Worthington Enterprises, Inc. (WOR) Q4 2025 Earnings Call Transcript

Good morning, and welcome to the Worthington Enterprises 4th Quarter Fiscal 2025 Earnings Conference Call. All participants will be able to listen only until the question and answer session of the call. This conference is being recorded at the request of Worthington Enterprises. If anyone objects, you may disconnect at this time. I'd now like to introduce Marcus Rajay, Treasurer and Investor Relations Officer. Mr. Rajay, you may begin.

Thank you, Rob. Rob, good morning everyone and thank you for joining us for Worthington Enterprise's fourth quarter fiscal 2025 earnings call. On the call today are Joe Hayek, our president and chief executive officer, and Colin Souza, our chief financial officer. Before I begin, I'd like to remind everyone that certain statements made during today's call are forward-looking in the nature and subject to risk and uncertainty that could cause actual results to differ materially from those expressed or implied. For more information on these risks and uncertainties, please refer to our earnings release issued yesterday after the market closed, which is available on the investor relations section of our website. Additionally, our remarks today will include references to non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures can also be found in the earnings release. With that, I'll turn the call over to Joe for opening remarks.

Thank you, Marcus, and good morning, everyone. Welcome to Worthington Enterprises Fiscal 2025 Fourth Career Learnings Call. It's been a great fiscal 2025 for us on several fronts. We're exceptionally proud of and grateful for our people who continue to work safely, taking care of each other and our customers. We're a people first company and our culture powers our success. So to all my colleagues, thank you. In the quarter we delivered year-over-year and sequential growth in revenue, adjusted EBITDA, and earnings per share. Driven by great work across our teams in building products and consumer products, our revenue in Q4 was up 14 percent from last year, excluding the deconsolidation of SCS, and was up 8 percent, excluding both SCS and revenues at Rogasco. Gross margin was 29.3% versus 24.8%. And adjusted EBITDA margin in the quarter was 26.8% versus 19.8% in Q4 a year ago. Our results in Q4 reflect our strategy and action. We are delivering on the commitments we make to each other and to our customers every day as we optimize our current businesses and grow Worthington. And we continue to leverage the Worthington business system and its three growth drivers innovation transformation and M&A to maximize both our near and long-term success on the innovation front we've made great strides this year the success of our new balloon time mini has created opportunities for us in new channels and we recently began partnering with CVS you'll soon be able to buy our suite of balloon time products in their stores nationwide halo griddles continue to receive accolades from various publications and in Q4, Men's Journal and CNET, both named Halo as among the best griddles of 2025. Finally, our PowerCore Cylinder was part of a solution 3M leveraged to develop their 3M fast bond water-based adhesives, which in April won the Adhesives and Sealants Council's 2025 Innovation Award. Our teams continue to focus on productivity improvements across our network by leveraging transformation. These efficiency gains, driven by automation and technology, continue to contribute to our success. Our team in the water business has made good progress as they embraced 80-20 as a way of thinking differently. While it's early, they're confident that 80-20 will have a positive impact on that business and eventually across more of our value streams. Strategic M&A that leverages our core capabilities is the third vital leg of the Worthington business system that powers our growth. Last week we were in New Jersey with our new colleagues at Elgin Manufacturing announcing that acquisition. Elgin is a leader in HVAC components and structural framing for commercial buildings and it's a strong strategic and cultural fit that complements our existing building product business. It's a great example of how we apply our investment criteria to identify and acquire companies with leading positions in niche markets that we believe will be accretive to our margins and cash flows. The Ocean team has much to be proud of. Above and beyond their over $115 million in LTM revenue and $13 million in adjusted EBITDA, their position for growth. And we think we can help them accelerate that growth. Elfable forms coiled steel, something with which we have deep experience. Their processes, go-to-market strategies, and end markets mirror ours, creating meaningful opportunities for synergies and growth. We are thrilled to welcome their 250 employees to Worthington and look forward to their contribution to our collective success. For seven years we have championed the idea that people are our most important asset. That conviction makes it particularly gratifying for us in Q4 to have been named the top workplace in central Ohio for the 13th consecutive year and in our first year as Worthington Enterprises. In the quarter we also announced the U.S. Army Partnership for Your Success at our facility in Wisconsin, we're very proud to be part of this unique program partnering with the U.S. Army as they integrate veterans into the workforce after their service to our powerful People First performance-based culture continues to serve us exceptionally well, and we leverage that strength every day as we focus on both the near-term, executing our strategies in managing tariff and economic uncertainty, and on our long-term growth aspirations and performance. While we're happy to be here today discussing our Q4 results, we are constantly thinking about and investing in our future. Leveraging our culture, the Worthington business system, and our strong balance sheet, we believe we are very well positioned going forward. Our focus is on our people, our customers, our value propositions, and the opportunities we have to continue to improve everyday life by elevating spaces and experiences, which will ultimately enable us to create long-term value for shareholder. We'll now turn the call over to Collins, but we'll take you through some details related to our financial performance in the quarter.

Thank you, Joe, and good morning, everyone. We delivered strong financial results in Q4 to close out our fiscal year, even with a few unique items impacting comparability. On a gap basis, we reported earnings from continuing operations of $0.08 per share, compared to a loss of $0.64 per share in the prior year quarters. our quarterly results included the following unique items a negative impact from net pre-tax restructuring impairment and other one-time charges of 61 million dollars or 98 cents per share these charges were primarily related to a non-cash impairment associated with our general tools and instruments business for gti and consumer products along with a non-cash impairment charge related to our equity investment in the sustainable energy solutions joint venture and related investments. Both GTI and SES represent relatively small portions of our overall business, and these actions reflect updated long-term assumptions for these assets, inclusive of the changing tarot landscape. The prior year quarter included pre-tax charges of $74 million, or $1.38 per share, primarily related to the deconsolidation of SES. Excluding these items, adjusted earnings from continuing operations was $1.06 per share, marking another strong quarter for us at Worthington Enterprises. This compares to adjusted earnings from continuing operations of 74 cents per share in the prior year quarter. Consolidated net sales for the quarter were $318 million, essentially flat compared to the prior year period. This reflects the deconsolidation of our former sustainable energy solution segment which contributed 40 million dollars in sales last year excluding fes in both periods net sales grew nearly 14 percent serving by higher overall volumes and contributions from the regasco acquisition gross profit increased significantly to 93 million dollars up from 79 million dollars in the prior year quarter reflecting an approximately 450 basis point expansion in gross margin to 29.3 percent consistent with the levels we reported in q3 adjusted EBITDA for the quarter was 85 million dollars up from 63 million dollars in q4 of last year and sequentially higher from 74 million dollars in q3 adjusted EBITDA margin was 26.8 percent up from 19.8 percent last year for the full fiscal year adjusted EBITDA was 263 million dollars with a TPM adjusted EBITDA margin of 22.8 percent the second half of our fiscal year tends to be seasonally stronger and this year follows that pattern suggesting a return to normalized seasonal trends we've been adding capacity in our heating cooling construction and celebrations product lines in response to our customers, who have in some cases seen significant increases in demand and value as domestic manufacturing partners. Turning to our cash flow and capital allocation, we continue to invest in our operations while maintaining a disciplined and balanced approach. During the quarter, we invested $13 million in capital expenditures, including $8 million related to our facility modernization projects. We also returned capital to shareholders paying $8 million in dividends in repurchasing 200,000 shares of our common stock for $10 million at an average price of $49.16 per share. Our joint ventures generated $41 million in dividends during the quarter, representing a 95% cash conversion rate on equity income. For the full fiscal year, we invested approximately $51 million in CapEx, including 25 million dollars related to our facility modernization projects we have approximately 40 million dollars remaining to spend on these projects and we expect the majority of this to be spent over fiscal year 26 with completion anticipated in early fiscal year 27. cash flow from operations for the quarter was 62 million dollars and free cash flow was 49 million dollars For the full fiscal year, free cash flow totaled $159 million, representing a 103% free cash flow conversion rate relative to our adjusted net earnings. Turning to our balance sheet and liquidity, we closed the quarter with $303 million in long-term funded debt, carrying an average interest rate of 3.6%, along with $250 million in cash. Subsequent to quarter end, in mid-June, we used approximately $93 million of that cash to complete the recently announced acquisition of Elgin Manufacturing. Our leverage remains extremely low with ample liquidity supported by a $500 million undrawn bank credit facility. Net debt at quarter end was $53 million, resulting in a net debt-to-trailing adjusted EBITDA leverage ratio of less than a quarter term. Yesterday, our Board of Directors declared quarterly dividends of $0.19 per share, an increase of $0.02 relative to the dividend paid last quarter, payable in September 2025. We are very pleased to continue rewarding shareholders as we deliver strong earnings while prioritizing and investing in long-term growth. I will now briefly walk through our segment performance where both businesses delivered excellent results to close out the fiscal year. In consumer products, Q4 net sales were $126 million, essentially flat compared to the prior year quarter, with a slight increase in volume. Adjusted EBITDA was $21 million with a 16.6% margin, up from $17 million and 13.6% in Q4 last year. The improvement was driven by lower SG&A expenses and a more favorable product mix. The consumer team continues to execute well in Q4, delivering higher profitability despite uncertainty in the broader consumer environment. As we have seen throughout the year, volumes remain closely tied to point-of-sale activity, and while consumers remain cautious, our market-leading brands and strong retail partnerships position us well. Our products remain highly relevant and valued by consumers as they elevate everyday experiences around outdoor living celebrations and home improvement with a solid foundation in place we believe we are poised for long-term growth as market conditions normalize and consumer confidence and repair and remodel activity improves in building products q4 net sales grew 25 year-over-year to 192 million dollars up from 154 million dollars in the prior year quarter this growth was driven by higher overall volumes along with the contributions from the regasco acquisition completed in q1 q4 is typically our strongest seasonal quarter for building products and this year was no exception with volumes up 19 both sequentially and year over year adjusted ebitda for the quarter was 71 million dollars 37 percent of sales compared to $52 million and 33.6 percent in the prior year quarter. The year-over-year increase in adjusted EBITDA was driven by volume growth and a combined six million dollar increase in equity income from WAVE and Clark-Bietrich. WAVE delivered another solid performance while Clark-Bietrich continues to navigate a mixed demand environment and competitive pressures exceptionally well. Overall, the building products team had a strong finish to the fiscal year and continues to win with customers by providing reliable service, product innovation, and value-added solutions. Our portfolio of market-leading products and solutions support critical building systems and components that elevate the spaces where people live, work, and gather.

As we look ahead, we remain confident in the long-term outlook for our building products business and the recent addition of eligible manufacturing strengthens our offerings and further supports our growth strategy at this point we're happy to take any questions thank you we will now begin the question and answer session if you would like to ask a question please press star one in your telephone keypad to raise your hand and join the queue if you would like to withdraw your question simply press star one again and your first question comes from the line of Katherine Thompson from Thompson Research Group. Your line is open.

Hi, thank you for taking my questions today. Good morning. The theme of this quarter is pretty similar to the prior quarter, which was a pretty solid margin expansion for your wholly owned margins so part of this is that we acknowledge is lapping some easier comps but also a large portion is company initiatives can you break down uh or break out what margin growth is what is it more one time and how much of it is more uh company specific initiatives yeah thanks catherine so as you said right good good gross margin expansion in the quarter 450 basis points uh similar to last quarter we did have in uh q4 last year we completed the transaction for our

scs business so he consolidated that from our financials that led to roughly half of the 450 basis point margin expansion in the quarter and then the balance of that was really driven by in the wholly owned building products business significant volume growth which translated to good conversion costs and good product mix improvements as that business and the end markets there really return to seasonally normal demand patterns in particular some of the higher margin products like the large format heating tanks there so ultimately those those things combined led to the operating margin improvement and um this will be the last quarter for the the FES lapse.

Yeah, and Catherine, Colin's absolutely right. You know, a couple of other things. And when you talk about, you know, company-specific initiatives, you're absolutely right. And we've talked about this in the last couple of quarters. When you see gross margin go up by $14 million in SG&A, go down by $2 million, you know, year over year, that's not on accident and our teams have been doing a fantastic job of sort of optimizing our businesses and certainly growing our businesses as Colin said because our conversion costs come down but you know we're our goals over the next couple of years which we've talked about is to get gross margin over 30 percent and to have our SG&A as potential sales at 20 or less and so we're not there yet and we know that we have work to do but we feel like we have plans in place and people are really leaning in and we're pretty convicted and excited about where we can go in the next couple years.

Okay, that's helpful. I wanted to shift the wave. Contributions were above $30 million this quarter. It's the first time we've seen that. Can you talk about the drivers for, is this timing of projects, price, or a true uptick in volume demand?

And is this level achievable going forward or maybe helped us to think about how to frame wave based on what you're seeing the market right now thank you great question it's a mix catherine of all the things that you mentioned you know a little bit on the volume side certainly it's a great business and they do a really good job taking care of their customers and understanding how customers can and make more money using their products. And that allows them to generate returns that they're entitled to. But I would say from an end market perspective, they continue to see relative strengths in healthcare, education, transportation, retail is okay. Office is still a little soft, obviously. Not a lot different than it would have been when we were together in March. So more, I think, steady as she goes there, I think, as the rest of the year lays out, that will have a lot to do with both WAVE and Clark-Dietrich and our businesses on the building product side. So we'll get a little bit dependent on market, but we kind of feel like steady as she goes.

Okay, and tying into that for Clark-Dietrich, which, you know, for that JV, I mean, that's very heavily tied to just traditional commercial construction. But you saw a nice uplift at 13 million, which is, you know, higher than the sub 10 million range you've had in the past few quarters. is that a signaling that we're we've hit more of a trough but or is it more um and you have some demand or is it more kind of like what we talked about with wave timing price true volume demand another very fair question on clark dietrich what we know and what you point out is there are a couple of differences it is much more new construction centric versus rnr on some of

our core businesses and on wave so it's a bit more exposed to higher interest rates and it's a bit more exposed to that commercial construction which is a bit more challenged and has been challenged and we think in the next several months will be more challenged and so So we actually view Q4 for us as a reflection of Clark Dietrich being a market leader and having a great value proposition, but probably a little more of, at least in the near term, an aberration. And so we would look for Clark Dietrich to be in Q1 at least, probably closer to flat with Q1 of last year.

Okay, great. I'll hop back in the queue. Thanks so much.

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

Thank you. Good morning, Joe. Colin, Marcus. Thanks for taking questions. If I missed it, forgive me. What were the revenue and EBITDA contributions from Regasco in the quarter, if you break those out? And, you know, what are your expectations for organic, wholly owned, top line growth, you know, both consumer and building products for Q1 and the balance of the year? I know you don't like to give specific guidance, but, you know, just wondering if you expect to generate positive organic growth, you know, in fiscal 26, or are we thinking closer to flat, you know, given all the current macro uncertainty?

Thanks, Dan. I'll take the first part of your question and then we'll attack the latter part. So on Rogasco specifically, very, very happy with that acquisition. They continue to perform well within the quarter. They contributed roughly $16.5 million in revenue and a couple million dollars, roughly $2 million in EBITDA to the building products business. So it's adding to the year-over-year growth and building products in addition to the the base business uh is operating very well as as i mentioned earlier uh where those those end markets are and products are returning to seasonally normal demand patterns there so uh very pleased with with uh regasco uh so far and excited uh what's become as well yeah dan relative to just q1 and beyond you're right we we don't talk sort of specific guidance.

I would type back to the market outlook is not terribly different than it was in March, which is to say it's a little bit murky. And you've got unemployment relatively low. You've got interest rates stubbornly high. Consumer confidence is okay getting better um you've got a lot of tariff uncertainty and and you continue to have a lot of things happening in the world and certainly in the economy for consumers and in building products that cause i think everybody to not have phenomenal visibility when we were together in March, you know, a week and a half later was April 2nd. And, you know, all the tariff announcements and all the things that happened pursuant to that. We're sitting here chatting now and in early July, there'll potentially be another set of data points that come out relative to what the trade policy and the tariff environment is likely to look like. And so So what we're focused on is really taking care of our customers. And I look at maybe the next few months as a reflection of the last quarter. And when we think about the quarter, I would say maybe take consumer and building products. But consumer, we held CERF in Q4. If you remember last year, Q3 was a very strong quarter for the consumer business because of some of the storms and the weather phenomenons that that were there and then q4 uh wasn't as good as we hoped it was going to be um in this year in 2025 it was another excellent q3 and q4 was significantly better there's two things going on there we we we've gotten better at supporting our our retailers and making sure that that demand for products is met with consistent supply. And our Helium business has also showed a really good improvement in part because some of the things that we've been doing with our new products and with our supply chain, but also remember that Party City bankruptcy and those stores closing has created There's more demand for our customers that are selling our products, and we're happy to support them. We think that's going to kind of continue to take place and be incremental. You know, on the building product side, there's probably a little more visibility in the next several months based on some of the trends that we've seen in our cooling and construction business, in our heating business, and in our water business. And obviously, we'll now have, certainly for a little bit of June, and then the balance of fiscal 2026, inclusion of Elgin's results. But so, yeah, we feel good about all the things that we can control and are pretty cautiously optimistic, I would say, about what will unfold in the next six months. But a lot of that won't always be totally in our control.

Understood.

Appreciate it, Joe. maybe just provide a little bit more detail on elgin you know how it came about how their hvac components fit into the rest of your wholly owned building products and any potential revenue or cost synergies sure it's as we mentioned yeah that acquisition is a great example of our strategy in action dan they're they're a leader in a niche market they roll form steel we can help them with that they purchased coils of steel we'd like to think that we're pretty good at that they have a good operational footprint we think that we're pretty good at that and can be helpful there and they sell into not the exact same customers that we have but several overlapping customers and the same types of customers which is really building products distribution so we think that creates meaningful opportunities for us for for synergies both on the top line and on the efficiency side we're one weekend uh so it's really hard to to quantify anything right now but we're we're pretty excited and we've got uh folks up there right now helping to to get uh people more integrated into worthington so uh again it's early but we're optimistic and excited and just out of curiosity the the purchase price pretty attractive it's at uh i think around seven

times EBITDA um anything you know anything with the word hvac in it generally trading at much higher levels so just talk about maybe the customer base they serve um you know and and kind of growth outlook organically uh would be really helpful yeah so it is um dan on on for elgin in particular their channels they're serving is primarily building products distribution but also contractors as well and you know we've through our m a process where we've talked about it before with you and others just uh we continue to have a pipeline of attractive areas and adjacencies and niche areas within building product and consumer products and hvac components we identified as one of those attractive areas and, you know, the M&A markets are what they are, a little softer than they've been historically, but we're able to fortunately get this transaction done and are excited to invest in this attractive niche area and excited, as Joe mentioned, of what's to come with that business and what we can do together.

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

Thanks, Dave. your next question comes from a line of susan mcclary from goldman sachs your line is open thank you good morning everyone my first question good morning my first question is on steel can you talk a bit about what you're seeing in terms of input costs across the business and maybe how you're also approaching pricing relative to any inflation that you're seeing there just given the softness that we are seeing across both the consumer and perhaps some of that building product space?

Yeah. Thanks, Susan. So just on the steel market in particular, it is a big input cost to our products. The steel market, as you've seen, there's a run-up in pricing in April and it's come back down and a little range down recently. But our teams are really working hard just around price risk mitigation and we're hedging as necessary to support our customers and offer prices that are locked in. And ultimately, for us, it's about mitigating any volatility of those costs within our results. And we continue to do that. We've been working through that for a long time with our price mitigation and price risk teams. And, you know, we don't anticipate any volatility as a result of that coming through here. And then just on the price and mix piece, you know, we've talked about it a little bit just around as our building products in particular is a good story around margin expansion in the wholly owned business with the increased volume there. We saw some good improvement from a conversion cost perspective that has trickled through the results as well.

Okay, that's helpful. And then turning to the modernization efforts, it's good to hear that that spend is coming through and it seems like it's been a really good effort there. Can you talk about the benefits that we should expect as we look to fiscal 2026, anything that you're especially focused on and how we should think about perhaps some of that flow through across the various segments?

Sure, Susan. And so some of that is in 26, but if you remember, there were two specific facilities, one is in Columbus and the other is in Wisconsin. You know, we spent 16, 17, $18 million over the last couple of years in our gas grill, aluminum forklift and other refillable tanks here in Columbus automating and really investing in that business to be able to increase throughput and ultimately increase our efficiencies. That's served us well and I think will serve our customers well since a lot of them have seen an increase in demand. And as a domestic manufacturer our supply chains pretty tight and so we talked about some of the things that that we're able to do in cases of natural disasters and things like that the the other piece which is really in the the camping gas business and some of our torch businesses up in wisconsin you know that will run through probably another 15 months from now and so the benefits from that won't really manifest themselves until maybe later in fiscal 2027.

Okay. And then just one last question. You mentioned in a response to a prior question that the M&A pipeline has perhaps softened a bit just given the backdrop that we're in. Can you talk a bit more about capital allocation, how you're thinking about the potential for deals in this environment?

And it was nice to see the dividend raise come through yesterday any thoughts on how you're balancing M&A versus shareholder returned yeah great great question and I'll maybe talk for 30 seconds and let Colin kind of go into some of his thoughts but capital allocation for us has long been balanced shares not super aggressively, because we have a bias towards growth, and not growth at any price, but as Dan just alluded to, we found an acquisition that we thought made a lot of sense for us and was a reasonable value, and so we increased our dividend by 12%. The board of directors did that yesterday, and so we're still pretty committed to a balanced approach, but from an M&A pipeline perspective I'll let Colin give you for his thoughts.

Yeah, so isn't it the M&A markets I would say are softer, our pipeline on process, what our teams focus on is really identifying targets, both could be private equity owned, could be family owned, private companies, and progressing those through the pipeline, having a number of conversations, and ultimately it takes a buyer and seller to come together to agree on something and we were fortunate to get that something done on elgin manufacturing um so we're continuing to focus there it's a key part of our growth strategy as joe mentioned that the elgin acquisition is a our strategy in action and um you know our capital allocation focus will definitely you know include m a in the future um you know with that being said we do feel like We've got good free cash flow generation up in the business, $159 million this year, this fiscal year, and are mindful as well about the facility modernization spend that we talked about earlier, which will be elevated from a CapEx standpoint here for the next 15 months or so.

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

Yeah. Okay. Thank you for all the color. Good luck with everything.

Thank you.

Your next question comes from a line of Brian McNamara from Canaccord Genuity. Your line is open.

Good morning, Brian. Hey, good morning, guys. Good morning, guys. Congrats on the strong results. So I'm curious what you're seeing in the marketplace as it relates to tariffs being a domestic manufacturer, presumably your advantage. But A lot has changed, as you mentioned, on China tariff since your Q3 report in late March. What specifically are your China source competitors doing that you're observing? Are they running down inventories on hand? Have they already taken price on the shelf? Are they doing something else? That would be helpful.

I don't know if the answer to your question is yes, yes, yes, yes, and yes, but, you know, related to tariffs, we first talked about this, I think, in December, and we talked about it again in march and and we will certainly it's appropriate to talk about it now but it's been an interesting sort of six months as people continue to plan and continue to react and ultimately we'll have to continue to do those things but yes only seven or eight percent of our Our revenues are sourced from overseas, predominantly in Asia, you know, 80% of our ish of our revenue is source produced and sold in North America, and then another 12, 13% looks like that only is in Europe. And so on the businesses, our tools businesses, so currently that's GTI, and that's level five and certainly halo our mitigation efforts along the way you have included and will include asking our suppliers to help us trying to find cost savings everywhere we can when it's appropriate at resourcing the locations where those products are made and if it's necessary it would include price increases and i think people have taken a variety of approaches and some of those things are already in place and others i think people are still trying to stuff out or ascertain what a longer term plan will be and so we'll we'll stay flexible uh and we'll stay kind of close with our customers but one of the things about our products is they tend to be pretty differentiated you know and as you mentioned as a as a domestic manufacturer we've added capacity in in a number of places to try and help our customers who are seeing increases in demand for their so So it's hard to give a really definitive answer because things could change next week or in a couple weeks relative to the trade environment. But we feel reasonably good about where we sit.

And then secondly, on gross margins, obviously a big improvement in H2. I think you said Q3 is typically a little stronger than Q4 and they're kind of in line-ish. So is it reasonable to assume kind of 29-plus percent sustains next year? I know that I guess the medium term target is 30. I'm just trying to figure out the nuances here. I know I think H1 is typically a bit weaker than H2, but any help there on the gross margin line for next year will be helpful.

Yeah, thanks, Brian. So just, you know, on the margin, you know, we've had a couple quarters in a row here, 29%. And you're right, you know, Q3 and Q4 are absolutely our seasonally stronger quarters here. and um you know we're we don't think uh things will revert to uh significantly less than that as over time but we're going to be working hard to get those up to 30 as joe talked about earlier so that's all the initiatives in place here around whether it's price risk whether it's conversion costs uh and a lot of where we're investing as well in our similar facilities so um you know over the the the near term right medium term we'll be working towards to get that higher as best in Canada okay and then finally on Elgin just three quick ones uh one in terms of modeling any seasonality on revenues uh two I think the trailing 12 month EBITDA margin was a bit south of 12 percent is there a path to get that to 20 just in line with your um your your M&A framework and if so how do you get there and then three is there any China sourcing there uh so good questions brian on on elgin you know roughly 115 million in revenue 13 million uh was there they're trailing evita um you know seasonally the second half of the the calendar year tends to be a little stronger for them and where they play um you know from a margin standpoint we feel as joe mentioned this is attractive uh business for us to to really deploy our business system, Worthington business system, and what we feel like we can bring to that is a lot of operational experience, know-how, efficiencies, some benefits from a purchasing standpoint and price risk, and then, you know, complement that with, you know, where we play from a channel perspective and serving a number of areas across the building product space and in overlap with with customers so um you know that's on top of the strong leadership team and the cultural fit that they have so we're excited to get to work together and we'll absolutely be focused on improving the margins there yeah they don't have any sourcing from china yeah excellent all right thanks a lot guys best of luck thanks brian and again if you'd like to ask a question press star one in your telephone keypad Your next question comes from the line of Walt Lipsack from Seaport Research.

Your line is open.

Hey, thanks. Good morning, Joe and Colin. I'm Walt Lipsack. But, hey, great quarter. And I wanted to ask about building products. And, you know, you've gone into some detail already about the tariff impact. But I wonder if we could talk a little bit kind of specifically about building products and any, you know, just your thoughts on how tariffs impacted pricing, supply, demand, you know, those kind of issues.

Yeah, we didn't really – it's very hard for us, well, to quantify any of that because it continues to be a little bit of a moving target. I think the teams, certainly in consumer, but also in building products, have proved the de-stocking and some of those phenomenons that we had to deal with, and we're seeing some real strength production business throughout the North American building products landscape, and just done a really good job increasing volumes, which gets conversion costs lower.

Okay, great. And, you know, kind of along those lines, I think you're talking about a little bit of this question here, but in building products, when you're preparing remarks, it sounded like you're gaining some market share or is there a share opportunity? I wonder if you could talk about that.

So, yeah, we're pretty focused. and as you know we are zeroed in on having leadership in niche markets and we do that effectively you know leveraging working business system innovation transformation in m a but that gives us the seat at the table with our customers when they're thinking through things and and when they're understanding their own markets and we're trying really hard to work with them and understand and their pain points. And so in a couple of different areas in, I think on the heating and cooking side, but also on the refrigeration side and in the celebration side, there's been increases in demand from our customers. And so we've responded there, both the investments we've historically made and in certainly adding capacity and adding shifts. So if some of that related to us being a domestic manufacturer, it's certainly probable, but we can't really quantify it relative to tariffs, but if some of it related to what we think we do pretty well and having a very tight supply chain, it's very likely.

Okay, that sounds great.

And then in your prepared remarks, also, Colin, I think you talked about consumer mix. uh was that consumer mix the balloon time or is there some other consumer mix that was positive for you guys yeah so good good mix and balloon time yes um performing very well joe mentioned it earlier um we make inroads on new product development there with the mini tank as well as channel expansion uh that we're seeing there so so absolutely with balloon time and And the other products contributing well, as well, and, you know, demand holding up similar to what we saw last quarter.

Okay, good. And, you know, you guys don't, you know, you gave some idea about the stability of the markets, but no guidance. I wonder, Joe, if you could help us just by talking about the year ahead, you know, as a new-ish CEO. know, you know, what are your objectives? What would you like to see happen over, you know, the next four quarters?

So you're giving me one more chance to give guidance, huh? Well, okay. Don't give guidance. Whatever you do, don't give guidance. I'm just teasing. We have a lot to be proud of, and I said it at the beginning of my remarks. You know, our culture is such a massive advantage for us and it leads to us being able to attract and retain the best and brightest for extended periods of time and people just get better the more they're in a role and we have so you know kind of many fantastic people that have been working hard on it's not just for the last 90 days but but for the last six months and the last 12 months and the last 18 months and so So, you know, when we think about what is possible for us, again, we're very happy to be talking about our Q4 results, but we've always had the luxury and a focus on thinking not just about the near term, but about the long term. And so we continue to invest. And so we're spending a lot of time when we talk about this with our people, we talk about why we win today, but then how we'll win tomorrow. So that's going to continue investments in connected culture and automation and AI and additional leadership in these niche markets and impactful strategic M&A. And so I think as we sit here today, we think we're really well positioned for the long term. We have to manage through some tariff uncertainty and some economic uncertainty. But our value propositions are really good. And if you think about going back to really our vision, right, is to elevate spaces and experiences, Sometimes that's making a room or part of a building more comfortable or more aesthetically pleasing. Other times it's giving somebody the ability to have that experience and in a recession sometimes it's harder for somebody to get on an airplane or stay in a hotel and so they might want to be barbecuing or on a camping trip and in other times those spaces and experiences are in a time of need where there's a natural disaster or a storm that can create hardships for somebody and our products can be there to make things maybe just a little better or a little less bad. And so what I want us to accomplish, what we all want us to accomplish is to continue to take care of our customers, continue to work our strategies, which are really, really good. and ultimately we do those things and there might be some bumps in the road but we see a lot of growth opportunities for us ahead our aspirations are kind of you know we just talked about them a little bit ago but we feel really good about what the future can look like for our teams okay great yeah good luck in 2026 i hope you keep winning thank you and that concludes our question and

answer session. I will now turn the call back over to Joe Hayek for closing comments.

Thank you everybody for joining us this morning. Have a wonderful Fourth of July holiday and a great summer. We'll look forward to speaking everybody again soon.

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