Q3 2026 Worthington Steel Inc Earnings Call

March 26, 2026

Speaker #1: Good morning, and welcome to Worthington Steel's third quarter fiscal year 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator 1: Good morning, and welcome to Worthington Steel's Q3 fiscal year 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to Melissa Dykstra, Vice President of Corporate Communications and Investor Relations. Please go ahead.

Operator: Good morning, and welcome to Worthington Steel's Q3 fiscal year 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to Melissa Dykstra, Vice President of Corporate Communications and Investor Relations. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. I will now hand the call over to Melissa Dykstra, Vice President of Corporate Communications and Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Operator. Good morning and welcome to Worthington Steel's third quarter fiscal year 2026 earnings call. On our call today, we have Geoff Gilmore, Worthington Steel's President and Chief Executive Officer, and Tim Adams, Vice President and Chief Financial Officer.

Melissa Dykstra: Thank you, operator. Good morning, and welcome to Worthington Steel's Q3 fiscal year 2026 earnings call. On our call today, we have Jeff Gilmore, Worthington Steel's President and Chief Executive Officer, and Tim Adams, Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested. We issued our earnings release yesterday after the market closed. Please refer to it for more detail on factors that could cause actual results to differ materially. Unless noted as reported, today's discussion will reference non-GAAP financial measures, which adjust for certain items included in our GAAP results and are presented on a standalone basis.

Speaker #2: Before we begin, I'd like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act.

Speaker #2: These statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested. We issued our earnings release yesterday after the market closed.

Melissa Dykstra: These statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested. We issued our earnings release yesterday after the market closed. Please refer to it for more detail on factors that could cause actual results to differ materially. Unless noted as reported, today's discussion will reference non-GAAP financial measures, which adjust for certain items included in our GAAP results and are presented on a standalone basis.

Speaker #2: Please refer to it for more detail on factors that could cause actual results to differ materially. Unless noted as reported, today's discussion will reference non-GAAP financial measures, which adjust for certain items included in our GAAP results and are presented on a standalone basis.

Speaker #2: You can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliations within our earnings release. Today's call is being recorded, and a replay will be made available later today on WorthingtonSteel.com.

Melissa Dykstra: You can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliations within our earnings release. Today's call is being recorded, and a replay will be made available later today on worthingtonsteel.com. Now, I'll turn it over to Jeff Gilmore.

Speaker #2: Now, I'll turn it over to Geoff Gilmore.

Speaker #3: Good morning, and thanks for being with us today. It's been a memorable few months for us to say the least, as most of you know, in January, we announced our proposed acquisition of Klockner, which will be the largest in our history and a meaningful strategic step for the company.

Geoff Gilmore: Good morning, and thanks for being with us today. It's been a memorable few months for us to say the least. As most of you know, in January, we announced our proposed acquisition of Kloeckner, which will be the largest in our history and a meaningful strategic step for the company. I appreciate that even with an announcement of this size and the work that goes with it, our team stayed anchored in what matters, safety, serving customers, and improving the business every day. Thank you to the entire Worthington Steel team. This quarter, I'll start with an update on the Kloeckner acquisition. The combination of our two organizations will create a larger, more diversified metals processing platform with meaningful opportunities to generate value and capture synergies through Worthington's proprietary Worthington business system that we call the transformation.

Speaker #3: I appreciate that, even with an announcement of this size and the work that goes with it, our team stayed anchored in what matters: safety, serving customers, and improving the business every day.

Geoff Gilmore: I appreciate that even with an announcement of this size and the work that goes with it, our team stayed anchored in what matters, safety, serving customers, and improving the business every day. Thank you to the entire Worthington Steel team.

Speaker #3: Thank you to the entire Worthington Steel team. This quarter, I'll start with an update on the Klockner acquisition. The combination of our two organizations will create a larger, more diversified metals processing platform with meaningful opportunities to generate value and capture synergies through Worthington's proprietary base business improvement program that we call the Transformation.

Geoff Gilmore: This quarter, I'll start with an update on the Kloeckner acquisition. The combination of our two organizations will create a larger, more diversified metals processing platform with meaningful opportunities to generate value and capture synergies through Worthington's proprietary Worthington business system that we call the transformation.

Speaker #3: This transaction is being executed through a voluntary public tender offer in Germany, and remains subject to the tender process and required regulatory approvals. Since our investor call in January, the voluntary tender offer has been launched.

Geoff Gilmore: This transaction is being executed through a voluntary public tender offer in Germany and remains subject to the tender process and required regulatory approvals. Since our investor call in January, the voluntary tender offer has been launched. We have submitted requests for regulatory approval in the required jurisdictions, and we are beginning to see approvals come through. Overall, the process is progressing well. Today is the final day of the initial acceptance period of the tender offer process, and we are confident we will secure enough shares to meet the 57.5% minimum threshold. We continue to expect the transaction to close in H2 of the calendar year. In preparation for closing, we've begun internal planning focused on integration, governance, and day one readiness. We're doing that responsibly and deliberately with an eye toward maintaining our high-performing cultures, unlocking value, and accelerating growth.

Speaker #3: We have submitted requests for regulatory approval in the required jurisdictions, and we are beginning to see approvals come through. Overall, the process is progressing well.

Geoff Gilmore: Overall, the process is progressing well. Today is the final day of the initial acceptance period of the tender offer process, and we are confident we will secure enough shares to meet the 57.5% minimum threshold. We continue to expect the transaction to close in H2 of the calendar year.

Speaker #3: Today is the final day of the initial acceptance period of the tender offer process, and we are confident we will secure enough shares to meet the 57.5% minimum threshold.

Speaker #3: We continue to expect the transaction to close in the second half of the calendar year. In preparation for closing, we have begun internal planning focused on integration, governance, and day-one readiness.

Geoff Gilmore: In preparation for closing, we've begun internal planning focused on integration, governance, and day one readiness. We're doing that responsibly and deliberately with an eye toward maintaining our high-performing cultures, unlocking value, and accelerating growth.

Speaker #3: We're doing that responsibly and deliberately with an eye toward maintaining our high-performing cultures, unlocking value, and accelerating growth. Most importantly, this deal is about combining two great companies that share the same values: I've had the opportunity to spend time with several of our future Klockner teammates.

Geoff Gilmore: Most importantly, this deal is about combining two great companies that share the same values. I've had the opportunity to spend time with several of our future Kloeckner teammates, and it reinforced our view that Worthington and Kloeckner are culturally aligned and fit together very well. Furthermore, since our announcement, the response from customers, suppliers, and investors has been overwhelmingly positive. As a reminder, the German public company takeover process is highly structured, and we will continue to provide updates as we reach key milestones. With that, let's turn to our results for Q3. Net sales were $769.8 million. Adjusted EBITDA was $41.6 million, and adjusted earnings per share were $0.27.

Speaker #3: And it reinforced our view that Worthington and Klockner are culturally aligned and fit together very well. Furthermore, since our announcement, the response from customers, suppliers, and investors has been overwhelmingly positive.

Geoff Gilmore: Furthermore, since our announcement, the response from customers, suppliers, and investors has been overwhelmingly positive. As a reminder, the German public company takeover process is highly structured, and we will continue to provide updates as we reach key milestones. With that, let's turn to our results for Q3. Net sales were $769.8 million. Adjusted EBITDA was $41.6 million, and adjusted earnings per share were $0.27.

Speaker #3: As a reminder, the German public company takeover process is highly structured, and we will continue to provide updates as we reach key milestones. With that, let's turn to our results for the third quarter.

Speaker #3: Net sales were $769.8 million. Adjusted EBITDA was $41.6 million. Adjusted earnings per share were $0.27. On a macro level, the third quarter of our fiscal year was volatile and uneven, with galvanized spreads remaining compressed and the effects of the holidays and winter weather dampening and delaying industrial activity.

Geoff Gilmore: On a macro level, Q3 of our fiscal year was volatile and uneven, with galvanized spreads remaining compressed and the effects of the holidays and winter weather dampening and delaying industrial activity. While direct volumes were up over the prior year, overall conditions were stable to soft, keeping customers' inventory disciplined and highly sensitive to interest rates and uncertainty. Even with those headwinds, our execution remained strong where it matters most, safety, customer service, and transformation. Commercially, the team continued to win the right work and capture high-value opportunities, including building on our momentum in the automotive market. Our direct shipments in Q3 to the Detroit Three increased by approximately 13%, significantly outpacing the reported 3% growth in Detroit Three production for the quarter. As discussed Q2, the outlook for the automotive market heading into calendar year 2026 remains cautiously optimistic.

Speaker #3: While direct volumes were up over the prior year, overall conditions were stable to soft, keeping customers' inventory disciplined and highly sensitive to interest rates and uncertainty.

Speaker #3: Even with those headwinds, our execution remained strong where it matters most: safety, customer service, and transformation. Commercially, the team continued to win the right work and capture high-value opportunities.

Geoff Gilmore: Even with those headwinds, our execution remained strong where it matters most, safety, customer service, and transformation. Commercially, the team continued to win the right work and capture high-value opportunities, including building on our momentum in the automotive market.

Speaker #3: Including building on our momentum in the automotive market. Our direct shipments in Q3 to the Detroit Three increased by approximately 13%, significantly outpacing the reported 3% growth in Detroit Three production for the quarter.

Geoff Gilmore: Our direct shipments in Q3 to the Detroit Three increased by approximately 13%, significantly outpacing the reported 3% growth in Detroit Three production for the quarter. As discussed Q2, the outlook for the automotive market heading into calendar year 2026 remains cautiously optimistic.

Speaker #3: As discussed last quarter, the outlook for the automotive market heading into calendar year 2026 remains cautiously optimistic. Conditions appear to be moving toward a more robust market later in the year.

Geoff Gilmore: Conditions appear to be moving toward a more robust market later in the year. That view is supported by growing confidence that a USMCA agreement will be completed in 2026, removing a significant amount of market uncertainty. Turning to agriculture, we believe we are nearing the trough of the market cycle, and that a slow rebound will begin in late calendar year 2026. On a positive note, our team has been able to secure new business with a key customer in this market, which will continue to ramp up over the next few quarters. In construction, conditions remained flat in most segments. We expect to see data center growth continue, and as lower interest rates take hold, we believe we will see some expansion in H2 2026 due to pent-up demand.

Speaker #3: That view is supported by growing confidence that a USMCA agreement will be completed in 2026. Removing a significant amount of market uncertainty. Turning to agriculture, we believe we are nearing the trough of the market cycle and that a slow rebound will begin in late calendar year 2026.

Speaker #3: On a positive note, our team has been able to secure new business with the key customer in this market, which will continue to ramp up over the next few quarters.

Geoff Gilmore: On a positive note, our team has been able to secure new business with a key customer in this market, which will continue to ramp up over the next few quarters. In construction, conditions remained flat in most segments. We expect to see data center growth continue, and as lower interest rates take hold, we believe we will see some expansion in H2 2026 due to pent-up demand.

Speaker #3: In construction, conditions remain flat in most segments. We expect to see data center growth continue and as lower interest rates take hold, we believe we will see some expansion in the second half of 2026 due to pent-up demand.

Speaker #3: And in heavy truck and trailer, as we expected, the market started off slowly in calendar year 2026. We are more confident about the back half of this year, where we expect to see a pickup in both the Class 8 truck sector as well as the trailer market.

Geoff Gilmore: In heavy truck and trailer, as we expected, the market started off slowly in calendar year 2026. We are more confident about the back half of this year, where we expect to see a pickup in both the Class 8 truck sector as well as the trailer market. Looking ahead, we are still cautiously optimistic about the second half of calendar year 2026. Overall, the backdrop looks modestly encouraging as key economic indicators show a return to expansion. With that market context, let me turn to our strategic priorities. We continue to make progress in the areas that matter most, investments in electrical steel growth, innovation, and transformation. In electrical steel, we advanced the projects that underpin our longer-term growth strategy. In Canada, we have shifted some production to our new facility and are shipping from both locations.

Speaker #3: Looking ahead, we are still cautiously optimistic about the second half of calendar year 2026. Overall, the backdrop looks modestly encouraging, as key economic indicators show a return to expansion.

Geoff Gilmore: Overall, the backdrop looks modestly encouraging as key economic indicators show a return to expansion. With that market context, let me turn to our strategic priorities. We continue to make progress in the areas that matter most, investments in electrical steel growth, innovation, and transformation. In electrical steel, we advanced the projects that underpin our longer-term growth strategy. In Canada, we have shifted some production to our new facility and are shipping from both locations.

Speaker #3: With that market context, let me turn to our strategic priorities. We continue to make progress in the areas that matter most: investments in electrical steel growth, innovation, and transformation.

Speaker #3: In electrical steel, we advanced the projects that underpin our longer-term growth strategy. In Canada, we have shifted some production to our new facility and are shipping from both locations.

Speaker #3: We will finish moving the existing equipment and production to the new facility over the next few months. We have more than 60% of the increased capacity sold for the facility.

Geoff Gilmore: We will finish moving the existing equipment and production to the new facility over the next few months. We have more than 60% of the increased capacity sold for the facility. We're sequencing the startup to protect performance and service levels, and we expect to fill the balance relatively quickly as the facility ramps up. Our traction motor lamination facility expansion in Mexico is also on track and will begin shipping production parts this quarter. Almost all the OEMs tied to the expansion are experiencing some type of OEM delays. Previously, we expected to reach full production levels in fiscal 2028. However, the OEMs have pushed out a number of the programs for a variety of reasons.

Speaker #3: We're sequencing the startup to protect performance and service levels, and we expect to fill the balance relatively quickly as the facility ramps up. Our traction motor lamination facility expansion in Mexico is also on track and will begin shipping production parts this quarter.

Geoff Gilmore: Our traction motor lamination facility expansion in Mexico is also on track and will begin shipping production parts this quarter. Almost all the OEMs tied to the expansion are experiencing some type of OEM delays. Previously, we expected to reach full production levels in fiscal 2028. However, the OEMs have pushed out a number of the programs for a variety of reasons.

Speaker #3: Almost all the OEMs tied to the expansion are experiencing some type of OEM delays. Previously, we expected to reach full production levels in fiscal 2028.

Speaker #3: However, the OEMs have pushed out a number of the programs for a variety of reasons. While timing is shifting on production starts for some of our new programs, when these platforms reach full production volumes in fiscal 2029, we will be at 75% capacity based upon current contracts.

Geoff Gilmore: While timing is shifting on production starts for some of our new programs, when these platforms reach full production volumes in fiscal 2029, we will be at 75% capacity based upon the current contracts. These delays are not surprising, as many automotive OEMs are rethinking their electrification strategy. With the elimination of the fuel economy mandate and the elimination of the $7,500 federal tax credit, the market is clearly pivoting away from a government-driven BEV mandate to a consumer-led demand for hybrids. The data is quite clear. Year over year, hybrid sales in the US increased 18% in 2025, and the same trend is happening in early 2026. Sales and production of hybrids are both up more than 10%, and the shift to hybrids is expected to continue.

Speaker #3: These delays are not surprising, as many automotive OEMs are rethinking their electrification strategy. With the elimination of the fuel economy mandate and the elimination of the $7,500 federal tax credit, the market is clearly pivoting away from a government-driven BEV mandate to a consumer-led demand for hybrids.

Geoff Gilmore: With the elimination of the fuel economy mandate and the elimination of the $7,500 federal tax credit, the market is clearly pivoting away from a government-driven BEV mandate to a consumer-led demand for hybrids. The data is quite clear. Year over year, hybrid sales in the US increased 18% in 2025, and the same trend is happening in early 2026. Sales and production of hybrids are both up more than 10%, and the shift to hybrids is expected to continue.

Speaker #3: The data is quite clear. Year over year, hybrid sales in the US increased 18% in 2025, and the same trend is happening in early 2026.

Speaker #3: Sales and production of hybrids are both up more than 10%, and the shift to hybrids is expected to continue. We are also seeing reports of increased consumer interest in hybrid and full electric vehicles, due to rising oil prices and geopolitical tensions.

Geoff Gilmore: We are also seeing reports of increased consumer interest in hybrid and full electric vehicles due to rising oil prices and geopolitical tensions. While it is too soon to see if this will translate into sales, we will be watching closely and are well-positioned to capitalize on this renewed interest. From a commercial standpoint, we have seen a slowdown in quotes for pure BEV opportunities, but the quote activity related to hybrids is picking up. We are excited by the growth in hybrids as we have the opportunity to produce the electrical steel laminations for a hybrid traction motor, as well as the specialty cold-rolled steel used in the powertrain for the hybrid's internal combustion engine. We continue to improve our business and find efficiencies using the Worthington business system and artificial intelligence.

Speaker #3: While it is too soon to see if this will translate into sales, we will be watching closely and are well-positioned to capitalize on this renewed interest.

Speaker #3: From a commercial standpoint, we have seen a slowdown in quotes for pure BEV opportunities, but the quote activity related to hybrids is picking up.

Geoff Gilmore: From a commercial standpoint, we have seen a slowdown in quotes for pure BEV opportunities, but the quote activity related to hybrids is picking up. We are excited by the growth in hybrids as we have the opportunity to produce the electrical steel laminations for a hybrid traction motor, as well as the specialty cold-rolled steel used in the powertrain for the hybrid's internal combustion engine. We continue to improve our business and find efficiencies using the Worthington business system and artificial intelligence.

Speaker #3: We are excited by the growth in hybrids, as we have the opportunity to produce the electrical steel laminations for hybrid traction motors, as well as the specialty cold-rolled steel used in the powertrain for the hybrid's internal combustion engine.

Speaker #3: We continue to improve our business and find efficiencies using the Worthington Business System and artificial intelligence. In one notable project, we used our transformation process to implement a lean flow operating model at our Delta, Ohio facility that aligns material release, production, and purchasing directly to customer demand, replacing a forecast-driven push process with a more disciplined pull approach.

Geoff Gilmore: In one notable project, we used our transformation process to implement a lean flow operating model at our Delta, Ohio facility that aligns material release, production and purchasing directly to customer demand, replacing a forecast-driven push process with a more disciplined pull approach. This allows us to tighten our purchasing windows and drive down inventory. The work has led to 60% fewer coils held in our work in process bay and an overall reduction of 6 days of inventory over the past 26 months. As the next step in the process, we will be adding predictive AI tools to ensure our flow is not only disciplined, but also predictable. That means spotting problems earlier and moving more quickly to remedy them. Predictive flow helps us stabilize performance as we run leaner, enabling faster, more consistent decisions at lower working capital levels.

Speaker #3: This allows us to tighten our purchasing windows and drive down inventory. The work has led to 60% fewer coils held in our work-in-process bay and an overall reduction of six days of inventory over the past 26 months.

Geoff Gilmore: The work has led to 60% fewer coils held in our work in process bay and an overall reduction of 6 days of inventory over the past 26 months. As the next step in the process, we will be adding predictive AI tools to ensure our flow is not only disciplined, but also predictable. That means spotting problems earlier and moving more quickly to remedy them. Predictive flow helps us stabilize performance as we run leaner, enabling faster, more consistent decisions at lower working capital levels.

Speaker #3: As the next step in the process, we will be adding predictive AI tools to ensure our flow is not only disciplined but also predictable.

Speaker #3: That means spotting problems earlier and moving more quickly to remedy them. Predictive flow helps us stabilize performance as we run leaner, enabling faster, more consistent decisions at lower working capital levels.

Speaker #3: Further, we will use what we learn at Delta, package what works, and build scalable solutions we can use across our footprint. We also continue to make progress transforming our administrative functions.

Geoff Gilmore: Further, we will use what we learn at Delta, package what works, and build scalable solutions we can use across our footprint. We also continue to make progress transforming our administrative functions. When we stepped back and looked at where we started about a year ago, a few themes stood out. There was a significant amount of manual, repetitive work, a fair amount of variation in how processes were executed across functions and facilities, and much of the work was being managed through email, spreadsheets, and manual follow-ups. We are addressing that in a couple of ways. First, where we see discrete opportunities to remove manual effort, we move quickly using automation and AI.

Speaker #3: When we stepped back and looked at where we started about a year ago, a few themes stood out. There was a significant amount of manual, repetitive work, a fair amount of variation in how processes were executed across functions and facilities, and much of the work was being managed through email, spreadsheets, and manual follow-ups.

Geoff Gilmore: There was a significant amount of manual, repetitive work, a fair amount of variation in how processes were executed across functions and facilities, and much of the work was being managed through email, spreadsheets, and manual follow-ups. We are addressing that in a couple of ways. First, where we see discrete opportunities to remove manual effort, we move quickly using automation and AI.

Speaker #3: We are addressing that in a couple of ways. First, where we see discrete opportunities to remove manual effort, we move quickly using automation and AI.

Speaker #3: For example, we are developing an AI agent for daily cash posting in our finance group that is expected to eliminate a significant amount of manual data entry and free up about 30 hours per month of analyst time.

Geoff Gilmore: For example, we are developing an AI agent for daily cash posting in our finance group that is expected to eliminate a significant amount of manual data entry and free up about 30 hours per month of analyst time. We've also deployed automation in accounts payable that is reducing manual invoice interventions and should remove roughly 150 hours of work per month as the models continue to improve. In our order to cash process, robotic automation that reconciles shipping notices with customer portal data has helped accelerate cash collection and reduce past due balances. Second, for workflows that are more interconnected, we're using AI to assist us in mapping processes, establishing standard work, and removing waste.

Speaker #3: We've also deployed automation in accounts payable that has reduced manual invoice interventions and should remove roughly 150 hours of work per month as the models continue to improve.

Speaker #3: And in our order-to-cash process, robotic automation that reconciles shipping notices with customer portal data has helped accelerate cash collection and reduce past-due balances.

Geoff Gilmore: In our order to cash process, robotic automation that reconciles shipping notices with customer portal data has helped accelerate cash collection and reduce past due balances. Second, for workflows that are more interconnected, we're using AI to assist us in mapping processes, establishing standard work, and removing waste.

Speaker #3: Second, for workflows that are more interconnected, we're using AI to assist us in mapping processes, establishing standard work, and removing waste. For instance, in indirect purchasing, we redesigned the sourcing workflow and then layered in analytics and AI tools that allow the team to focus more on strategic sourcing rather than repetitive tasks.

Geoff Gilmore: For instance, in indirect purchasing, we redesigned the sourcing workflow and then layered in analytics and AI tools that allow the team to focus more on strategic sourcing rather than repetitive tasks. We're still early in this part of the transformation journey, but what we are building is a repeatable capability that allows us to apply automation and AI across more processes and functions over time, structurally improving efficiency and scalability across the organization. To close, while this was a challenging quarter from a macroeconomic standpoint, our team remained focused on executing the business, advancing our electrical steel strategy, and moving the Kloeckner process forward in a disciplined way. At the center of that is a culture that puts safety first and reflects the dedication of our people across the organization. To our employees, thank you.

Speaker #3: We're still early in this part of the transformation journey, but what we are building is a repeatable capability that allows us to apply automation and AI across more processes and functions over time structurally improving efficiency and scalability across the organization.

Speaker #3: To close, while this was a challenging quarter from a macroeconomic standpoint, our team remained focused on executing the business, advancing our electrical steel strategy, and moving the clock or process forward in a disciplined way.

Geoff Gilmore: To close, while this was a challenging quarter from a macroeconomic standpoint, our team remained focused on executing the business, advancing our electrical steel strategy, and moving the Kloeckner process forward in a disciplined way.

Speaker #3: At the center of that is a culture that puts safety first and reflects the dedication of our people across the organization. To our employees, thank you.

Geoff Gilmore: At the center of that is a culture that puts safety first and reflects the dedication of our people across the organization. To our employees, thank you. The discipline, care, and commitment you bring every day are what turn our strategy into action. I'll now turn the call over to Tim for more detail on the financials for the quarter.

Speaker #3: The discipline, care, and commitment you bring every day are what turn our strategy into action. I'll now turn the call over to Tim for more detail on the financials for the quarter.

Geoff Gilmore: The discipline, care, and commitment you bring every day are what turn our strategy into action. I'll now turn the call over to Tim for more detail on the financials for the quarter.

Speaker #1: Thank you, Geoff, and good morning, everyone. Our third quarter was a disciplined quarter and a more challenging environment. While we saw softer demand in certain markets and continued pressure in Europe, we executed well generating strong free cash flow gaining share in key markets and maintaining a strong balance sheet.

Timothy Adams: Thank you, Jeff, and good morning, everyone. Our Q3 was a disciplined quarter in a more challenging environment. While we saw softer demand in certain markets and continued pressure in Europe, we executed well, generating strong free cash flow, gaining share in key markets, and maintaining a strong balance sheet. That consistency in execution, particularly in more challenging environments, is a hallmark of how we run the business. We also took an important strategic step forward with the proposed Kloeckner transaction, which we believe will strengthen our long-term positioning. For Q3, we reported earnings of $10.4 million or $0.20 per share, as compared with earnings of $13.8 million or $0.27 per share in the prior year quarter.

Speaker #1: That consistency in execution, particularly in more challenging environments, is a hallmark of how we run the business. We also took an important strategic step forward with a proposed Clocker transaction, which we believe will strengthen our long-term positioning.

Timothy Adams: That consistency in execution, particularly in more challenging environments, is a hallmark of how we run the business. We also took an important strategic step forward with the proposed Kloeckner transaction, which we believe will strengthen our long-term positioning. For Q3, we reported earnings of $10.4 million or $0.20 per share, as compared with earnings of $13.8 million or $0.27 per share in the prior year quarter.

Speaker #1: For the third quarter, we reported earnings of $10.4 million, or $0.20 per share, as compared with earnings of $13.8 million, or $0.27 per share, in the prior year quarter.

Timothy Adams: There were several non-recurring items that impacted comparability in the quarter, including a number of Kloeckner-related items, which are primarily transactional and timing related, and not indicative of our ongoing operating performance. First, the current quarter results include $15.4 million of pre-tax SG&A expense or $0.24 per share for advisory, legal, and regulatory fees incurred in connection with the previously announced acquisition of Kloeckner. Additionally, we recognized $9.1 million of pre-tax miscellaneous income, or $0.14 per share, related to a foreign currency forward contract designed to hedge a portion of the Kloeckner purchase price. Unrelated to the Kloeckner transaction, we recognized a $6 million pre-tax restructuring gain or $0.06 per share on the sale of real estate and equipment associated with our previously announced Worthington Samuel Coil Processing plant closure in Cleveland, Ohio.

Speaker #1: There were several non-recurring items that impacted comparability in the quarter, including a number of clock or related items, which are primarily transactional and timing-related and not indicative of our ongoing operating performance.

Speaker #1: First, the current quarter results include $15.4 million of pre-tax SG&A expense, or $0.24 per share, for advisory, legal, and regulatory fees incurred in connection with the previously announced acquisition of Clocker.

Speaker #1: Additionally, we recognize $9.1 million of pre-tax miscellaneous income, or $0.14 per share, related to a foreign currency forward contract designed to hedge a portion of the Clocker purchase price.

Timothy Adams: Additionally, we recognized $9.1 million of pre-tax miscellaneous income, or $0.14 per share, related to a foreign currency forward contract designed to hedge a portion of the Kloeckner purchase price. Unrelated to the Kloeckner transaction, we recognized a $6 million pre-tax restructuring gain or $0.06 per share on the sale of real estate and equipment associated with our previously announced Worthington Samuel Coil Processing plant closure in Cleveland, Ohio.

Speaker #1: Unrelated to the Clocker transaction, we recognized a $6 million pre-tax restructuring gain, or $0.06 per share, on the sale of real estate and equipment associated with our previously announced Worthington Steel Coil Processing plant closure in Cleveland, Ohio.

Speaker #1: Finally, in the quarter, we recognized a $1.5 million pre-tax impairment of certain internal-use software, or $0.03 per share. The prior year quarterly results included several non-recurring items, including a $7.4 million pre-tax impairment of assets, or $0.07 per share, primarily related to the operational consolidation of our Worthington Steel Coil Processing facility in Cleveland into WSCP's remaining facility in Twinsburg, Ohio.

Timothy Adams: Finally, in the quarter, we recognized a $1.5 million pre-tax impairment of certain internal use software or over $0.03 per share. The prior year quarterly results included several non-recurring items, including a $7.4 million pre-tax impairment of assets or $0.07 per share, primarily related to the operational consolidation of our Worthington Samuel Coil Processing facility in Cleveland into WSCP's remaining facility in Twinsburg, Ohio. Additionally, we recognize pre-tax restructuring expenses of $900 thousand or $0.01 per share related to a voluntary retirement plan at our TWB joint venture. Excluding these items, we generated adjusted earnings of $0.27 per share in the current year quarter compared with $0.35 per share in the prior year quarter.

Timothy Adams: Additionally, we recognize pre-tax restructuring expenses of $900 thousand or $0.01 per share related to a voluntary retirement plan at our TWB joint venture. Excluding these items, we generated adjusted earnings of $0.27 per share in the current year quarter compared with $0.35 per share in the prior year quarter.

Speaker #1: Additionally, we recognized pre-tax restructuring expenses of $900,000, or 1 cent per share, related to a voluntary retirement plan at our Taylor Watted Blank joint venture.

Speaker #1: Excluding these items, we generated adjusted earnings of $0.27 per share in the current-year quarter, compared with $0.35 per share in the prior-year quarter.

Speaker #1: In the third quarter, we reported adjusted EBIT of $20 million. Which was down 5.3 million dollars from the prior year quarter adjusted EBIT of $25.3 million.

Timothy Adams: In Q3, we reported adjusted EBIT of $20 million, which was down $5.3 million from the prior year quarter adjusted EBIT of $25.3 million. The year-over-year decrease was driven primarily by lower toll processing volumes, higher SG&A largely related to compensation, and unfavorable results in Europe, partially offset by higher direct volumes and higher equity earnings from Serviacero. Total shipments were approximately 818,000 tons, down 64,000 tons or 7% year over year, as lower toll volumes more than offset volume growth in direct sales. Direct sales volume made up 63% of our mix in the current year quarter compared with 57% in the prior year quarter. Direct volume increased 4% compared with the prior year quarter.

Speaker #1: The year-over-year decrease was driven primarily by lower toll processing volumes, higher SG&A largely related to compensation, and unfavorable results in Europe, partially offset by higher direct volumes and higher equity earnings from Servia Sero.

Speaker #1: Total shipments were approximately 818,000 tons down 64,000 tons or 7% year-over-year as lower toll volumes more than offset volume growth in direct sales. Direct sale volume made up 63% of our mix in the current year quarter compared with 57% in the prior year quarter.

Timothy Adams: Total shipments were approximately 818,000 tons, down 64,000 tons or 7% year over year, as lower toll volumes more than offset volume growth in direct sales. Direct sales volume made up 63% of our mix in the current year quarter compared with 57% in the prior year quarter. Direct volume increased 4% compared with the prior year quarter.

Speaker #1: Direct volume increased 4% compared with the prior-year quarter. The year-over-year increase was split evenly between the legacy business and the addition of Sedum compared to the prior-year quarter.

Timothy Adams: The year-over-year increase was split evenly between the legacy business and the addition of Decoup compared to the prior year quarter. Our increased shipments to the automotive market remained a bright spot. Direct shipments to automotive increased 10% year over year. Similar to last quarter, the increase in automotive volume reflects share gains from new programs plus the impact of a key automotive OEM customer returning to a more normal build schedule after curtailing production last fiscal year. This growth in the automotive market reflects the strength of our long-standing customer relationships and our collaborative, proactive approach to assisting customers to meet their needs. Outside of automotive, agriculture volume was up 9%, primarily due to improved OEM equipment demand, and container volume was up 11%. As Geoff mentioned earlier, we won additional business with a key OEM customer in the ag sector.

Speaker #1: Our increased shipments to the automotive market remained a bright spot. Direct shipments to automotive increased 10% year-over-year. Similar to last quarter, the increase in automotive volume reflects share gains from new programs plus the impact of a key automotive OEM customer returning to a more normal build schedule after curtailing production last fiscal year.

Speaker #1: This growth in the automotive market reflects the strength of our longstanding customer relationships and our collaborative proactive approach to assisting customers to meet their needs.

Timothy Adams: This growth in the automotive market reflects the strength of our long-standing customer relationships and our collaborative, proactive approach to assisting customers to meet their needs. Outside of automotive, agriculture volume was up 9%, primarily due to improved OEM equipment demand, and container volume was up 11%. As Geoff mentioned earlier, we won additional business with a key OEM customer in the ag sector.

Speaker #1: Outside of automotive, agriculture volume was up 9% primarily due to improved OEM equipment demand. And container volume was up 11%. As Geoff mentioned earlier, we won additional business with a key OEM customer in the ag sector.

Speaker #1: These gains were partially offset by lower shipments to a number of other markets, including energy, which was down 22% year-over-year, largely driven by project-based solar programs. Construction was down 7%, and service center, where we saw some increased competition, was down 21%.

Timothy Adams: These gains were partially offset by lower shipments to a number of other markets, including energy, which was down 22% year over year, largely driven by project-based solar programs. Construction was down 7%, and service center, where we saw some increased competition, was down 21%. Heavy truck was down 12% due to ongoing market weakness. Toll processing volumes declined 22% year over year due to a combination of closing our Cleveland area Worthington Samuel Coil Processing facility in fiscal 2025 and near-term demand headwinds. We view the softer market conditions in toll processing as cyclical, not structural, and expect toll volumes to improve as end-market demand recovers, excluding the impact of the Cleveland facility consolidation last May. Direct spreads were relatively flat year over year, excluding the impact of the Cedam acquisition, which closed in June.

Speaker #1: Heavy truck was down 12% due to ongoing market weakness. Toll processing volumes declined 22% year-over-year due to a combination of closing our Cleveland-area Worthington Steel coil processing facility in fiscal 2025 and near-term demand headwinds.

Timothy Adams: Toll processing volumes declined 22% year over year due to a combination of closing our Cleveland area Worthington Samuel Coil Processing facility in fiscal 2025 and near-term demand headwinds. We view the softer market conditions in toll processing as cyclical, not structural, and expect toll volumes to improve as end-market demand recovers, excluding the impact of the Cleveland facility consolidation last May. Direct spreads were relatively flat year over year, excluding the impact of the Cedam acquisition, which closed in June.

Speaker #1: We view the softer market conditions in toll processing as cyclical, not structural. And expect toll volumes to improve as end market demand recovers excluding the impact.

Speaker #1: Of the Cleveland facility consolidation last May. Direct spreads were relatively flat year-over-year, excluding the impact of the Sedum acquisition, which closed in June. Direct spreads were impacted by a $3.3 million favorable swing in pre-tax inventory holding gains.

Timothy Adams: Direct spreads were impacted by a $3.3 million favorable swing in pre-tax inventory holding gains. In the current year quarter, we had estimated pre-tax inventory holding gains of $2.1 million compared to estimated pre-tax inventory holding losses of $1.2 million in the prior year quarter. After stabilizing around $800 per ton in the fall, the price for hot rolled coil increased $175 per ton in our Q3 to approximately $975 per ton. We expect the market price for steel to remain volatile in the near term, with expected mill outages, extending lead times, and a tightening market.

Speaker #1: In the current year quarter, we had estimated pre-tax inventory holding gains of $2.1 million compared to estimated pre-tax inventory holding losses of $1.2 million in the prior year quarter.

Speaker #1: After stabilizing around $800 per ton in the fall, the price for hot-rolled coil increased $175 per ton in our third quarter to approximately $975 per ton.

Speaker #1: We expect the market price for steel to remain volatile in the near term, with expected mill outages extending lead times and a tightening market.

Timothy Adams: Given that many of our contracts use lagging index-based pricing mechanisms, we estimate in our Q4 of fiscal 2026, pre-tax inventory holding gains will fall within a range of $15 to 20 million. Turning to the other drivers for adjusted EBIT this quarter, SG&A expense, excluding the $15.4 million impact of the Kloeckner-related acquisition expenses, was up $7.5 million, primarily due to increased compensation expense in the legacy business, and $4.8 million of incremental SG&A with the addition of Kloeckner. It is worth noting that our Q3 results include increased headwinds in Europe. As expected, Kloeckner EBIT, prior to minority interest, decreased $8.4 million during the quarter. This performance reflects challenging economic conditions in Europe, particularly in the electrical steel and automotive end markets, where demand remains weak and competition, especially from China, has intensified.

Speaker #1: Given that many of our contracts use lagging index-based pricing mechanisms, we estimate in our fourth quarter of fiscal 2026, pre-tax inventory holding gains will fall within a range of $15 to $20 million.

Speaker #1: Turning to the other drivers for adjusted EBIT this quarter, SG&A expense excluding the 15.4 million dollar impact of the Clocker-related acquisition expenses was up 7.5 million dollars primarily due to increased compensation expense in the legacy business and 4.8 million dollars of incremental SG&A with the addition of Sedum.

Timothy Adams: It is worth noting that our Q3 results include increased headwinds in Europe. As expected, Kloeckner EBIT, prior to minority interest, decreased $8.4 million during the quarter. This performance reflects challenging economic conditions in Europe, particularly in the electrical steel and automotive end markets, where demand remains weak and competition, especially from China, has intensified.

Speaker #1: It is worth noting that our Q3 results include increased headwinds in Europe. As expected, Sedum EBIT prior to minority interest decreased $8.4 million during the quarter.

Speaker #1: This performance reflects challenging economic conditions in steel and automotive end markets, where demand remains weak and competition, especially from China, has intensified. While expected, we are actively addressing these headwinds through cost actions and operational adjustments, and our team in Europe is moving with urgency to improve performance.

Timothy Adams: While expected, we are actively addressing these headwinds through cost actions and operational adjustments, and our team in Europe is moving with urgency to improve performance. Although near-term conditions remain challenging, we are focused on positioning the business to return to profitability and to capture share as the market recovers. Finally, equity earnings from Serviacero, our Mexico-based joint venture, increased $3.5 million due to higher direct spreads, inventory holding gains, as well as the favorable impact of exchange rate movements. Turning to cash flows on the balance sheet, for the quarter, cash flow from operations was $63 million and free cash flow was $33 million, with both metrics benefiting from a reduction in working capital. Capital expenditures were $30 million in the quarter related to several projects, including the previously announced electrical steel investments.

Speaker #1: Although near-term conditions remain challenging, we are focused on positioning the business to return to profitability and to capture share as the market recovers. Finally, equity earnings from Servia Sero, our Mexico-based joint venture, increased $3.5 million due to higher direct spreads, inventory holding gains, as well as the favorable impact of exchange rate movements.

Timothy Adams: Finally, equity earnings from Serviacero, our Mexico-based joint venture, increased $3.5 million due to higher direct spreads, inventory holding gains, as well as the favorable impact of exchange rate movements. Turning to cash flows on the balance sheet, for the quarter, cash flow from operations was $63 million and free cash flow was $33 million, with both metrics benefiting from a reduction in working capital.

Speaker #1: Turning to cash flows in the balance sheet for the quarter, cash flow from operations was $63 million and free cash flow was $33 million, with both metrics benefiting from a reduction in working capital.

Timothy Adams: Capital expenditures were $30 million in the quarter related to several projects, including the previously announced electrical steel investments. We expect CapEx for fiscal 2026 to finish in the range of $110 to 115 million as several of our large capital growth projects transition from the build phase into startup production.

Speaker #1: Capital expenditures were $30 million in the quarter related to several projects, including the previously announced electrical steel investments. We expect CapEx for fiscal 2026 to finish in the range of $110 to $115 million, as several of our large capital growth projects transition from the build phase into startup production.

Timothy Adams: We expect CapEx for fiscal 2026 to finish in the range of $110 to 115 million as several of our large capital growth projects transition from the build phase into startup production.

Geoff Gilmore: In addition, we are pursuing maintenance projects that keep our key assets market ready. We take a disciplined approach to capital allocation, balancing investment in growth with maintaining balance sheet strength. On a trailing 12-month basis, we generated $81 million of free cash flow. We increased borrowings during the current quarter on our ABL to purchase approximately 8.3 million or 8% of Kloeckner & Co shares for $101 million. We ended the quarter with $90 million of cash and net debt of $161 million, up sequentially, driven primarily by the purchase of Kloeckner & Co shares. Earlier this week, we announced a quarterly dividend of $0.16 per share, payable on 26 June 2026. In summary, this was a disciplined quarter in a more challenging environment.

Speaker #1: In addition, we are pursuing maintenance projects that keep our key assets market-ready. We take a disciplined approach to capital allocation, balancing investment in growth with maintaining balance sheet strength.

Speaker #1: On a trailing 12-month basis, we generated $81 million of free cash flow. We increased borrowings during the current quarter on our ABL to purchase approximately 8.3 million, or 8%, of Clocker shares for $101 million.

Geoff Gilmore: We ended the quarter with $90 million of cash and net debt of $161 million, up sequentially, driven primarily by the purchase of Kloeckner & Co shares. Earlier this week, we announced a quarterly dividend of $0.16 per share, payable on 26 June 2026. In summary, this was a disciplined quarter in a more challenging environment.

Speaker #1: We ended the quarter with $90 million of cash and net debt of $161 million, up sequentially, driven primarily by the purchase of Clocker shares.

Speaker #1: Earlier this week, we announced a quarterly dividend of $0.16 per share, payable on June 26, 2026. In summary, this was a disciplined quarter in a more challenging environment.

Geoff Gilmore: We are gaining share in key markets, generating consistent cash flow, and maintaining a strong balance sheet. At the same time, we are taking actions to address underperformance in Europe while continuing to advance our strategic priorities, including the proposed Kloeckner transaction. This reflects how we manage the business, staying focused on execution and positioning the company to perform through cycles. We believe these actions position Worthington Steel to navigate the current environment and continue creating value over the long term. I want to thank our entire Worthington Steel team for their continued focus on safety, customer service, and execution this quarter. At this point, we'll be happy to take your questions.

Speaker #1: We are gaining share in key markets, generating consistent cash flow, and maintaining a strong balance sheet. At the same time, we are taking actions to address underperformance in Europe, while continuing to advance our strategic priorities, including the proposed Clocker transaction.

Geoff Gilmore: This reflects how we manage the business, staying focused on execution and positioning the company to perform through cycles. We believe these actions position Worthington Steel to navigate the current environment and continue creating value over the long term. I want to thank our entire Worthington Steel team for their continued focus on safety, customer service, and execution this quarter. At this point, we'll be happy to take your questions.

Speaker #1: This reflects how we manage the business, staying focused on execution and positioning the company to perform through cycles. We believe these actions position Worthington Steel to navigate the current environment and continue creating value over the long term.

Speaker #1: I want to thank our entire Worthington Steel team for their continued focus on safety, customer service, and execution this quarter. At this point, we will be happy to take your questions.

Operator 2: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Samuel McKinney with KeyBanc Capital Markets. Your line is open. Please go ahead.

Geoff Gilmore: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Samuel McKinney with KeyBanc Capital Markets. Your line is open. Please go ahead.

Speaker #1: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star-one on your telephone keypad.

Speaker #1: To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device.

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from the line of Samuel McKinney with KeyBank Capital Markets. Your line is open.

Speaker #1: Please go ahead.

Samuel McKinney: Hey, good morning.

Speaker #2: Hey, good morning.

Geoff Gilmore: Hey, Sam.

Speaker #3: Hey, Sam.

Samuel McKinney: Hey, with direct volumes for Q3 only up 3% year-over-year, I was surprised to hear you say the direct auto shipments increased by 10%. Assuming much of this was owed to the market share wins you've outlined, can you talk through some of those wins and the impact they're having?

Speaker #2: Hey, with direct volumes for the third quarter only up 3% year over year, I'm surprised to hear you say the direct auto shipments increased by 10%.

Speaker #2: Assuming much of this was owed to the market share wins you've outlined, can you talk through some of those wins and the impact they're having?

Geoff Gilmore: Yes, Sam, this is Geoff. I'll take that. Clearly positive impact. You know, if you look at automotive as a whole, it was down maybe 1 or 2% actually, year over year. I think as we mentioned, if you look specifically at the Detroit Three, their production was up 3% and ours were up 13%. If you look at the difference in the gap, that really is that market share gain that we've been speaking about the last several quarters. You know, fortunately for us, we've continued to win market share with those customers mentioned, as well as several others. That's something that you'll continue to see layered in.

Speaker #3: Yeah, Sam, this is Jeff. I'll take that. Clearly, positive impact. If you look at automotive as a whole, it was down maybe one or two percent actually year-over-year.

Speaker #3: And so, I think as we mentioned, if you look specifically at the Detroit Three, their production was up 3%, and ours were up 13%.

Speaker #3: So, if you look at the difference in the gap, that really is that market share gain that we've been speaking about the last several quarters.

Speaker #3: And fortunately for us, we've continued to win market share with those customers mentioned, as well as several others. So that's something that you'll continue to see layered in.

Geoff Gilmore: The beginning of your question was, hey, being up 13% there, but only 3% as a whole. As you're aware, weather in the Midwest was quite challenging late January and specifically for a week. That absolutely disrupted the entire supply chain, whether it was the mills trying to ship out to us receiving in, and then to us trying to ship to our customers. Probably, you know, the impact there was 10,000 to 15,000 tons. Look, the mills are extremely busy right now. They have extended lead times. Their on-time delivery performance has been challenging. We just weren't able to make up for that backlog during the month of February. We did some, but again, probably could have shipped closer to 15,000 additional tons.

Speaker #3: The beginning of your question was, hey, being up 13% there but only 3% as a whole. As you're aware, weather in the Midwest was quite challenging in late January.

Speaker #3: And specifically for a week. And that absolutely disrupted the entire supply chain, whether it was the mills trying to ship out, to us receiving in, and then to us trying to ship to our customers.

Geoff Gilmore: Probably, you know, the impact there was 10,000 to 15,000 tons. Look, the mills are extremely busy right now. They have extended lead times. Their on-time delivery performance has been challenging. We just weren't able to make up for that backlog during the month of February. We did some, but again, probably could have shipped closer to 15,000 additional tons. Fortunately, those aren't orders lost. We'll make up that backlog and are starting to do so already this month.

Speaker #3: And probably the impact there was 10,000 to 15,000 tons. And look, the mills are extremely busy right now. They have extended lead times.

Speaker #3: Their on-time delivery performance has been challenging, and so we just weren't able to make up for that backlog during the month of February.

Speaker #3: We did some, but again, probably could have shipped closer to 15,000 additional tons. Fortunately, those aren't orders lost. We'll make up that backlog and are starting to do so already this month.

Geoff Gilmore: Fortunately, those aren't orders lost. We'll make up that backlog and are starting to do so already this month.

Samuel McKinney: Okay, thanks. That's helpful. Then on to Kloeckner, how should we think about the over $100 million of short-term debt you used to purchase their securities? Just any other color you could give on that equity investment in the context of meeting the threshold would be helpful. Like Tim said, that's about 8% of the Kloeckner shares.

Speaker #2: Okay, thanks. That's helpful. And then, on the Klöckner, how should we think about the over $100 million of short-term debt you used to purchase their securities?

Speaker #2: Just any other color you could give on that equity investment in the context of meeting the threshold would be helpful. Like Tim said, that's about 8% of the Klöckner shares.

Timothy Adams: Yeah. Sam, this is Tim. We had the ability through antitrust, right? We had to look at the regulations of antitrust as far as how much we could buy, and we could buy 10% in the open market. We used that opportunity, when the tender offer was announced to buy in the open market. We increased our ABL by $126 million, and we used $101 million of it to buy shares in the open market. As long as the price stays below the tender offer of $11, we can buy shares. You've seen the price of Kloeckner rise a little bit. That shut us out of the market. We bought shares early in the quarter, and we haven't bought much since.

Speaker #3: Yeah. Sam, this is Tim. So, we had the ability through antitrust, right? We had to look at the regulations of antitrust as far as how much we could buy.

Speaker #3: And we could buy in the open market 10%. And we used that opportunity, when the tender offer was announced, to buy in the open market.

Timothy Adams: We increased our ABL by $126 million, and we used $101 million of it to buy shares in the open market. As long as the price stays below the tender offer of $11, we can buy shares. You've seen the price of Kloeckner rise a little bit. That shut us out of the market. We bought shares early in the quarter, and we haven't bought much since.

Speaker #3: So, we increased our ABL by $126 million, and we used $101 million of it to buy shares in the open market. As long as the price stays below the tender offer of $11, we can buy shares.

Speaker #3: So you've seen the price of Klöckner rise a little bit. That shut us out of the market. So we bought shares early in the quarter, and we haven't bought much since.

Samuel McKinney: Okay, thanks. Last one for me. Steel pricing obviously has remained hot in recent weeks. Can you give us a sense of the net working capital expectation for Q4 in the context of the $15 to 20 million of inventory holding gains?

Speaker #2: Okay, thanks. And then last one for me, steel pricing obviously has remained hot in recent weeks. Can you give us a sense of the net working capital expectation for the fourth quarter in the context of the $15 to $20 million of inventory holding gains?

Geoff Gilmore: Yeah, I think I mean, we are definitely gonna see some upward pressure on working capital. I think you can kind of look at the percentage price increase and kind of translate that into how much working capital should go up. You will absolutely see some upward pressure on working capital in Q4 for sure.

Speaker #3: Yeah, I think there—I mean, we are definitely going to see some upward pressure on working capital. I think you can kind of look at the percentage price increase and kind of translate that into how much working capital should go up.

Speaker #3: But you will absolutely see some upward pressure on working capital in Q4, for sure.

Timothy Adams: Okay, thanks. That's it for me.

Speaker #2: Okay, thanks. That's it for me.

Timothy Adams: Thanks, Sam.

Speaker #3: Thanks, Sam.

Operator 2: Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Your line is open. Please go ahead.

Timothy Adams: Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Your line is open. Please go ahead.

Speaker #1: Your next question. This comes from the line of John Tomaso. John Tomaso, very independent research. Your line is open. Please go ahead.

John Tumazos: Thank you. The German stock market is down 8% year to date, and their economy is more vulnerable to the energy escalation as they're almost entirely an energy importer. Is your view of the amount of debt level that you wanna hold post-acquisition or the degree of exposure to Europe change given our incursion into Iran and the subsequent events in the last four weeks?

Speaker #4: Thank you. The German stock market is down 8% year to date, and their economy is more vulnerable to the energy escalation, as they're almost entirely an energy importer.

Speaker #4: Does your view of the amount of debt level that you want to hold post-acquisition, or the degree of exposure to Europe, change given our encouragement into Iran and the subsequent events in the last four weeks?

Geoff Gilmore: John, good question. Hi, by the way, thanks for calling in. Look, we went into this acquisition eyes wide open and a clear understanding on Europe and, you know, the current challenges. I think a few things. First, their economy, I think they are doing their own things to increase, I'll call it protectionism, which certainly will help their economy specifically, you know, I think aimed at China. I think they've increased spend on defense pretty significantly here over the last, you know, 6, 12 months, which should benefit the business environment, specifically manufacturing. You know, what we did not predict was a war with China and the impact, or China, I'm sorry, with Iran and the impact on the oil prices.

Speaker #3: John, good question. Hi, by the way. Thanks for calling in. Look, we went into this acquisition eyes wide open, and with a clear understanding on Europe and the current challenges.

Speaker #3: I think a few things first, their economy, I think they are doing their own things to increase I'll call it protectionism, which certainly will help their economy specifically I think aimed at China.

Geoff Gilmore: I think they've increased spend on defense pretty significantly here over the last, you know, 6, 12 months, which should benefit the business environment, specifically manufacturing. You know, what we did not predict was a war with China and the impact, or China, I'm sorry, with Iran and the impact on the oil prices.

Speaker #3: I think they've increased spend on defense pretty significantly here over the last 6 to 12 months, which should benefit the business environment, specifically manufacturing.

Speaker #3: But what we did not predict was a war with China. And the impact—or, China, I'm sorry—the impact on the oil prices. So right now, it's not having a major impact on the business here or in Europe.

Geoff Gilmore: You know, right now, it's not having a major impact on the business here or Europe. But if this is prolonged, yeah, then we certainly are concerned about their economy, but we're equally concerned about the economy here. Obviously, higher energy prices, higher gas prices, is certainly not gonna be good for either economy. That's really our position on it right now.

Speaker #3: But if this is prolonged, yeah, then we certainly are concerned about their economy. But we're equally concerned about the economy here. Obviously, higher energy prices, higher gas prices, is certainly not going to be good for either economy.

Speaker #3: So that's really our position on it right now.

John Tumazos: Following up on what you just said, would you then wanna have more equity in your financial structure and less debt?

Speaker #4: So, following up on what you just said, would you then want to have more equity in your financial structure and less debt?

Geoff Gilmore: No, John. We're comfortable with the capital structure where we're moving forward right now. We're quite comfortable with the debt level that we'll be carrying forward. You know, to be more transparent, it's because we're very confident in our plan and how we'll go about paying that debt down over time. We haven't had any serious discussions about reducing the debt and increasing equity as part of the capital structure, and I think we're gonna be in very good shape.

Speaker #3: No. John, we're comfortable with the capital structure. Where we're moving forward right now, we're quite comfortable with the debt level that we'll be carrying forward.

Speaker #3: And to be more transparent, it's because we're very confident in our plan and how we'll go about paying that debt down over time. So we haven't had any serious discussions about reducing the debt and increasing equity as part of the capital structure.

Speaker #3: And I think we're going to be in very good shape.

Operator 2: There are no further questions at this time. I will now turn the call back to Geoff Gilmore, President and CEO, for closing remarks.

Geoff Gilmore: There are no further questions at this time. I will now turn the call back to Geoff Gilmore, President and CEO, for closing remarks.

Speaker #1: There are no further questions at this time. I will now turn the call back to Jeff Gilmore, president and CEO for closing remarks.

Geoff Gilmore: From a macroeconomic standpoint, there were some challenges with the business. Just a reminder, during last call, I addressed the overall market as well as some of the challenges in spreads, specifically hot-rolled and coated, and hot-rolled and cold-rolled. At that time, I had mentioned I felt like the quarter would be we'd be experiencing the trough. I feel strongly that that's the case and that's what we've seen. I think the tightness in the market in the US and where we're seeing prices headed, along with, you know, cautiously optimistic now on all markets that we're starting to see recovery. That's the sentiment across the market. We're no different.

Speaker #3: From a macroeconomic standpoint, there were some challenges with the business. But just a reminder, during last call, I addressed the overall market as well as some of the challenges and spreads specifically hot rolled and coated and hot rolled and cold rolled.

Geoff Gilmore: At that time, I had mentioned I felt like the quarter would be we'd be experiencing the trough. I feel strongly that that's the case and that's what we've seen. I think the tightness in the market in the US and where we're seeing prices headed, along with, you know, cautiously optimistic now on all markets that we're starting to see recovery. That's the sentiment across the market. We're no different.

Speaker #3: But at that time, I had mentioned I felt like the quarter would be really we'd be experiencing the trough. And I feel strongly that that's the case.

Speaker #3: And that's what we've seen. I think the tightness in the market in the U.S. and where we're seeing prices headed, along with being cautiously optimistic now on all markets, that we're starting to see recovery.

Speaker #3: And that's the sentiment across the market. We're no different. That we can start to see signs of growth, not just with market share gains in automotive, but other key markets as well.

Geoff Gilmore: That we can start to see signs of growth, not just with market share gains in automotive, but other key markets, as well. Certainly those markets will increase demand for galvanized as well as cold rolled, and hopefully we start to see some of that spread pressure alleviate gradually over time. More importantly, we could not be more well-positioned to continue to grow as a company, have a great deal of confidence of us achieving the threshold goal for Kloeckner, and that just puts us in a position to accelerate growth moving forward. The business is in great shape. Look forward to what's to come, and thank you again for listening in today.

Speaker #3: And certainly, those markets will increase demand for galvanized as well as cold rolled. And hopefully, we start to see some of that spread pressure alleviate gradually over time.

Geoff Gilmore: More importantly, we could not be more well-positioned to continue to grow as a company, have a great deal of confidence of us achieving the threshold goal for Kloeckner, and that just puts us in a position to accelerate growth moving forward. The business is in great shape. Look forward to what's to come, and thank you again for listening in today.

Speaker #3: More importantly, we could not be more well-positioned to continue to grow as a company. Have a great deal of confidence of us achieving the threshold goal for Klockner and that just puts us in a position to accelerate growth moving forward.

Speaker #3: So the business is in great shape. Look forward to what's to come. And thank you again for listening in today.

Operator 2: This concludes today's call. Thank you for attending. You may now disconnect.

Geoff Gilmore: This concludes today's call. Thank you for attending. You may now disconnect.

Q3 2026 Worthington Steel Inc Earnings Call

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