To The Moon

• Adjusted EBITDA Margin: 24% in Q3, up from 21% last year.
• Net Sales: $305 million, a 3.9% decrease from $317 million in the prior year quarter.
• Revenue Growth (Excluding SES): Over 8% in Q3.
• Gross Profit: $89 million, up from $73 million in the prior year quarter.
• Gross Margin: Expanded by approximately 620 basis points to 29.3%.
• Adjusted Earnings Per Share: $0.91, up from $0.80 in Q3 of the prior year.
• Cash Flow from Operations: $57 million for the quarter.
• Free Cash Flow: $44 million for the quarter.
• Consumer Products Net Sales: Grew 5% year over year to $140 million.
• Building Products Net Sales: Grew 11% year over year to $165 million.
• Long-term Funded Debt: $294 million with an average interest rate of 3.6%.
• Cash on Hand: $223 million at quarter-end.
• Dividend Declared: $0.17 per share payable in June 2025.

• Warning! GuruFocus has detected 4 Warning Signs with WOR.

Release Date: March 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Worthington Enterprises Inc (NYSE:WOR) set Q3 records in production and shipments, reflecting strong operational performance.
• The company achieved year-over-year and sequential growth in both adjusted EBITDA and earnings per share, with an adjusted EBITDA margin of 24% compared to 21% a year ago.
• Excluding the impact of SES, revenues grew by over 8% in Q3, driven by the inclusion of Ragasco and improved demand.
• The Building Products team launched innovative products like SureSense, enhancing customer efficiency and reducing costs.
• Worthington Enterprises Inc (NYSE:WOR) maintains a strong balance sheet with low leverage and ample liquidity, supported by a $500 million undrawn bank credit facility.

Negative Points

• Net sales decreased by 3.9% to $305 million, primarily due to the deconsolidation of the Sustainable Energy Solutions segment.
• The quarter was negatively impacted by net pretax restructuring and other charges of $5 million, affecting earnings per share.
• ClarkDietrich, a joint venture, experienced a decline in equity earnings due to lower steel prices and unfavorable weather conditions.
• The Consumer Products segment faced a $1 million charge related to a customer bankruptcy, impacting SG&A expenses.
• Macroeconomic uncertainty and potential tariff impacts pose risks to future demand and pricing strategies.

Q & A Highlights

Q: How are tariffs impacting Worthington Enterprises, and are there any supply issues affecting the business? A: Joseph Hayek, President and CEO, stated that tariffs and trade-related uncertainties are significant concerns. Worthington is primarily a domestic manufacturer, which is a competitive advantage. They have diversified sourcing capabilities and are focused on being good partners to their customers. While they have announced price increases on many products, they have not seen a material uptick in demand directly related to tariffs. However, they have noticed increased inquiries in some value streams competing against imports. Overall, they believe they are well-positioned to benefit from tariffs and are confident in their strategy to manage cost pressures.

Q: Can you provide insights into the core products' EBITDA margin and the performance of joint ventures like WAVE and ClarkDietrich? A: Colin Souza, CFO, reported that the Building Products segment saw an increase in EBITDA margin from 6% to 11% year-over-year, driven by a positive mix shift and a return to seasonally normal demand levels. ClarkDietrich faced a significant year-over-year decline due to steel price volatility, but WAVE performed steadily in a flat market. The company is optimistic about future growth, particularly in data centers for WAVE.

Q: What factors contributed to the spike in gross margin, and what is the outlook for Q4 and fiscal 2026? A: Joseph Hayek explained that the gross margin expansion was due to the deconsolidation of the SES business unit, positive mix shifts, and a unique LPM adjustment in Building Products. The company aims to sustain margins in the high 20s, with Q3 and Q4 typically being the strongest quarters. They plan to continue driving gross margin higher through volume growth and cost efficiencies.

Q: How did new product launches contribute to growth, and what is the outlook for organic growth in 2025? A: Joseph Hayek noted that recent product launches, such as SureSense and Balloon Time Mini, did not significantly contribute to the current quarter's growth but are expected to drive future revenue and margin improvements. The company is focused on leveraging its market share and relationships to grow in newer value streams like Tools and Grills, which have significant growth potential.

Q: What is the status of the M&A pipeline, and how does macroeconomic uncertainty affect deal-making? A: Joseph Hayek stated that the M&A pipeline is healthy, and the company continues to assess opportunities that align with their long-term strategy. While macroeconomic uncertainty can impact deal-making, Worthington remains focused on acquiring businesses that fit their strategy and can add value over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.