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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A reveal strong financial performance, strategic product launches, and a balanced approach to M&A and shareholder returns. Management's focus on modernization, margin expansion, and strategic M&A, coupled with a 12% dividend increase, signals confidence. Despite macroeconomic uncertainties, the company shows resilience with steady WAVE contributions and margin growth. The market cap suggests moderate stock movement, aligning with a positive sentiment. The lack of specific guidance and murky outlook are concerns but are offset by operational strengths and strategic initiatives.
Revenue Revenue in Q4 was up 14% from last year, excluding the deconsolidation of SES, and was up 8%, excluding both SES and revenues at Ragasco. This growth was driven by higher overall volumes and contributions from the Ragasco acquisition.
Gross Margin Gross margin was 29.3% versus 24.8% in the prior year quarter, reflecting an approximately 450 basis point expansion. This improvement was consistent with the levels reported in Q3.
Adjusted EBITDA Margin Adjusted EBITDA margin in the quarter was 26.8% versus 19.8% in Q4 a year ago. The increase was driven by volume growth and contributions from acquisitions.
Earnings from Continuing Operations On a GAAP basis, earnings from continuing operations were $0.08 per share compared to a loss of $0.64 per share in the prior year quarter. Excluding unique items, adjusted earnings from continuing operations were $1.06 per share, up from $0.74 per share in the prior year quarter.
Consolidated Net Sales Consolidated net sales for the quarter were $318 million, essentially flat compared to the prior year period. Excluding SES in both periods, net sales grew nearly 14% driven by higher overall volumes and contributions from the Ragasco acquisition.
Gross Profit Gross profit increased significantly to $93 million, up from $79 million in the prior year quarter, reflecting the improvement in gross margin.
Adjusted EBITDA Adjusted EBITDA for the quarter was $85 million, up from $63 million in Q4 of last year and sequentially higher from $74 million in Q3.
Free Cash Flow Free cash flow for the quarter was $49 million. For the full fiscal year, free cash flow totaled $159 million, representing a 103% free cash flow conversion rate relative to adjusted net earnings.
Net Debt Net debt at quarter end was $53 million, resulting in a net debt to trailing adjusted EBITDA leverage ratio of less than 0.25 turn.
Consumer Products Net Sales Q4 net sales were $126 million, essentially flat compared to the prior year quarter, with a slight increase in volume.
Consumer Products Adjusted EBITDA 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.
Building Products Net Sales Q4 net sales grew 25% year-over-year to $192 million, up from $154 million in the prior year quarter. This growth was driven by higher overall volumes and contributions from the Ragasco acquisition.
Building Products Adjusted EBITDA Adjusted EBITDA for the quarter was $71 million, 37% of sales, compared to $52 million and 33.6% in the prior year quarter. The increase was driven by volume growth and a combined $6 million increase in equity income from WAVE and ClarkDietrich.
Balloon Time Mini: The success of the new Balloon Time Mini has created opportunities in new channels, including a partnership with CVS for nationwide distribution.
HALO Griddles: HALO Griddles received accolades from Men's Journal and CNET as among the Best Griddles of 2025.
PowerCore cylinder: The PowerCore cylinder was part of the solution used by 3M to develop their award-winning 3M Fastbond water-based adhesives.
Elgen Manufacturing acquisition: Worthington acquired Elgen Manufacturing, a leader in HVAC components and structural framing for commercial buildings, with $115 million in LTM revenue and $13 million in adjusted EBITDA. This acquisition strengthens Worthington's Building Products business and creates opportunities for synergies and growth.
Productivity improvements: Efficiency gains driven by automation and technology have contributed to success, particularly in the water business, which is adopting the 80/20 methodology.
Facility modernization: Invested $13 million in Q4 and $51 million for the fiscal year in facility modernization projects, with $40 million remaining to be spent by early fiscal year 2027.
Strategic M&A: Focused on acquiring companies with leading positions in niche markets, exemplified by the Elgen Manufacturing acquisition.
People-first culture: Worthington was named the Top Workplace in central Ohio for the 13th consecutive year and announced a partnership with the U.S. Army to integrate veterans into the workforce.
Tariff and Economic Uncertainty: The company is managing tariff and economic uncertainty, which could impact their long-term growth aspirations and performance.
Restructuring and Impairment Charges: The company faced a negative impact from net pretax restructuring, impairment, and other one-time charges of $61 million, primarily related to a noncash impairment associated with the General Tools & Instruments business and the Sustainable Energy Solutions joint venture.
Changing Tariff Landscape: Updated long-term assumptions for certain assets, including the General Tools & Instruments business and Sustainable Energy Solutions, reflect challenges due to the changing tariff landscape.
Consumer Environment Uncertainty: The broader consumer environment remains uncertain, with volumes closely tied to point-of-sale activity and cautious consumer behavior.
Mixed Demand Environment and Competitive Pressures: The Building Products segment is navigating a mixed demand environment and competitive pressures, which could impact performance.
Facility Modernization Costs: The company has approximately $40 million remaining to spend on facility modernization projects, which could strain financial resources if not managed effectively.
Seasonal Trends: The second half of the fiscal year tends to be seasonally stronger, and this year follows that pattern, suggesting a return to normalized seasonal trends.
Capacity Expansion: The company has been adding capacity in heating, cooling, construction, and celebrations product lines in response to significant increases in demand and the value of domestic manufacturing partners.
Capital Expenditures: Approximately $40 million remains to be spent on facility modernization projects, with the majority expected to be spent over fiscal year 2026 and completion anticipated in early fiscal year 2027.
Consumer Products Outlook: The company believes it is poised for long-term growth as market conditions normalize and consumer confidence and repair/remodel activity improve.
Building Products Outlook: The company remains confident in the long-term outlook for its Building Products business, supported by the recent acquisition of Elgen Manufacturing, which strengthens offerings and supports growth strategy.
Quarterly Dividend: The Board of Directors declared a quarterly dividend of $0.19 per share, an increase of $0.02 or 12% relative to the dividend paid last quarter, payable in September 2025.
Share Repurchase: Repurchased 200,000 shares of common stock for $10 million at an average price of $49.16 per share during the quarter.
The earnings call summary and Q&A indicate strong growth in net sales, particularly in the Building Products segment. The acquisition strategy and innovation focus are promising, and the consumer products segment shows positive momentum with new partnerships. Despite some margin compression challenges, strategic cost improvements and a balanced capital allocation strategy are in place. The overall sentiment is positive, with strong financial metrics and optimistic guidance, suggesting a likely stock price increase in the short term.
The earnings call presents a positive outlook with strong financial performance, strategic growth through acquisitions, and benefits from tariffs. Despite some challenges in the construction segment, the company is well-positioned for growth with its focus on high-margin, low-asset-intensity businesses. The positive sentiment is reinforced by strong gross margins and operational efficiencies, alongside strategic investments in AI and automation. The company's market cap suggests a moderate reaction, leading to a 'Positive' prediction for stock price movement.
The earnings call summary and Q&A reveal strong financial performance, strategic product launches, and a balanced approach to M&A and shareholder returns. Management's focus on modernization, margin expansion, and strategic M&A, coupled with a 12% dividend increase, signals confidence. Despite macroeconomic uncertainties, the company shows resilience with steady WAVE contributions and margin growth. The market cap suggests moderate stock movement, aligning with a positive sentiment. The lack of specific guidance and murky outlook are concerns but are offset by operational strengths and strategic initiatives.
The earnings call highlights strong financial performance with increased earnings per share, improved gross margin, and solid free cash flow conversion. The Q&A section reveals management's confidence in navigating tariffs and maintaining a healthy M&A pipeline. Despite a slight decline in net sales, the acquisition of Ragasco and increased volumes offset this. The shareholder return plan, including dividends and share repurchases, further supports a positive outlook. Considering the company's market cap, the stock price is likely to experience a positive movement of 2% to 8% over the next two weeks.
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