very well and gain share as we grow organically and leverage our strengths to make strategic acquisitions. People are our most important asset, and we're pleased that our team continues to be recognized by others. For instance, this month, we were recognized by Computerworld as one of the best places to work in IT for 2026. Newsweek again named us one of America's most responsible companies. Entering our country's America 250 celebration, we are honored to receive Victory Media's military-friendly designation with a gold rating for the 11th consecutive year. We're very proud of our people and the work they continue to do, taking care of our customers and each other. We're executing well. Entering 2026, we're positioned to continue growing Worthington and creating meaningful value for all of our stakeholders.

But our people, their talent, resilience, and creativity are enabling us to navigate the current environment very well and gain share as we grow organically and leverage our strengths to make strategic acquisitions. People are our most important asset, and we're pleased that our team continues to be recognized by others. For instance, this month, we were recognized by Computerworld as one of the best places to work in IT for 2026. Newsweek again named us one of America's most responsible companies. Entering our country's America 250 celebration, we are honored to receive Victory Media's military-friendly designation with a gold rating for the 11th consecutive year. We're very proud of our people and the work they continue to do, taking care of our customers and each other. We're executing well. Entering 2026, we're positioned to continue growing Worthington and creating meaningful value for all of our stakeholders.

Speaker #4: Thank you , Joe , and good morning , We everyone . delivered solid financial results in reporting earnings GAAP of $0.55 per share , Q2 compared to $0.56 per share in the prior year period .

Speaker #4: current The quarter included $0.10 per share of unique items losses related to a , primarily that occurred within our SES , JV and the related revaluation of divestiture marketable securities received as consideration , both of which are included in miscellaneous expense .

Speaker #4: The prior year quarter included $0.04 per share of restructuring and expenses other . Excluding these items , in both adjusted periods , earnings were $0.65 per share , up from $0.60 per share in the prior year quarter .

Speaker #4: As a reminder, Q2 is our seasonally weakest quarter typically, and we are pleased to deliver year-over-year growth in adjusted earnings per share.

Speaker #4: Adjusted EBITDA and free cash flow. As our teams continue to execute well, leveraging the Worthington business to navigate the current environment net.

Joe Hayek: I will now turn it over to Colin, who will take you through some details related to our financial performance in the quarter.

I will now turn it over to Colin, who will take you through some details related to our financial performance in the quarter.

Colin Souza: Thank you, Joe, and good morning, everyone. We delivered solid financial results in Q2, reporting GAAP earnings of $0.55 per share compared to $0.56 per share in the prior year period. The current quarter included $0.10 per share of unique items, primarily losses related to a divestiture that occurred within our SESJV, and the related revaluation of the marketable securities received as consideration, both of which are included in miscellaneous expense. The prior year quarter included $0.04 per share of restructuring and other expenses. Excluding these items in both periods, adjusted earnings were $0.65 per share, up from $0.60 per share in the prior year quarter.

Collin Souza: Thank you, Joe, and good morning, everyone. We delivered solid financial results in Q2, reporting GAAP earnings of $0.55 per share compared to $0.56 per share in the prior year period. The current quarter included $0.10 per share of unique items, primarily losses related to a divestiture that occurred within our SESJV, and the related revaluation of the marketable securities received as consideration, both of which are included in miscellaneous expense. The prior year quarter included $0.04 per share of restructuring and other expenses. Excluding these items in both periods, adjusted earnings were $0.65 per share, up from $0.60 per share in the prior year quarter.

Speaker #4: Consolidated sales for the quarter were $327 million, up 19% compared to $274 million in the prior year. The increase was primarily driven by higher volumes in building and the inclusion of products from Elgin this quarter.

Speaker #4: Following our acquisition of that business in June, gross profit increased to $85 million, up from $74 million last year, with a margin of 25.8%, compared to 27% in the prior year quarter.

Speaker #4: Adjusted EBITDA was $60 million, up from $56 million in Q2 of last year, and adjusted EBITDA margin was 18.5% on a trailing 12-month basis.

Colin Souza: As a reminder, Q2 is typically our seasonally weakest quarter, and we are pleased to deliver year-over-year growth in adjusted earnings per share, adjusted EBITDA, and free cash flow as our teams continue to execute well, leveraging the Worthington Business System to navigate the current environment. Consolidated net sales for the quarter were $327 million, up over 19% compared to $274 million in the prior year quarter. The increase was primarily driven by higher volumes in building products and the inclusion of Elgin following our acquisition of that business in June. Gross profit increased to $85 million, up from $74 million last year, with gross margin at 25.8% compared to 27% in the prior year quarter. Adjusted EBITDA was $60 million, up from $56 million in Q2 of last year, and adjusted EBITDA margin was 18.5%. On a trailing 12-month basis, adjusted EBITDA now stands at $284 million.

As a reminder, Q2 is typically our seasonally weakest quarter, and we are pleased to deliver year-over-year growth in adjusted earnings per share, adjusted EBITDA, and free cash flow as our teams continue to execute well, leveraging the Worthington Business System to navigate the current environment. Consolidated net sales for the quarter were $327 million, up over 19% compared to $274 million in the prior year quarter. The increase was primarily driven by higher volumes in building products and the inclusion of Elgin following our acquisition of that business in June. Gross profit increased to $85 million, up from $74 million last year, with gross margin at 25.8% compared to 27% in the prior year quarter. Adjusted EBITDA was $60 million, up from $56 million in Q2 of last year, and adjusted EBITDA margin was 18.5%. On a trailing 12-month basis, adjusted EBITDA now stands at $284 million.

Speaker #4: Adjusted EBITDA now stands at $284 million. This performance reflects the resilience of our differentiated portfolio and our continued focus on the things we can control, even in a softer macro environment characterized by mixed consumer sentiment and subdued commercial construction activity.

Speaker #4: Turning to cash flow, capital, and allocation, we continued to invest in our operations while remaining disciplined in our balanced approach. Capital expenditures totaled $12 million in the quarter, including $6 million for the last of our facility modernization projects.

Speaker #4: We also returned capital to planned shareholders through $10 million in repurchase dividends and the repurchase of 250,000 shares of our common stock for $14 million, at an average price per share.

Speaker #4: $54.87 per joint venture once again delivered, providing $34 million in dividends during the quarter, which equates to a 118% cash conversion rate on equity income.

Speaker #4: Operating cash flow for the quarter was cash flow $52 million in free $39 million on a trailing 12 month basis . Free cash was flow totaled $161 million , a 96% free cash flow conversion rate representing relative to adjusted net earnings .

Colin Souza: This performance reflects the resilience of our differentiated portfolio and our continued focus on the things we can control, even in a softer macro environment characterized by mixed consumer sentiment and subdued commercial construction activity. Turning to our cash flow and capital allocation, we continue to invest in our operations while maintaining a disciplined and balanced approach. Capital expenditures totaled $12 million in the quarter, including $6 million for the last of our planned facility modernization projects. We also returned capital to shareholders through $10 million in dividends and the repurchase of 250,000 shares of our common stock for $14 million at an average price of $54.87 per share. Our joint ventures once again delivered, providing $34 million in dividends during the quarter, which equates to a 118% cash conversion rate on equity income. Operating cash flow for the quarter was $52 million, and free cash flow was $39 million.

This performance reflects the resilience of our differentiated portfolio and our continued focus on the things we can control, even in a softer macro environment characterized by mixed consumer sentiment and subdued commercial construction activity. Turning to our cash flow and capital allocation, we continue to invest in our operations while maintaining a disciplined and balanced approach. Capital expenditures totaled $12 million in the quarter, including $6 million for the last of our planned facility modernization projects. We also returned capital to shareholders through $10 million in dividends and the repurchase of 250,000 shares of our common stock for $14 million at an average price of $54.87 per share. Our joint ventures once again delivered, providing $34 million in dividends during the quarter, which equates to a 118% cash conversion rate on equity income. Operating cash flow for the quarter was $52 million, and free cash flow was $39 million.

Speaker #4: trailing This figure still reflects elevated capital from our facility modernization projects , which expenditures totaled roughly $30 million over the same period . We have approximately $30 million of modernization spend remaining , most of that with expected to occur over the next three quarters .

Speaker #4: As this project is completed, we expect capital return to expenditures will normalize to more typical levels, and we will see further improvement in free cash flow conversion over time. Turning to our balance sheet and liquidity.

Speaker #4: We closed the quarter . with $305 million in long term funded debt and $180 million in cash . Our leverage remains extremely low , with ample liquidity supported by a $500 million revolving credit facility that was drawn , fully fully undrawn , and available at quarter end .

Colin Souza: On a trailing 12-month basis, free cash flow totaled $161 million, representing a 96% free cash flow conversion rate relative to adjusted net earnings. This trailing figure still reflects elevated capital expenditures from our facility modernization projects, which totaled roughly $30 million over the same period. We have approximately $30 million of modernization spend remaining, with most of that expected to occur over the next three quarters. As this project is completed, we expect capital expenditures will return to more normalized levels, and we'll see further improvement in free cash flow conversion over time. Turning to our balance sheet and liquidity, we closed the quarter with $305 million in long-term funded debt and $180 million in cash. Our leverage remains extremely low, with ample liquidity supported by a $500 million revolving credit facility that was fully undrawn and available at quarter end.

On a trailing 12-month basis, free cash flow totaled $161 million, representing a 96% free cash flow conversion rate relative to adjusted net earnings. This trailing figure still reflects elevated capital expenditures from our facility modernization projects, which totaled roughly $30 million over the same period. We have approximately $30 million of modernization spend remaining, with most of that expected to occur over the next three quarters. As this project is completed, we expect capital expenditures will return to more normalized levels, and we'll see further improvement in free cash flow conversion over time. Turning to our balance sheet and liquidity, we closed the quarter with $305 million in long-term funded debt and $180 million in cash. Our leverage remains extremely low, with ample liquidity supported by a $500 million revolving credit facility that was fully undrawn and available at quarter end.

Speaker #4: Net debt was $125 million, resulting in a net debt to trailing adjusted EBITDA ratio of approximately 0.4 times, providing significant flexibility.

Speaker #4: Regarding financial If deployment . as planned , the completed pending acquisition of LSI that Joe discussed earlier should close in January and will be primarily with cash on funded hand , supplemented by modest revolver borrowings the transaction , we expect to Following maintain a conservative leverage profile and solid .

Speaker #4: Liquidity position supported by cash generation of our businesses healthy. Yesterday, our Board of Directors declared a quarterly dividend of $0.19 per share, payable March 2026.

Speaker #4: Making assets, and I believe the business is better positioned moving forward, and the financial impact on our results should be minimal. Let me now turn to our segment performance in Consumer. Sales in net Q2 were products.

Colin Souza: Net debt was $125 million, resulting in a net debt-to-trailing Adjusted EBITDA ratio of approximately 0.4x, providing significant financial flexibility. Regarding capital deployment, if completed as planned, the pending acquisition of LSI that Joe discussed earlier should close in January and will be funded primarily with cash on hand supplemented by modest revolver borrowings. Following the transaction, we expect to maintain a conservative leverage profile and solid liquidity position supported by healthy cash generation of our businesses. Yesterday, our board of directors declared a quarterly dividend of $0.19 per share payable in March 2026. We haven't talked about our SES joint venture performance in a while. They had $1.5 million in losses flow through equity income this quarter.

Net debt was $125 million, resulting in a net debt-to-trailing Adjusted EBITDA ratio of approximately 0.4x, providing significant financial flexibility. Regarding capital deployment, if completed as planned, the pending acquisition of LSI that Joe discussed earlier should close in January and will be funded primarily with cash on hand supplemented by modest revolver borrowings. Following the transaction, we expect to maintain a conservative leverage profile and solid liquidity position supported by healthy cash generation of our businesses. Yesterday, our board of directors declared a quarterly dividend of $0.19 per share payable in March 2026. We haven't talked about our SES joint venture performance in a while. They had $1.5 million in losses flow through equity income this quarter.

Speaker #4: up 3% compared to the prior year quarter . As continued positive momentum in our celebrations category helped offset modestly lower volumes . Adjusted EBITDA was flat $15 million , with at a compared 13.3% in Q2 last year 12.7% margin , reflecting stable performance and a to cautious consumer environment .

Speaker #4: And the impact of higher conversion costs on volumes. As we move into the lower back half of our fiscal year, typically a seasonally stronger period for the business.

Speaker #4: We are well positioned with a for this portfolio of affordable and essential products that support improving every day experiences and outdoor living , celebrations and home improvement .

Colin Souza: We've completed a divestiture in the quarter of some of the loss-making assets and believe the business is better positioned moving forward, and the financial impact on our results should be minimal. Let me now turn to our segment performance. In consumer products, net sales in Q2 were $120 million, up 3% compared to the prior year quarter, as continued positive momentum in our celebrations category helped offset modestly lower volumes. Adjusted EBITDA was flat at $15 million, with a 12.7% margin compared to 13.3% in Q2 last year, reflecting stable performance in a cautious consumer environment and the impact of higher conversion costs on lower volumes. As we move into the back half of our fiscal year, typically a seasonally stronger period for this business, we are well-positioned with a portfolio of affordable and essential products that support improving everyday experiences in outdoor living, celebrations, and home improvement.

We've completed a divestiture in the quarter of some of the loss-making assets and believe the business is better positioned moving forward, and the financial impact on our results should be minimal. Let me now turn to our segment performance. In consumer products, net sales in Q2 were $120 million, up 3% compared to the prior year quarter, as continued positive momentum in our celebrations category helped offset modestly lower volumes. Adjusted EBITDA was flat at $15 million, with a 12.7% margin compared to 13.3% in Q2 last year, reflecting stable performance in a cautious consumer environment and the impact of higher conversion costs on lower volumes. As we move into the back half of our fiscal year, typically a seasonally stronger period for this business, we are well-positioned with a portfolio of affordable and essential products that support improving everyday experiences in outdoor living, celebrations, and home improvement.

Speaker #4: Our consumer team remains focused and disciplined as we navigate the current environment, and as we gain new placement and continue to grow market share, we are positioned to outgrow the market as conditions improve.

Speaker #4: Elgin net sales were up over year closed . broad based strength Excluding multiple across categories , including cooking water , and heating and in particular , cooling , reflecting construction , where our market leading product portfolio is adoption of more enabling wider environmentally friendly refrigerants .

Colin Souza: Our consumer team remains focused and disciplined as we navigate the current environment and as we continue to gain new placement and market share. We are positioned to outgrow the market as conditions improve. In building products, Q2 net sales grew 32% year-over-year to $208 million. Growth was driven by higher volumes and contributions from the Elgin acquisition, which closed in June and contributed $25 million in net sales. Excluding Elgin, net sales were up 16% year-over-year, reflecting broad-based strength across multiple categories, including heating and cooking, water, and in particular, cooling and construction, where our market-leading product portfolio is enabling wider adoption of more environmentally friendly refrigerants. Adjusted EBITDA for the quarter was $53 million compared to $47 million in the prior year quarter, with an adjusted EBITDA margin of 25.5%.

Our consumer team remains focused and disciplined as we navigate the current environment and as we continue to gain new placement and market share. We are positioned to outgrow the market as conditions improve. In building products, Q2 net sales grew 32% year-over-year to $208 million. Growth was driven by higher volumes and contributions from the Elgin acquisition, which closed in June and contributed $25 million in net sales. Excluding Elgin, net sales were up 16% year-over-year, reflecting broad-based strength across multiple categories, including heating and cooking, water, and in particular, cooling and construction, where our market-leading product portfolio is enabling wider adoption of more environmentally friendly refrigerants. Adjusted EBITDA for the quarter was $53 million compared to $47 million in the prior year quarter, with an adjusted EBITDA margin of 25.5%.

Speaker #4: Continued to perform well, contributing $26 million in equity earnings, while Clark Detrick results were lower in a challenging market environment, contributing $4 million in equity earnings compared to $10 million last year.

Speaker #4: Overall , products delivered another solid quarter , and the team building continues to execute well . We expect LSI will be another addition to the adding more exposure and portfolio , attractive end market leader where we can deploy the Worthington great system to create , and enhance markets value with a .

Speaker #4: In summary , this quarter marks the fifth consecutive quarter of year over year in growth adjusted per share and adjusted EBITDA for WORTHINGTON ENTERPRISES, INC. , demonstrating the consistency in resiliency of our earnings businesses and positioning us for continued success as we head into our seasonally strongest quarters this point , we're .

Colin Souza: The $6 million increase was primarily driven by volume growth in our wholly owned businesses, partially offset by lower combined equity earnings from the joint ventures. WAVE continued to perform well, contributing $26 million in equity earnings, while ClarkDietrich results were lower in a challenging market environment, contributing $4 million in equity earnings compared to $10 million last year. Overall, building products delivered another solid quarter, and the team continues to execute well. We expect LSI will be another great addition to the portfolio, adding more exposure in attractive end markets with a market leader where we can deploy the Worthington Business System to create and enhance value.

The $6 million increase was primarily driven by volume growth in our wholly owned businesses, partially offset by lower combined equity earnings from the joint ventures. WAVE continued to perform well, contributing $26 million in equity earnings, while ClarkDietrich results were lower in a challenging market environment, contributing $4 million in equity earnings compared to $10 million last year. Overall, building products delivered another solid quarter, and the team continues to execute well. We expect LSI will be another great addition to the portfolio, adding more exposure in attractive end markets with a market leader where we can deploy the Worthington Business System to create and enhance value.

Speaker #4: Happy to take any questions.

Speaker #1: We will now begin the question and answer session. To ask a question, press * then the number 1 on your telephone keypad.

Speaker #1: To withdraw your question, press star one. Again, our first question will come from the line of Kathryn Thompson with Thompson Research.

Speaker #1: Please go ahead .

Speaker #5: Hi . Thank you for taking my questions today . I wanted to First , on back circle your acquisition . LSI is similar strategy to Elgin .

Speaker #5: Wanted to just once again see if you can expand on the strategy for growth from here. As you integrate both into the network, but also importantly, how do you see growth over these— from a Worthington standpoint?

Colin Souza: In summary, this quarter marks the fifth consecutive quarter of year-over-year growth in adjusted earnings per share and adjusted EBITDA for Worthington Enterprises, demonstrating the consistency and resiliency of our businesses and positioning us for continued success as we head into our seasonally strongest quarters. At this point, we're happy to take any questions.

In summary, this quarter marks the fifth consecutive quarter of year-over-year growth in adjusted earnings per share and adjusted EBITDA for Worthington Enterprises, demonstrating the consistency and resiliency of our businesses and positioning us for continued success as we head into our seasonally strongest quarters. At this point, we're happy to take any questions.

Speaker #5: Also, complimentary—not just cost opportunities, but opportunities as you expand into the system?

Speaker #3: Sure. Good top-line morning, Kathryn. Thank you—so, a handful to unpack there, and we'll have things to try and tag team it.

Operator: We will now begin the question and answer session. To ask a question, press Star, then the number one on your telephone keypad. To withdraw your question, press Star one again. Our first question will come from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Speaker #3: You know, generally speaking, when we think about it, one of the unique aspects of Worthington's business system is really the M&A complementary nature of how those pillars work together, specifically.

Speaker #3: Beyond acquiring, M&A goes to leaders and niche so that we are identifying sustainable competitive advantages. As you know, for us that starts with steel and then, things like roll formed, which gives us real coil of advantages from a manufacturing expertise perspective.

Kathryn Thompson: Hi. Thank you for taking my questions today. First, I wanted to circle back on your acquisition of LSI, a similar strategy to Elgin. I wanted to just once again see if you can expand on the strategy for growth from here as you integrate both into the Worthington network. Also, importantly, how you see growth over these from a complementary standpoint, but also not just cost opportunities, but top-line opportunities as you expand into the system.

Speaker #3: You know, some companies that acquire who supply chain and from manufacturing mirror our own capabilities, we see additional opportunities for us. And so we'll always look to leverage our transformation playbook for companies across our portfolio.

Speaker #3: No different with companies that acquire . And so about the actions we that we at took Elgin when you think are right out of that playbook in terms of , machine , and those guarding , adding new equipment and safety the of those flow of some cells .

Joe Hayek: Sure. Good morning, Kathryn. Thank you. So a handful of things to unpack there, and we'll try and tag-team it. Generally speaking, when we think about M&A, one of the unique aspects of the Worthington Business System is really the complementary nature of how those pillars work together. So specifically for us, M&A goes beyond identifying and acquiring market leaders in niche markets that have sustainable competitive advantages. As you know, for us, things that start with a coil of steel and then that steel is stamped or roll-formed gives us real advantages from a manufacturing expertise perspective. So companies that we acquire whose supply chain and manufacturing capabilities mirror our own really create additional opportunities for us. And so we'll always look to leverage our transformation playbook for companies across our portfolio, no different with companies that we acquire.

Joseph Hayek: Sure. Good morning, Kathryn. Thank you. So a handful of things to unpack there, and we'll try and tag-team it. Generally speaking, when we think about M&A, one of the unique aspects of the Worthington Business System is really the complementary nature of how those pillars work together. So specifically for us, M&A goes beyond identifying and acquiring market leaders in niche markets that have sustainable competitive advantages. As you know, for us, things that start with a coil of steel and then that steel is stamped or roll-formed gives us real advantages from a manufacturing expertise perspective. So companies that we acquire whose supply chain and manufacturing capabilities mirror our own really create additional opportunities for us. And so we'll always look to leverage our transformation playbook for companies across our portfolio, no different with companies that we acquire.

Speaker #3: That's really a force multiplier for us . And , you know , the third pillar of the Wellington business system is innovation . And at Elgin , and we're pretty convinced that obviously , that we're limited in what we can say there because the transaction hasn't actually closed LSI .

Speaker #3: But we're convinced that innovation is part of who they are as well. So we're very excited about accelerating innovation at Elgin. And at the core, clearly, as we've learned more about LSI, we're excited about their innovation capabilities as well.

Speaker #4: Yeah, just touch on LSI a little bit.

Speaker #4: little think the , you know , more . we've shared our acquisition criteria with I you before . And Joe touched on a little bit .

Speaker #4: It's market leading positions in niche markets . It's higher growth , higher margin opportunities , lower intensity and companies that can and we're capital have a sustainable competitive advantage .

Joe Hayek: And so when you think about the actions that we took at Elgin, those are right out of that playbook in terms of safety, machine guarding, adding new equipment, and tweaking the flow of some of those cells. That's really a force multiplier for us. And the third pillar of the Worthington Business System is innovation. And at Elgin, and we're pretty convinced that LSI, obviously, we're limited in what we can say there because the transaction hasn't actually closed, but we're convinced that innovation is a core part of who they are as well. So we're very excited about accelerating innovation at Elgin. And clearly, as we've learned more about LSI, we're excited about their innovation capabilities as well. Yeah. And Kathryn, I'll just touch on LSI a little more. I think we've shared our acquisition criteria with you before, and Joe touched on a little bit.

And so when you think about the actions that we took at Elgin, those are right out of that playbook in terms of safety, machine guarding, adding new equipment, and tweaking the flow of some of those cells. That's really a force multiplier for us. And the third pillar of the Worthington Business System is innovation. And at Elgin, and we're pretty convinced that LSI, obviously, we're limited in what we can say there because the transaction hasn't actually closed, but we're convinced that innovation is a core part of who they are as well. So we're very excited about accelerating innovation at Elgin. And clearly, as we've learned more about LSI, we're excited about their innovation capabilities as well.

Speaker #4: And LSI checked a lot of those boxes. All those boxes for us really excited us and makes this opportunity. They are a leading player in the commercial metal roofing space.

Speaker #4: It's an attractive end market, a very niche market, but it's clip-led by demand resilient in commercial and the reroofing cycle.

Speaker #4: for metal roofs . Really strong margins and financial profile . Joe touched on it . There EBITDA of $22 million in revenue With of $51 million , and the time on the company , the spent more we there's some more we value creation opportunities .

Collin Souza: Yeah. And Kathryn, I'll just touch on LSI a little more. I think we've shared our acquisition criteria with you before, and Joe touched on a little bit.

Speaker #4: By meaningfully integrating them into the Worthington business system, we thought—and then lastly, we felt they were just a really strong cultural fit.

Speaker #4: The more we know their people and look forward to working with them. Once the transaction closes, we got to know them.

Joe Hayek: It's market-leading positions in niche markets. It's higher growth, higher margin opportunities, lower capital intensity, and companies that can demonstrate they have a sustainable competitive advantage. LSI checked a lot of those boxes, all those boxes for us, and makes us really excited about this opportunity. They are a leading player in the commercial metal roofing clip space. It's an attractive end market, a very niche market, but it's led by resilient demand in commercial and the re-roofing cycle there for metal roofs. Really strong margins and financial profile. Joe touched on it with EBITDA of $22 million and revenue of $51 million. The more we spent time on the company, the more we thought there's some meaningful value creation opportunities by plugging them into the Worthington Business System.

It's market-leading positions in niche markets. It's higher growth, higher margin opportunities, lower capital intensity, and companies that can demonstrate they have a sustainable competitive advantage. LSI checked a lot of those boxes, all those boxes for us, and makes us really excited about this opportunity. They are a leading player in the commercial metal roofing clip space. It's an attractive end market, a very niche market, but it's led by resilient demand in commercial and the re-roofing cycle there for metal roofs. Really strong margins and financial profile. Joe touched on it with EBITDA of $22 million and revenue of $51 million. The more we spent time on the company, the more we thought there's some meaningful value creation opportunities by plugging them into the Worthington Business System.

Speaker #5: Okay , great . And then a follow up question . Appreciated . Color on water tanks . something And it's that you have mentioned before .

Speaker #5: On earnings calls and public commentary . Just as areas that you benefit from data center and reindustrialization . What broadly are other areas that or just maybe help us further understand the opportunities you were involved in that are data center centric ?

Speaker #5: Thank you

Speaker #2: Sure .

Speaker #4: So, Kathryn, it's Colin. I'll

Speaker #4: A shot at that one. And I know Joe shared a little bit with our water tanks and how they would solve—solution or provide solutions for liquid cooling in data centers.

Joe Hayek: Then lastly, we felt they were just a really strong cultural fit, the more we got to know their people, and look forward to working with them once the transaction closes.

Then lastly, we felt they were just a really strong cultural fit, the more we got to know their people, and look forward to working with them once the transaction closes.

Kathryn Thompson: Okay. Great. And then a follow-up question. Appreciated color on water tanks, and is something that you have mentioned before on earnings calls and public commentary, just as areas that you benefit from data center and broadly reindustrialization. What are other areas that, or just maybe, help us further understand the opportunities you're involved in that are data center-centric? Thank you.

Speaker #4: data centers . You know , wave with its structural grid . And DCR acquisition that they did previously . Clark Dietrich with with some of their then the products end up in data centers as .

Joe Hayek: Sure. So Kathryn, it's Colin. I'll take a shot at that one. And I know Joe shared a little bit with our water tanks and how they solve or provide solutions for liquid cooling in data centers. And we're excited about that opportunity. That's one example across our portfolio. And it's probably not well understood where all we play and have exposure to data centers, like you suggested. WAVE and ClarkDietrich both provide products that end up in data centers. WAVE with its structural grid and then the DCR acquisition that they did previously, ClarkDietrich with some of their products end up in data centers as well. Elgin, the business we acquired in June, serves data centers with their HVAC components and strut products.

Collin Souza: Sure. So Kathryn, it's Colin. I'll take a shot at that one. And I know Joe shared a little bit with our water tanks and how they solve or provide solutions for liquid cooling in data centers. And we're excited about that opportunity. That's one example across our portfolio. And it's probably not well understood where all we play and have exposure to data centers, like you suggested. WAVE and ClarkDietrich both provide products that end up in data centers. WAVE with its structural grid and then the DCR acquisition that they did previously, ClarkDietrich with some of their products end up in data centers as well. Elgin, the business we acquired in June, serves data centers with their HVAC components and strut products.

Speaker #4: It's not a significant portion of any of our Elgin businesses. But in the aggregate, across our portfolio, it is meaningful and is an opportunity for growth for us.

Speaker #5: Okay. Great. And in terms of 'meaningful,' is it percentage of sales that you can estimate that it may contribute?

Speaker #4: It would probably be , you know , less than 10% of kind of the the businesses that I mentioned . But it is one of the fastest growing areas within those businesses

Speaker #5: Perfect. Thank you so much. Best of luck.

Speaker #3: Kathryn . Thanks ,

Speaker #3: Kathryn .

Joe Hayek: The acquisition we announced the signing of yesterday, LSI, also serves data centers as there's a number of data centers that have metal roofing and require clips and components there. So data centers overall, demand, it's not a significant portion of any of our businesses, but in the aggregate across our portfolio, it is meaningful and is an opportunity of growth for us.

The acquisition we announced the signing of yesterday, LSI, also serves data centers as there's a number of data centers that have metal roofing and require clips and components there. So data centers overall, demand, it's not a significant portion of any of our businesses, but in the aggregate across our portfolio, it is meaningful and is an opportunity of growth for us.

Speaker #6: Joe , Colin Good

Speaker #6: the questions . . I Marcus . wanted to dovetail on Catherine's question on LSI . Just . at the profile .

Speaker #6: over 40% adjusted EBITDA margin , trailing 12 months . Just help us understand what drives that . How sustainable . then And maybe talk a little bit about Okay .

Kathryn Thompson: Okay. Great. And in terms of meaningful, is it a percentage of sales that you can estimate that it may contribute?

Joe Hayek: It would probably be less than 10% of kind of the businesses that I mentioned, but it is one of the faster-growing areas within those businesses.

Collin Souza: It would probably be less than 10% of kind of the businesses that I mentioned, but it is one of the faster-growing areas within those businesses.

Speaker #3: Dan And again , it's Joe . Good morning . you . Thank We're we're . a little bit limited . Obviously the transaction is expected to close in January .

Speaker #3: But as as Colin mentioned you know Ellis is a terrific company . They are in a business that really is driven by I'll call it resilient .

Kathryn Thompson: Okay. Perfect. Thank you so much. Best of luck.

Joe Hayek: Thanks, Kathryn. Thanks, Kathryn.

Collin Souza: Thanks, Kathryn.

Joseph Hayek: Thanks, Kathryn.

Operator: Our next question will come from the line of Daniel Moore with CJS Securities. Please go ahead.

Speaker #3: You know, retrofit. They don't count on new construction for a lot of their growth. They're a market leader. They've been that a long time.

Daniel Moore: Thank you, Joe, Colin, Marcus. Good morning. Thanks for taking the questions. I wanted to dovetail on Katherine's question on LSI. Just looking at the margin profile, obviously extremely healthy, over 40% just EBITDA margin trailing 12 months. Just help us understand what drives that, how sustainable, and then maybe talk a little bit about kind of what are the key drivers behind 3% to 5% growth in the market and a follow-up there.

Speaker #3: They it for a great have a reputation with their customers . They're very reliable . They're very creative . And they have really three kind of go to market buckets .

Speaker #3: The first is , is what Colin's been talking about , which is the steam standing metal roofing clips . They do some work around transportation , but then they also have a business that is really retrofit where you actually can put a new metal roof on top of an existing metal roof that has a lot of attributes from from a great cost and value perspective , and from a also structural integrity perspective .

Joe Hayek: Sure. And Dan, again, it's Joe. Good morning. Thank you. We're a little bit limited. Obviously, the transaction is expected to close in January. But as Colin mentioned, LSI is a terrific company. They are in a business that really is driven by kind of, I'll call it resilient retrofit. They don't count on new construction for a lot of their growth. They're a market leader. They've been at it for a long time. They have a great reputation with their customers. They're very reliable. They're very creative. And they have really three kind of go-to-market buckets. The first is what Colin's been talking about, which is the standing seam metal roofing clips.

Joseph Hayek: Sure. And Dan, again, it's Joe. Good morning. Thank you. We're a little bit limited. Obviously, the transaction is expected to close in January. But as Colin mentioned, LSI is a terrific company. They are in a business that really is driven by kind of, I'll call it resilient retrofit. They don't count on new construction for a lot of their growth. They're a market leader. They've been at it for a long time. They have a great reputation with their customers. They're very reliable. They're very creative. And they have really three kind of go-to-market buckets. The first is what Colin's been talking about, which is the standing seam metal roofing clips.

Speaker #3: You know, metal roofs, along with long time ago, people figured out that drilling holes and using screws and kinds of fasteners was a pretty bad, different idea from a long-term leak perspective.

Speaker #3: from And so LSI is a market leader . They have a great culture . And and we're really excited about the prospects of them becoming part of Worthington next in the few .

Speaker #6: Got it . Very helpful . The switching building know solid products , you growth , mid-teens basis on an . Maybe just talk organic much of that about how is versus pricing volume .

Joe Hayek: They do some work around transportation, but then they also have a business that is really retrofit where you can actually put a new metal roof on top of an existing metal roof that has a lot of great attributes from a cost and value perspective, and also from a structural integrity perspective. Metal roofs, a long time ago, people figured out that drilling holes and using screws in different kinds of fasteners was a pretty bad idea from a long-term leak perspective. And so LSI is a market leader. They have a great culture, and we're really excited about the prospects of them becoming part of Worthington in the next few weeks.

They do some work around transportation, but then they also have a business that is really retrofit where you can actually put a new metal roof on top of an existing metal roof that has a lot of great attributes from a cost and value perspective, and also from a structural integrity perspective. Metal roofs, a long time ago, people figured out that drilling holes and using screws in different kinds of fasteners was a pretty bad idea from a long-term leak perspective. And so LSI is a market leader. They have a great culture, and we're really excited about the prospects of them becoming part of Worthington in the next few weeks.

Speaker #6: And then you mentioned , you know , some of the end markets that obviously are driving that growth . You know , maybe as we get into the seasonally stronger , you know , your period confidence that that those demand drivers are will continue here in the near near to mid-term .

Speaker #4: Yeah . Dan , it's a good question . On on the building products on the wholly owned portfolio . Really good volume contributions across the board , across portfolio .

Speaker #4: There the within that , that business segment , you know , a number of value streams were up are year over year . I mentioned a few of them earlier .

Speaker #4: Heating and cooking water cooling construction . The one that was a little softer is just we've talked about it before , before on the European side , and more Economy .

Daniel Moore: Got it. Very helpful. Switching gears, building products, really solid growth, mid-teens on an organic basis. Maybe just talk about how much of that is pricing versus volume. And then you mentioned some of the end markets that obviously are driving that growth, maybe as we get into the seasonally stronger period, your confidence that those demand drivers will continue here in the near to midterm?

Speaker #4: There . . So we we continue to be excited and optimistic on some of the demand and the drivers across that portfolio . And we're seeing is that trickling through to the margins of that business as well .

Speaker #4: So EBITDA margins for the wholly owned business up almost 300 basis points year over year , and we believe and we've shared this before , just , you know , in a the targets there are still us , which we intact for think this is a low teens EBITDA margin business .

Joe Hayek: Yeah. Dan, it's a good question. On the building products, on the wholly owned portfolio, really good volume contributions across the board, across the portfolio there within that business segment. A number of value streams were up year over year. I mentioned a few of them earlier, heating and cooking, water, cooling, and construction. The one that was a little softer is just we've talked about it before on the European side, and that's just more challenging economy there. So we continue to be excited and optimistic on some of the demand and the drivers across that portfolio. And what we're seeing is that trickling through to the margins of that business as well. So EBITDA margins for the wholly owned business up almost 300 basis points year over year.

Collin Souza: Yeah. Dan, it's a good question. On the building products, on the wholly owned portfolio, really good volume contributions across the board, across the portfolio there within that business segment. A number of value streams were up year over year. I mentioned a few of them earlier, heating and cooking, water, cooling, and construction. The one that was a little softer is just we've talked about it before on the European side, and that's just more challenging economy there. So we continue to be excited and optimistic on some of the demand and the drivers across that portfolio. And what we're seeing is that trickling through to the margins of that business as well. So EBITDA margins for the wholly owned business up almost 300 basis points year over year.

Speaker #4: Over time .

Speaker #3: Yeah . And Dan it's really a credit to our teams because it is it is more than anything else . And it's because we've been gaining volume share .

Speaker #3: We've done a nice job with innovation and we've done a really nice job commercially, as well as from an operational manufacturing perspective. So it's a really great story that we continue to see that kind of momentum in really broad swaths across that business.

Speaker #3: .

Speaker #6: Very helpful . Maybe 1 or 2 more . Clark Detrick , you obviously contribution hit kind of a new know , post pandemic for the low quarter .

Speaker #6: about , Talk you know , what there . How much of it was seeing just top line versus maybe costs and what steps can be kind of protect taken to margins from here .

Joe Hayek: We believe, and we've shared this before, just the targets there are still intact for us, which we think this is a low-teens EBITDA margin business over time. Yeah. Dan, it's really a credit to our teams because it is more volume than anything else. And it's because we've been gaining share. We've done a really nice job with innovation, and we've done a really nice job commercially and from an operational manufacturing perspective. So it's a really great story that we continue to see that kind of momentum in really broad swaths across that business.

We believe, and we've shared this before, just the targets there are still intact for us, which we think this is a low-teens EBITDA margin business over time.

Speaker #6: So we don't see that dip further?

Speaker #3: Sure. It is a great business. They are a market leader, and they're operating Clark in an environment—pretty tough, it's an environment. But that will improve over time as they are—conditions allow.

Joseph Hayek: Yeah. Dan, it's really a credit to our teams because it is more volume than anything else. And it's because we've been gaining share. We've done a really nice job with innovation, and we've done a really nice job commercially and from an operational manufacturing perspective. So it's a really great story that we continue to see that kind of momentum in really broad swaths across that business.

Speaker #3: Colin, I think, has a bit more of—I mean, the details.

Speaker #4: Yeah. Clark, Detrick, Joe's right. LED by a really great team there. They've seen some margin compression as a result of the challenging new construction environment.

Speaker #4: And that's led to some increased competition in their spaces, particularly from smaller players. So they might be a leader in that space.

Speaker #4: And focus as well on savings initiatives cost. They've shifted their focus over the last year, year and a half because of their mix, breadth, and scale of their offering. They can leverage that.

Daniel Moore: Very helpful. Maybe one or two more. ClarkDietrich, obviously, contribution hit kind of a new post-pandemic low for the quarter. Talk about what you're seeing there, how much of it was just top-line versus maybe costs, and what steps can be taken to kind of protect margins from here so we don't see that dip further?

Speaker #4: compete better on larger projects . If you think about stadiums , data centers , hospitals where some of the smaller can't do that .

Speaker #4: So the competitors mix has shifted . But the profitability levels in those areas are less than their traditional , you know , drywall studs , space .

Joe Hayek: Sure. And ClarkDietrich is a great business. They are a market leader, and they're operating in a pretty tough environment. But it's an environment that will improve over time as market conditions allow. I mean, Colin, I think, has a bit more of the details.

Joseph Hayek: Sure. And ClarkDietrich is a great business. They are a market leader, and they're operating in a pretty tough environment. But it's an environment that will improve over time as market conditions allow. I mean, Colin, I think, has a bit more of the details.

Speaker #4: So they're doing the right things to take care of their customers. We do not expect anything worse than flat sequential performance moving forward there.

Colin Souza: Yeah. ClarkDietrich, Joe's right, led by a really great team there. They've seen some margin compression as a result of the challenging new construction environment, and that's led to some increased competition in their spaces, particularly from smaller players. So they continue to be a market leader in that space and continue to focus as well on cost savings initiatives. Their mix has shifted over the last year, year and a half. Because of their breadth and scale of their offering, they can compete better on larger projects. If you think about stadiums, data centers, and hospitals, where some of the smaller competitors can't do that. So the mix has shifted, but the profitability levels in those areas are less than their traditional drywall studs space. So they're doing the right things to take care of their customers. We do expect no worse than flat sequential performance moving forward there.

Collin Souza: Yeah. ClarkDietrich, Joe's right, led by a really great team there. They've seen some margin compression as a result of the challenging new construction environment, and that's led to some increased competition in their spaces, particularly from smaller players. So they continue to be a market leader in that space and continue to focus as well on cost savings initiatives. Their mix has shifted over the last year, year and a half. Because of their breadth and scale of their offering, they can compete better on larger projects. If you think about stadiums, data centers, and hospitals, where some of the smaller competitors can't do that. So the mix has shifted, but the profitability levels in those areas are less than their traditional drywall studs space. So they're doing the right things to take care of their customers. We do expect no worse than flat sequential performance moving forward there.

Speaker #4: And , you know , despite the tough environment they're performing at pre-COVID levels . And as we see in green construction in the future , they're very well positioned to benefit .

Speaker #6: maybe Helpful last just in terms of capital allocation . Bought back some stock in the quarter at at levels , you know , higher than stock is indicated where this a little morning .

Speaker #6: Still only turn of leverage on a pro forma basis a following LSI . So you know , from you to delever or are here , would comfortable continuing to opportunistically cash to prefer shareholders return and continue to explore tuck Thanks again in M&A ?

Speaker #3: Question. And I would say yes.

Speaker #3: Stan . We'll we'll we'll continue say yes , to and think about our capital structure . We'll continue to . opportunistically Yeah . look Great strategic M&A at and returns of capital to shareholders .

Speaker #3: But you know, our formula is such that we talk about it on a regular basis, so we'll continue to be balanced with a bias toward basis.

Colin Souza: Despite the tough environment, they're performing at pre-COVID levels. As we see green shoots in construction in the future, they're very well positioned to benefit.

Despite the tough environment, they're performing at pre-COVID levels. As we see green shoots in construction in the future, they're very well positioned to benefit.

Speaker #3: growth .

Daniel Moore: Helpful. Maybe last, just in terms of capital allocation, bought back some stock in the quarter at levels a little higher than where stock is indicated this morning. Still only a turn of leverage on a pro forma basis following LSI. So from here, would you prefer to delever or are you comfortable continuing to opportunistically return cash to shareholders and continue to explore Tuck and M&A? Thanks again.

Speaker #1: .

Speaker #8: Thank you. Good morning, everyone. My first question is about the momentum that you are seeing on the consumer side of the business.

Joe Hayek: Yeah. Great question. I would say yes, yes, and yes, Dan. We'll continue to think about our capital structure. We'll continue to opportunistically look at strategic M&A and returns of capital to shareholders. But our formula is such that we talk about it on a regular basis. So we'll continue to be balanced with a bias toward growth.

Joseph Hayek: Yeah. Great question. I would say yes, yes, and yes, Dan. We'll continue to think about our capital structure. We'll continue to opportunistically look at strategic M&A and returns of capital to shareholders. But our formula is such that we talk about it on a regular basis. So we'll continue to be balanced with a bias toward growth.

Speaker #3: Health, and we're certainly, no doubt, that cautious consumers are—and they're being impacted by economic conditions. And I think a couple of things.

Speaker #3: There are things that are unique about our consumer business, one being that some of our products end up being used by the pro—for contractors. And so, our consumer user base products have proven to be less impacted by prices or economic conditions than consumers overall.

Daniel Moore: Thank you. I'll circle back if there's follow-ups. Thanks again.

Joe Hayek: Sure. Thank you.

Joseph Hayek: Sure. Thank you.

Operator: Our next question comes from the line of Susan Maklari with Goldman Sachs. Please go ahead.

Susan Maklari: Thank you. Good morning, everyone. My first question is talking about the momentum that you are seeing on the consumer side of the business. You mentioned that Balloon Time is now going to be available in Costco. Can you just give us a bit more color on some of these new partnerships that you're getting into that you're having success with, how much more maybe there is to go there, and then how we should think about the upside from all of this as we do get into the busier spring and summer next year?

Speaker #3: But relative to consumers generally, products that are geared toward consumers are pretty affordable. And we do not traffic in consumer durables, for instance.

Speaker #3: Remember, our products are used in a wide swath of activities and experiences. Experiences are instead, or are replacing, more expensive experiences.

Speaker #3: of so demand tends . to be a bit more Sometimes those resilient than in other categories . But to your question specifically , you know , our innovation engines are really opening new doors for us , and we think that we're gaining share .

Joe Hayek: Sure. Good morning, Susan. Thank you. So yeah, you're right. There is a lot of focus on health of the consumer generally right now. And there's certainly no doubt that consumers are cautious, and they're being impacted by economic conditions and prices. I think a couple of things that are unique about our consumer business. For one, some of our consumer products end up being used by the pros or contractors. And so that user base is proving to be less impacted by economic conditions than consumers overall. But relative to consumers generally, remember, our products that are geared toward consumers are pretty affordable. We do not traffic in consumer durables, for instance. And our products are used in a wide swath of activities and experiences. Sometimes those experiences are instead of or are replacing more expensive experiences.

Joseph Hayek: Sure. Good morning, Susan. Thank you. So yeah, you're right. There is a lot of focus on health of the consumer generally right now. And there's certainly no doubt that consumers are cautious, and they're being impacted by economic conditions and prices. I think a couple of things that are unique about our consumer business. For one, some of our consumer products end up being used by the pros or contractors. And so that user base is proving to be less impacted by economic conditions than consumers overall. But relative to consumers generally, remember, our products that are geared toward consumers are pretty affordable. We do not traffic in consumer durables, for instance. And our products are used in a wide swath of activities and experiences. Sometimes those experiences are instead of or are replacing more expensive experiences.

Speaker #3: I think about the Costco win additional placement for Sherwin-Williams and Home Depot . We've talked previous in quarters about , you know , CVS , staples , Walgreens , you know , our store count is actually up overall , 63% .

Speaker #3: And so that innovation is really what's driving that growth, and the placement. And so it's helping us in the current environment really well.

Speaker #3: And we navigate, we think it also positions us for additional growth as conditions improve, and people have a bit more disposable income.

Speaker #3: Then maybe finally, and look at the last—if you consider our revenues, EBITDA are what many would describe as a pretty down year in, relatively, the same modest headwinds.

Speaker #3: And that gives us confidence that we're doing a lot of the right things in the face of that.

Joe Hayek: And so demand tends to be a bit more resilient than in other categories. But to your question specifically, our innovation engines are really opening new doors for us. And we think that we're gaining share. I think about the Costco win, additional placement for Sherwin-Williams and Home Depot. We've talked in previous quarters about CVS, Staples, and Walgreens. Our store count is actually up overall 63%. And so that innovation is really what's driving that growth and the placement. And so it's helping us navigate the current environment really well. And we think it also positions us for additional growth as conditions improve and people have a bit more disposable income.

And so demand tends to be a bit more resilient than in other categories. But to your question specifically, our innovation engines are really opening new doors for us. And we think that we're gaining share. I think about the Costco win, additional placement for Sherwin-Williams and Home Depot. We've talked in previous quarters about CVS, Staples, and Walgreens. Our store count is actually up overall 63%. And so that innovation is really what's driving that growth and the placement. And so it's helping us navigate the current environment really well. And we think it also positions us for additional growth as conditions improve and people have a bit more disposable income.

Speaker #8: Okay. A couple of flat colors.

Speaker #8: on then maybe SG&A in the last several quarters . Can you talk a bit about the further opportunities there where we just as it nice relates to the Worthington Business Systems other and any upside , either in SG&A or actually even in the Cog side of the well business as .

Speaker #3: We were 320 basis points from a CA perspective, tariff and down sales. But our gross margin was down 120 basis points from a year ago.

Joe Hayek: Then maybe finally, if you look at the last couple of years in consumer, our revenues and EBITDA are relatively flat in what many would describe as a pretty down market and in the face of some modest tariff headwinds. So that gives us confidence that we're doing a lot of the right things there.

Then maybe finally, if you look at the last couple of years in consumer, our revenues and EBITDA are relatively flat in what many would describe as a pretty down market and in the face of some modest tariff headwinds. So that gives us confidence that we're doing a lot of the right things there.

Speaker #3: Now the the majority of that decline is attributable to to Elgin and the dynamics that I mentioned earlier . You know , that said , a little bit of the decline was actually related to investments that were making in growth .

Speaker #3: So specifically, we’ve added roughly 40 heads in a few of our facilities to meet increased demand. And it takes some time for those colleagues to ramp up from a productivity hours to, just from a perspective.

Susan Maklari: Okay. That's great color. Good to hear all that. Then maybe switching to the cost side of the business, you've done a really nice job on SG&A in the last several quarters. Can you talk a bit about the further opportunities there where we are just as it relates to the Worthington business systems and any other upside, either in SG&A or actually even in the COGS side of the business as well?

Speaker #3: But we're really pleased that we've been able to identify and work on those resources that we think are going to be colleagues of ours for a while to come.

Speaker #3: You know, we had some great volumes that were down slightly in a couple of our value streams from a seasonal perspective. You know, started a bit later this year than it did last year.

Joe Hayek: Sure. So I'll take maybe the gross margin side of the question, Susan. But you're right, and thanks for noticing. Yeah, we were down 320 basis points from an SG&A perspective from a percentage sales. But our gross margin was down 120 basis points from a year ago. Now, the majority of that decline is attributable to Elgin and the dynamics that I mentioned earlier. That said, a little bit of the decline was actually related to investments that we're making in growth. So specifically, we've added roughly 40 heads in a few of our facilities to meet increased demand. And it just takes some time for those colleagues of ours to ramp up from a productivity perspective. But we're really pleased that we've been able to identify and onboard those resources that we think are going to be great colleagues of ours for a while to come.

Joseph Hayek: Sure. So I'll take maybe the gross margin side of the question, Susan. But you're right, and thanks for noticing. Yeah, we were down 320 basis points from an SG&A perspective from a percentage sales. But our gross margin was down 120 basis points from a year ago. Now, the majority of that decline is attributable to Elgin and the dynamics that I mentioned earlier. That said, a little bit of the decline was actually related to investments that we're making in growth. So specifically, we've added roughly 40 heads in a few of our facilities to meet increased demand. And it just takes some time for those colleagues of ours to ramp up from a productivity perspective. But we're really pleased that we've been able to identify and onboard those resources that we think are going to be great colleagues of ours for a while to come.

Speaker #3: And so costs conversion in those businesses a bit were were higher winter . But I think on the A which side , is , as you said , a good story for us .

Speaker #3: Colin .

Speaker #4: So in Yeah . , you know , as , as Joe said , SG&A down

Speaker #4: year . We've as we've talked about before , we continue to focus on cost controls , leveraging technology where we can , you know , transformation is a part of business system .

Speaker #4: from an a standpoint and our targets that we put out there from a gross standpoint , we've been running in the high really 20s from a gross and we think we can get to margin over 30% gross time , consistently margin while driving our way down to to margin , 20% as well So we're still we feel good about those goals .

Joe Hayek: We had some volumes that were down slightly in a couple of our value streams from a seasonal perspective. Winter started a bit later this year than it did last year. And so conversion costs in those businesses were a bit higher. But I think on the SG&A side, which is, as you said, a really good story for us, Colin.

We had some volumes that were down slightly in a couple of our value streams from a seasonal perspective. Winter started a bit later this year than it did last year. And so conversion costs in those businesses were a bit higher. But I think on the SG&A side, which is, as you said, a really good story for us, Colin.

Speaker #4: There's some some temporary cost impact in the quarter . On the gross margin side , as Joe talked about . But we've been helping been offset that from an G&A standpoint more of that to and come .

Colin Souza: Yeah. So as Joe said, SG&A down 320 basis points year over year. As we've talked about before, we continue to focus on cost controls, leveraging technology where we can. Transformation is a part of our business system. It's not just in the front of the house. It's also in the back office as well. So we're trying to maintain as best we can our costs and really create that operating leverage to grow from an SG&A standpoint. And our targets that we put out there from a gross margin standpoint, we've been running in the high 20s from a gross margin. And we think we can get to 30% gross margin over time consistently while driving our SG&A down to 20% as well over time. So we feel good about those goals. There's some temporary cost impact in the quarter on the gross margin side, as Joe talked about.

Collin Souza: Yeah. So as Joe said, SG&A down 320 basis points year over year. As we've talked about before, we continue to focus on cost controls, leveraging technology where we can. Transformation is a part of our business system. It's not just in the front of the house. It's also in the back office as well. So we're trying to maintain as best we can our costs and really create that operating leverage to grow from an SG&A standpoint. And our targets that we put out there from a gross margin standpoint, we've been running in the high 20s from a gross margin. And we think we can get to 30% gross margin over time consistently while driving our SG&A down to 20% as well over time. So we feel good about those goals. There's some temporary cost impact in the quarter on the gross margin side, as Joe talked about.

Speaker #8: Yeah , over time . okay . That's all great to hear . And then maybe I'm going to squeeze one more in , which is it's really nice to see how well wave continues to in do environment .

Speaker #8: Can you talk a bit about what they're seeing in that business? And is there anything in terms of the outlook that we should be aware of?

Speaker #8: There ?

Speaker #4: Susan . Yeah . So wave up $2 million year over year from a contribution Their standpoint . end markets remain generally stable , though performance varies by sector within there .

Speaker #4: And as you know , they're driven a little more by repair . And remodel activity as well . So education health care , transportation and data centers have all been strong for retail office and markets them .

Speaker #4: have been weaker . But steady . While So they continue ways to to really enhance to find margin by ultimately recognizing pain points of their end consumer .

Colin Souza: But we've been helping offset that from an SG&A standpoint and more of that to come.

But we've been helping offset that from an SG&A standpoint and more of that to come.

Speaker #4: contractors and delivering enhanced value to those , those contractors and that's really ultimately valued by those in the market . And ahead , looking you know , as commercial construction contractors volumes , you know , could benefit over time as rates So decline either or just as the market adjusts to current current levels , you know , the team at wave just continues to do a terrific job in are well positioned forward .

Susan Maklari: Yeah. Okay. That's all great to hear. And then maybe I'm going to squeeze one more in, which is it's really nice to see how well WAVE continues to do in this environment. Can you talk a bit about what they're seeing in that business and anything in terms of the outlook that we should be aware of there?

Colin Souza: Yeah, Susan. So WAVE up $2 million year over year from a contribution standpoint. Their end markets remain generally stable, though performance varies by sector within there. And as you know, they're driven a little more by repair and remodel activity as well. So education, healthcare, transportation, and data centers have all been strong for them, while retail and office markets have been weaker but steady. So they continue to find ways to really enhance margin by ultimately recognizing pain points of their end consumers, so contractors, and ultimately delivering enhanced value to those contractors. And that's really valued by those contractors in the market. And looking ahead, as commercial construction volumes could benefit over time, either as rates decline or just as the market adjusts to current levels, the team at WAVE just continues to do a terrific job and are very well positioned moving forward.

Collin Souza: Yeah, Susan. So WAVE up $2 million year over year from a contribution standpoint. Their end markets remain generally stable, though performance varies by sector within there. And as you know, they're driven a little more by repair and remodel activity as well. So education, healthcare, transportation, and data centers have all been strong for them, while retail and office markets have been weaker but steady. So they continue to find ways to really enhance margin by ultimately recognizing pain points of their end consumers, so contractors, and ultimately delivering enhanced value to those contractors. And that's really valued by those contractors in the market. And looking ahead, as commercial construction volumes could benefit over time, either as rates decline or just as the market adjusts to current levels, the team at WAVE just continues to do a terrific job and are very well positioned moving forward.

Speaker #4: moving So , you know , we're not surprised they're up another quarter . From a very contribution standpoint and are pleased with kind of where they're at .

Speaker #4: And going .

Speaker #8: the upcoming quarters .

Speaker #3: Thank you, Susan. Colin, and—

Speaker #1: Our question comes from the line of Walter Liptak with Next Seaport Research. Please go ahead.

Speaker #9: Please .

Speaker #10: Hi . Thanks . morning guys , and it a good quarter with , you know , just a couple of outside of your control looks like .

Speaker #10: So Good , Colin , I think you mentioned just at a high level things mix and being weaker . And I think on the construction side , referring more to Clark Detrick .

Speaker #10: Were you referring to, on the mix side, but what?

Speaker #4: Yeah . So on the construction side . Well , you know , Clark Detrick specifically driven by new construction , they're on the very front end and they're getting intense competition there , just as the volumes declined a bit .

Colin Souza: So we're not surprised. They're up another quarter from a contribution standpoint and are pleased with kind of where they're at and where they're going.

So we're not surprised. They're up another quarter from a contribution standpoint and are pleased with kind of where they're at and where they're going.

Speaker #4: So that's really what I was referring to, how it was, you know, subdued and trickling earnings.

Speaker #3: Yeah . And

Susan Maklari: Yeah. Okay. Thank you both for all the color. And good luck with the upcoming quarters.

Speaker #3: Bit of a, you know, a contrast to the other parts of our business within construction that are more geared towards repair and maintenance.

Joe Hayek: Thank you, Susan.

Joseph Hayek: Thank you, Susan.

Operator: Our next question comes from the line of Walt Liptak with Seaport Research. Please go ahead.

Speaker #3: You know, our cooling and remodel business continued to have, through to really construction, strong results. And really good growth. And so it's a bit of a tale of prospects.

Walt Liptak: Hi. Thanks. Good morning, guys. It looks like a good quarter with just a couple of things outside of your control. Colin, I think you mentioned just at a high level mix and construction being weaker. I think on the construction side, you're referring more to ClarkDietrich. But what were you referring to on the mix side?

Walter Liptak: Hi. Thanks. Good morning, guys. It looks like a good quarter with just a couple of things outside of your control. Colin, I think you mentioned just at a high level mix and construction being weaker. I think on the construction side, you're referring more to ClarkDietrich. But what were you referring to on the mix side?

Speaker #3: two construction markets right now . New is still a little slow , but the repair and remodel is we would consider it healthy pretty .

Speaker #10: Okay, great. I just wanted to make sure I wasn't missing something there. And then on the mix, too, I'm not totally sure I understand the pluses and minuses there, because the mix sounds—especially in building products—like it pretty much was good.

Colin Souza: Yeah. So on the construction side, well, ClarkDietrich, specifically driven by new construction. They're on the very front end, and they're getting intense competition there just as the volumes declined a bit. So that's really what I was referring to, how it was subdued and trickling through to our earnings.

Collin Souza: Yeah. So on the construction side, well, ClarkDietrich, specifically driven by new construction. They're on the very front end, and they're getting intense competition there just as the volumes declined a bit. So that's really what I was referring to, how it was subdued and trickling through to our earnings.

Speaker #3: I think I think from a mix

Speaker #3: perspective , . Yeah , I if you're talking about Clark Detrick , has their tended to be more towards the large , project stadium mix large infrastructure projects , which is .

Speaker #3: Good business , but maybe a bit lower margin profile than more . The traditional , slightly smaller , you know , drywall stud business .

Joe Hayek: Yeah. And Walt, that's actually a bit of a contrast to the other parts of our business within construction that are more geared on repair, remodel, maintenance. Our cooling and construction business continued to have really strong results and really good growth prospects. And so it's a bit of a tale of two construction markets right now. New is still a little slow, but repair and remodel is, we would consider it, pretty healthy.

Joseph Hayek: Yeah. And Walt, that's actually a bit of a contrast to the other parts of our business within construction that are more geared on repair, remodel, maintenance. Our cooling and construction business continued to have really strong results and really good growth prospects. And so it's a bit of a tale of two construction markets right now. New is still a little slow, but repair and remodel is, we would consider it, pretty healthy.

Speaker #3: That's, I think, Colin was to around Detrick what referring Clark.

Speaker #10: Okay , good then just a follow up on a previous question . Clark Detrick . They are they getting into like seasonally And stronger period like these EBITDA levels is , you know , a I heard you say , you know , kind of stable .

Speaker #10: But I think then, if it's seasonally stronger, you know, do you get a lift going into the back half of the year, Clark Detrick?

Walt Liptak: Okay. Great. I just wanted to make sure I wasn't missing something there. And then on the mix too, I'm not totally sure I understand the pluses and minuses there because the mix sounds, especially in building products, like it was pretty good.

Walter Liptak: Okay. Great. I just wanted to make sure I wasn't missing something there. And then on the mix too, I'm not totally sure I understand the pluses and minuses there because the mix sounds, especially in building products, like it was pretty good.

Speaker #4: Yeah . So I mentioned Walt just no worse than , you know , sequentially flat is the expectation there . You know , seasonality .

Joe Hayek: Yeah. I think from a mix perspective, if you're talking specifically about ClarkDietrich, their mix has tended to be more towards the large, large projects, stadium infrastructure projects, which is good business, but maybe a bit lower margin profile than more the traditional slightly smaller drywall stud business. That's, I think, what Colin was referring to around ClarkDietrich.

Joseph Hayek: Yeah. I think from a mix perspective, if you're talking specifically about ClarkDietrich, their mix has tended to be more towards the large, large projects, stadium infrastructure projects, which is good business, but maybe a bit lower margin profile than more the traditional slightly smaller drywall stud business. That's, I think, what Colin was referring to around ClarkDietrich.

Speaker #4: Not too pronounced in Clark, obviously. If it's colder out and they can't get to job Detrick sites, that impacts it.

Speaker #4: But the the earnings contribution are impacted by some of the other factors about , whether been that we've steel talking pricing or mix projects as well .

Speaker #10: Okay , of great . Okay . Thanks for that clarification . And then third quarter last year I remember that there was like some smaller gas containers used for that are heating that were strong .

Walt Liptak: Okay. Good. And just to follow up on a previous question about ClarkDietrich, are they getting into a seasonally stronger period like these EBITDA levels? I think I heard you say kind of stable, but then if it's seasonally stronger, do you get a lift going into the back half of the year for ClarkDietrich?

Walter Liptak: Okay. Good. And just to follow up on a previous question about ClarkDietrich, are they getting into a seasonally stronger period like these EBITDA levels? I think I heard you say kind of stable, but then if it's seasonally stronger, do you get a lift going into the back half of the year for ClarkDietrich?

Speaker #10: Is comp a comp that we there a should be tougher thinking about ? the weather seems like it's And , you know , colder the last month or been so , you know , are those small containers to to enough be a plus or minus , you know , in , in the third quarter .

Colin Souza: Yeah. So I mentioned, Walt, just no worse than sequentially flat is the expectation there. Seasonality, it's not too pronounced in ClarkDietrich. Obviously, if it's colder out and they can't get to job sites, that has an impact. But the earnings contribution are impacted by some of the other factors that we've been talking about, whether it's steel pricing or mix of projects as well.

Collin Souza: Yeah. So I mentioned, Walt, just no worse than sequentially flat is the expectation there. Seasonality, it's not too pronounced in ClarkDietrich. Obviously, if it's colder out and they can't get to job sites, that has an impact. But the earnings contribution are impacted by some of the other factors that we've been talking about, whether it's steel pricing or mix of projects as well.

Speaker #3: Sure . So when we think that , really well , it's around , you know , seasonality . Yeah . about And if you live in the Midwest northeast , you know , it's been a pretty cold December .

Speaker #3: But the or the Strongest seasonal quarters for us are always Q3 and . Q4 . And thats dovetails with a things . One , the winter handful of and some of that temporary or , you know , backup heat that our products provide to people when it's exceptionally cold or when their pipes burst , or when they need other things in ways of creating ways to to cook or to to produce heat .

Walt Liptak: Okay. Great. Okay. Thanks for that clarification. And then Q3 last year, I remember that there was some smaller gas containers that are used for heating that were strong. Is there a tougher comp that we should be thinking about? And the weather seems like it's been colder the last month or so. Are those small containers enough to be a ± in the third quarter?

Walter Liptak: Okay. Great. Okay. Thanks for that clarification. And then Q3 last year, I remember that there was some smaller gas containers that are used for heating that were strong. Is there a tougher comp that we should be thinking about? And the weather seems like it's been colder the last month or so. Are those small containers enough to be a ± in the third quarter?

Speaker #3: And then you get also into people thinking about the spring, you know, the construction season and things that are there.

Speaker #3: spring So . Seasonally speaking , you know , Q3 and last year strong . And I think , you know , we don't was see a lot of in differences seasonality year last year this versus .

Joe Hayek: Sure. So when we think about that, Walt, it's really around seasonality. Yeah. And if you live in the Midwest or the Northeast, you know it's been a pretty cold December. But the strongest seasonal quarters for us are always Q3 and Q4. And that dovetails with a handful of things: one, the winter and some of that temporary or backup heat that our products provide to people when it's exceptionally cold, or when their pipes burst, or when they need other things and ways of creating ways to cook or to produce heat. And then you also get into people thinking about the spring, the spring construction season, and other things that are there. So seasonally speaking, Q3 and last year was strong. And I think we don't see a lot of differences in seasonality this year versus last year.

Joseph Hayek: Sure. So when we think about that, Walt, it's really around seasonality. Yeah. And if you live in the Midwest or the Northeast, you know it's been a pretty cold December. But the strongest seasonal quarters for us are always Q3 and Q4. And that dovetails with a handful of things: one, the winter and some of that temporary or backup heat that our products provide to people when it's exceptionally cold, or when their pipes burst, or when they need other things and ways of creating ways to cook or to produce heat. And then you also get into people thinking about the spring, the spring construction season, and other things that are there. So seasonally speaking, Q3 and last year was strong. And I think we don't see a lot of differences in seasonality this year versus last year.

Speaker #10: Okay, okay. Great. Thank you.

Speaker #7: Sure .

Speaker #1: Once again, for questions, please press star one. Our next question will come from Brian McNamara with the line of Canaccord Genuity.

Speaker #1: ahead . Please

Speaker #11: Hey good morning guys . Thanks for taking our questions . My first one on gross margin . You pretty much answered already . But I'm curious what margin would have looked like gross the what the .

Speaker #11: And Exalgin, then when would you expect to benefit from the recent headcount additions on the gross margin line?

Speaker #3: So it was the impacts from Elgin . Brian , if you're talking about , you know , 120 basis points , that was that was a majority of that .

Speaker #3: And there were a couple of puts and takes. But we would, other than for investments that we made in expected headcount, and certainly the investments that we made in the operations at Elgin, expect to start to produce results in Q3 and certainly beyond.

Walt Liptak: Okay. Okay. Great. Thank you.

Walter Liptak: Okay. Okay. Great. Thank you.

Joe Hayek: Sure.

Joseph Hayek: Sure.

Operator: Again, for any questions, press star one. And our next question will come from the line of Brian McNamara with Canaccord Genuity. Please go ahead.

Speaker #11: there's a lot And then of obviously noise in the gross margin lines , very very seasonal , So how should investors think about that ?

Speaker #11: That line item in the back half of the lumpy year?

Brian McNamara: Hey, good morning, guys. Thanks for taking our questions. My first one on gross margin, you pretty much answered already, but I'm curious what the gross margin would have looked like ex-Elgin, and then when you would expect to see the benefit from the recent headcount additions on the gross margin line.

Speaker #3: I don't Sure . think it's I don't think it should be seasonally that different than , than it's been from a trend perspective its call it in our fiscal , you know , in 2025 .

Speaker #3: You know , one of the things that's that's a little unique this year versus last year has been tariffs . And , you know , there's a lot that continues to be around tariffs .

Joe Hayek: So it was the impacts from Elgin. Brian, if you're talking about 120 basis points, that was a majority of that. There were a couple of other puts and takes. But we would expect for the investments that we made in headcount and certainly the investments that we made in the operations at Elgin to start to produce results in Q3 and certainly beyond.

Joseph Hayek: So it was the impacts from Elgin. Brian, if you're talking about 120 basis points, that was a majority of that. There were a couple of other puts and takes. But we would expect for the investments that we made in headcount and certainly the investments that we made in the operations at Elgin to start to produce results in Q3 and certainly beyond.

Speaker #3: But from our perspective, you know, we still think that we're a net beneficiary of the discussed tariffs announced that are in place out there.

Speaker #3: So, a level playing field is a thing for us. You know, we believe we gained share in multiple of our value streams.

Speaker #3: I mentioned the 40 or so heads that we've hired since the beginning of June to ramp up, but demand— more when it comes to the tariff mitigation.

Walt Liptak: Then there's a lot of, obviously, noise in the gross margin lines. Very seasonal, very lumpy. How should investors think about that line item in the back half of the year?

Walter Liptak: Then there's a lot of, obviously, noise in the gross margin lines. Very seasonal, very lumpy. How should investors think about that line item in the back half of the year?

Speaker #3: know what You we've talked about this , but I think it's worth revisiting . You know , there are three primary levers that that we can pull to mitigate some of those negative impacts on us .

Joe Hayek: Sure. I don't think it should be seasonally that different than it's been from a trend perspective in, let's call it, in our fiscal 2025. One of the things that's a little unique this year versus last year has been tariffs. And there's a lot that continues to be discussed around tariffs. But from our perspective, we still think that we're a net beneficiary of the tariffs that are announced and in place out there. So a level playing field is a good thing for us. We believe we gained share in multiple of our value streams. I've mentioned the 40 or so heads that we've hired since the beginning of June to ramp up demand. But more, when it comes to the tariff mitigation, what we've talked about this, but I think it's worth revisiting.

Joseph Hayek: Sure. I don't think it should be seasonally that different than it's been from a trend perspective in, let's call it, in our fiscal 2025. One of the things that's a little unique this year versus last year has been tariffs. And there's a lot that continues to be discussed around tariffs. But from our perspective, we still think that we're a net beneficiary of the tariffs that are announced and in place out there. So a level playing field is a good thing for us. We believe we gained share in multiple of our value streams. I've mentioned the 40 or so heads that we've hired since the beginning of June to ramp up demand. But more, when it comes to the tariff mitigation, what we've talked about this, but I think it's worth revisiting.

Speaker #3: You know, the first is asking our suppliers to help us offset some of that cost. We've certainly done that. The additional second is taking costs out of our own supply chains everywhere that we can.

Speaker #3: And certainly, we have done that. But the third is pricing actions. And so those mitigants can take time to implement and finalize.

Speaker #3: and to But we are pleased that , you know , as early of December , we've gotten to a point like where where we feel we're where we need to be in all three of those areas , you know , as we balance our own , you know , profitability goals with being a term partner to good long our customers .

Speaker #3: But we do feel good about where we are now.

Speaker #11: You read my mind on tariff front . That was my next question . you're a the predominantly a Obviously , manufacturer domestic . Theoretically .

Speaker #11: You know, that does provide a cost advantage as it relates to tariffs relative to some of your peers that have kind of significant China IT sourcing.

Joe Hayek: There are three primary levers that we can pull to mitigate some of those negative impacts on us. The first is asking our suppliers to help us offset some of that additional cost. We've certainly done that. The second is taking costs out of our own supply chains everywhere that we can. We've certainly done that. The third is pricing actions. So those mitigants can take time to implement and to finalize. But we are pleased that as of early December, we've gotten to a point where we feel like we're where we need to be in all three of those areas as we balance our own profitability goals with being a good long-term partner to our customers. But we do feel good about where we are now.

There are three primary levers that we can pull to mitigate some of those negative impacts on us. The first is asking our suppliers to help us offset some of that additional cost. We've certainly done that. The second is taking costs out of our own supply chains everywhere that we can. We've certainly done that. The third is pricing actions. So those mitigants can take time to implement and to finalize. But we are pleased that as of early December, we've gotten to a point where we feel like we're where we need to be in all three of those areas as we balance our own profitability goals with being a good long-term partner to our customers. But we do feel good about where we are now.

Speaker #11: It doesn't appear overall that— I know you mentioned share gains, but it doesn't appear that that advantage has played out yet. I'm curious what you're seeing in the market as it relates to competitive pricing and the relative value of the products you're providing?

Speaker #3: Yeah , I think so . It depends on the markets that we're participating in , in , in some markets , it's a bit more evident that imported products are just simply more expensive .

Speaker #3: And in other it's a bit more markets There are people nuanced . look at I mean , Europe , for instance look at , the European economy struggling more than maybe the domestic is I economy .

Speaker #3: I think it's in part because of the tariff situation here. A lot of those products are landing in Europe, and so the European manufacturers are effectively facing more of that competition.

Brian McNamara: You read my mind on the tariff front. That was my next question. Obviously, you're predominantly a domestic manufacturer. Theoretically, that should provide a cost advantage as it relates to tariffs relative to some of your peers that have significant kind of China sourcing. It doesn't appear overall that the—I know you mentioned share gains, but it doesn't appear that that advantage has played out yet. I'm curious what you're seeing in the market as it relates to competitive pricing and the relative value your products are providing.

Speaker #3: But from us, from our— from our— we feel really good about where our value perspective is. We focus really hard on innovation and on doing things that aren't just a price increase.

Speaker #3: For a price increases sake , but that we're we're adding value and we're with partnering our customers , be they distributors , contractors or retailers , understanding where they're at .

Joe Hayek: Yeah. So it depends on the markets that we're participating in. In some markets, it's a bit more evident that imported products are just simply more expensive. And in other markets, it's a bit more nuanced. I mean, look at Europe, for instance. The European economy is struggling more than maybe the domestic economy. I think it's in part because of the tariff situation here. A lot of those products are landing in Europe. And so the European manufacturers are effectively facing more of that competition. But from our perspective, we feel really good about where our value is. We focus really hard on innovation and on doing things that aren't just a price increase for a price increase's sake, but that we're adding value and we're partnering with our customers, be they distributors, contractors, or retailers, understanding where they're at.

Joseph Hayek: Yeah. So it depends on the markets that we're participating in. In some markets, it's a bit more evident that imported products are just simply more expensive. And in other markets, it's a bit more nuanced. I mean, look at Europe, for instance. The European economy is struggling more than maybe the domestic economy. I think it's in part because of the tariff situation here. A lot of those products are landing in Europe. And so the European manufacturers are effectively facing more of that competition. But from our perspective, we feel really good about where our value is. We focus really hard on innovation and on doing things that aren't just a price increase for a price increase's sake, but that we're adding value and we're partnering with our customers, be they distributors, contractors, or retailers, understanding where they're at.

Speaker #3: I mean , it's been a tough row for these retailers , you know , since the spring to really understand things . all these And so we try really hard to to add value lead with and data and lead with value .

Speaker #3: You can, and as you see in some of our increased placements and are gaining market, that's paying off. It doesn't, you know, it doesn't manifest itself over share, period.

Speaker #3: from our perspective know , keep and , you that we're a long term in mind focused company . We good ability to about our continue doing what we need to while being a good partner in in the long term for our customers .

Speaker #11: That's all for me. Thanks a lot, guys. Best of luck.

Speaker #3: Thanks .

Speaker #7: Brian . .

Speaker #1: And that will our conclude answer session . I call turn the back over to Joe question and will now for comments any closing .

Speaker #3: Regina, thank you and everyone for joining us this morning, thank you. Have a great week and have a wonderful holiday season.

Joe Hayek: I mean, it's been a tough row for these retailers since the spring to really understand all these things. And so we try really hard to add value, lead with data, and lead with value. And as you can see in some of our increased placements and our gaining market share, that's paying off. It doesn't manifest itself over a two-week period. But from our perspective, and keep in mind that we're a long-term focused company, we feel really good about our ability to continue doing what we need to while being a good partner in the long term for our customers.

I mean, it's been a tough row for these retailers since the spring to really understand all these things. And so we try really hard to add value, lead with data, and lead with value. And as you can see in some of our increased placements and our gaining market share, that's paying off. It doesn't manifest itself over a two-week period. But from our perspective, and keep in mind that we're a long-term focused company, we feel really good about our ability to continue doing what we need to while being a good partner in the long term for our customers.

Speaker #3: Hope you're surrounded by family and friends and people that you love. We look forward to speaking to everybody soon.

Speaker #1: That concludes today's conference call. Thank you all for joining. You may disconnect.

Brian McNamara: That's helpful. That's all for me. Thanks a lot, guys. Best of luck.

Joe Hayek: Thanks, Brian.

Joseph Hayek: Thanks, Brian.

Operator: That will conclude our question-and-answer session. I will now turn the call back over to Joe Hayek for any closing comments.

Joe Hayek: Regina, thank you. Thank you, everyone, for joining us this morning. Have a great week and have a wonderful holiday season. Hope you're surrounded by friends, family, and people that you love. We look forward to speaking to everybody soon.

Joseph Hayek: Regina, thank you. Thank you, everyone, for joining us this morning. Have a great week and have a wonderful holiday season. Hope you're surrounded by friends, family, and people that you love. We look forward to speaking to everybody soon.

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

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