Worthington Enterprises Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kathryn Thompson - Thompson Research Group - Analyst : Thank you for the color today you gave in the prepared commentary. But one thing, just one of the -- a couple of things I want to focus on. First, kind of the obvious in terms of tariffs, you had some commentary, but give more color in terms of how tariffs are being navigated in today's market versus the ones that were implemented in the first Trump administration. And is this an opportunity for you in terms of pricing? Are you seeing any type of supply issues that are disruptive at all to the business?

Question: Kathryn Thompson - Thompson Research Group - Analyst : Okay. Perfect. Also, to -- just any puts and takes in terms of the core products, EBITDA margin, and the contributing factors for progress in that segment? And then as a follow-on, just with your JVs, just kind of sequentially year-over-year comps, year-over-year OpEx pretty tough, but sequentially flattish and also any type of outlook in which you're seeing in WAVE and ClarkDietrich?

Question: Dan Moore - CJS Securities - Analyst : I wanted to start with margins. Gross margin, we don't talk a lot about consolidated but spiked above 29%, clearly some favorable seasonality there. Just talk about the puts and takes, any unusual good guys in the quarter. And how do you -- how should we think about sort of Q4, and more importantly, annualized range or run rate as we look into '26?

Question: Dan Moore - CJS Securities - Analyst : Very helpful. Appreciate it. Shifting gears to Consumer segment, clearly, it's tough to know with precision, but any sense for how much of the volume growth in the quarter is restocking or stocking at new customers versus more true end-market demand?

Question: Dan Moore - CJS Securities - Analyst : Great, Joe. Very helpful. And then last is just, free cash flow conversion has been really strong on a trailing basis. How should we kind of think about the sustainability of that? And looking free cash flow conversion as we think about maybe fiscal '26 versus what we've seen year-to-date here. And then you bought back 150,000 shares in the quarter. Would you expect to maintain similar cadence if shares remain at or near current levels?

Question: Charles Perron-Piche - Goldman Sachs - Analyst : This is actually Charles Perron for Susan this morning. First, I want to go back on the revenue and the volume initiatives for consumer building products. You highlighted several initiatives around product launches in your prepared remarks to drive organic growth every time. Can you maybe unpack how much these initiatives contributed to the growth this quarter? And how much they can allow you maybe to outperform the underlying market growth when you think about calendar 2025?

Question: Charles Perron-Piche - Goldman Sachs - Analyst : That's helpful color, Joe. Next, I want to circle back on the margin performance this quarter, dig a little deeper. Can you talk a little bit more about the drivers between the volume leverage that you got across the core building products and consumer products and the success of operating initiatives? And how do those inform me your ability to expand margins in the coming quarter even if the end-market demand were to moderate across those verticals?

Question: Charles Perron-Piche - Goldman Sachs - Analyst : Okay. Okay. No, that's helpful. And maybe last, can you provide an update on the M&A pipeline and your willingness to do deals despite the ongoing macro uncertainty?

Question: Brian McNamara - Canaccord Genuity - Analyst : I was hoping you guys could quantify organic sales growth in Q3. I think you mentioned the SES, but I don't think you quantified the Ragasco contribution.

Question: Brian McNamara - Canaccord Genuity - Analyst : Okay. And then any color on kind of what we're seeing quarter-to-date here, just given the what we'll call it uncertain consumer macro?

Question: Brian McNamara - Canaccord Genuity - Analyst : Okay. And I know Dan touched on this point, but gross margin is a pretty difficult line item to model for you guys. And I guess the point of my question is, are they kind of stucturally higher here now? I know last year, you had large heating tanks that were typically higher margin. They weren't doing great, assuming they're doing better. Anything else we should be considering there? I think Ragasco has also been additive to margin there. Consumer Products doing better. I think they're higher margin. Anything else investors should be thinking about on that line?

Question: Brian McNamara - Canaccord Genuity - Analyst : Got it. And then on the SG&A front, obviously, you guys separated from a $5 billion company. So I think there was -- I guess there is a -- just kind of getting used to being a public company, maybe getting a little more efficient with spend there. Kind of where are we, what inning are we there in terms of kind of truing up that line item?

Question: Brian McNamara - Canaccord Genuity - Analyst : Great. And then finally, I'm just curious, what are you seeing on the M&A front? I'm assuming a good number of targets in Consumer, for example, have some decent production in China and things like that. Is that helping deals get to the finish line or more likely hurting them?

Question: Walter Liptak - Seaport Global Securities LLC - Analyst : Thanks for the good quarter. Let's then talk about -- I will start with maybe -- I don't know, maybe it will be a tough one. But I was really impressed with Joe's comments about solving customers' problems, and then you had those four, five, six things that you called out, including like the party time tanks and things. Is it possible for you to kind of quantify that for us in a way like in addition to growth rate, or how much the TAM is on all those projects added up, or what the profit improvement could be just to give us an idea because some of them sounded very impressive? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 26, 2025 / 12:30PM, WOR.N - Q3 2025 Worthington Enterprises Inc Earnings Call

Question: Walter Liptak - Seaport Global Securities LLC - Analyst : Okay. Yes. That sounds great. Yes, I think everyone start for growth in (inaudible), but it sounds like you've got some things that could really happen, including like the Balloon Time Mini, short-term, and other things that will help your growth and offset those headwinds. Got it. I wanted to ask about -- the consumer was better than I was expecting. I wonder -- and you kind of talked about that already, but what's the next positive thing that could happen with the large chains. Is it sell-through that you'll be looking for is like a key metric? Or given the headwinds that are out there, what's next? And you guys are US-based manufacturer, which in a lot of ways, makes it unique. What are the conversations like with the large chains?

Question: Walter Liptak - Seaport Global Securities LLC - Analyst : That's great. Yes. Thanks for that insight. Okay. The last one for me is, it sounds like you're early days with your 80-20 work. And so I just wanted to ask how are you feeling about the work that you're doing there? And yes, I guess, just how are you feeling about it?