Executive Summary

Q2 FY2025 delivered solid execution despite softer end-markets: net sales fell 8% YoY to $274.0M on SES deconsolidation, but adjusted EPS rose 5% to $0.60 and adjusted EBITDA grew 2% to $56.2M; consolidated adjusted EBITDA margin expanded to 20.5% (+200 bps seq; +200 bps YoY) .
Gross margin reached ~27% (+580 bps YoY), aided by the prior-year recall comp, SES deconsolidation mix effect, and Ragasco inclusion; management indicated 27% is an appropriate level near term .
Building Products improved sequentially on Ragasco and stronger WAVE JV, while Consumer Products grew EBITDA YoY on higher volumes and margin; two customer bankruptcies increased bad debt by ~$2M in the quarter (≈$0.03 EPS impact) .
Balance sheet remains strong (cash $193.8M; no revolver borrowings; $500M undrawn facility). Company repurchased 200k shares ($8.1M) and declared a $0.17 dividend; M&A remains a priority with buybacks toggled vs deal opportunities .
No formal quantitative guidance; narrative positive on margin optimization, modernization benefits, and JV stability (WAVE strong; ClarkDietrich stabilizing sequentially). Potential stock catalysts: sustained 27% gross margins, JV resilience, and accretive M&A execution .

What Went Well and What Went Wrong

What Went Well
- Adjusted EBITDA and EPS grew YoY and sequentially; consolidated adjusted EBITDA margin reached 20.5% (27% gross margin commentary) despite lower sales .
- Building Products benefited from Ragasco and higher WAVE equity income; sequential EBITDA +17% to $47M (30.0% margin) .
- Management emphasized innovation and margin optimization; examples include 3M PowerCore adhesive launch and HALO Versa pizza oven press recognition; “thinking more like a startup” to optimize margins as growth returns .
What Went Wrong
- Net sales declined 8% YoY primarily from SES deconsolidation; ClarkDietrich equity income fell YoY (though improved sequentially) .
- Small propane tank (gas grill) production was constrained by facility modernization, limiting output in the quarter (volume-sensitive) .
- ~~$2M increase in bad debt reserve tied to two customer bankruptcies pressured Consumer Products and EPS (~~$0.03) .

Financial Results

Metric	Q2 FY2024 (oldest)	Q4 FY2024	Q1 FY2025	Q2 FY2025 (newest)
Net Sales ($M)	$298.229	$318.801	$257.308	$274.046
GAAP Diluted EPS – Continuing	$0.36	$(0.64)	$0.48	$0.56
Adjusted EPS – Continuing (non-GAAP)	$0.57	$0.74	$0.50	$0.60
Adjusted EBITDA ($M)	$55.044	$63.168	$48.437	$56.213
Adjusted EBITDA Margin %	18.5%	19.8%	18.8%	20.5%

Segment performance and volumes

Metric	Q2 FY2024 (oldest)	Q4 FY2024	Q1 FY2025	Q2 FY2025 (newest)
Consumer Products Net Sales ($M)	$119.389	$125.336	$117.596	$116.748
Consumer Products Adj. EBITDA ($M)	$12.674	$17.061	$17.775	$15.484
Consumer Products Adj. EBITDA Margin %	10.6%	13.6%	15.1%	13.3%
Building Products Net Sales ($M)	$151.303	$153.551	$139.712	$157.298
Building Products Adj. EBITDA ($M)	$45.809	$51.628	$39.729	$47.185
Building Products Adj. EBITDA Margin %	30.3%	33.6%	28.4%	30.0%
Volume – Consumer Products (units)	15,931	15,660	16,171	16,420
Volume – Building Products (units)	3,347	3,579	3,094	3,329

Key KPIs and JV contributions

KPI	Q4 FY2024 (oldest)	Q1 FY2025	Q2 FY2025 (newest)
Equity Income – WAVE ($M)	$27.534	$27.901	$24.564
Equity Income – ClarkDietrich ($M)	$11.560	$8.744	$9.730
Equity Income – Other ($M)	$1.294	$(1.153)	$0.262
Total Equity Income ($M)	$40.388	$35.492	$34.556
Cash from Operations ($M)	$45.169	$41.146	$49.053
Capital Expenditure ($M)	$11.336	$9.629	$15.161
Cash & Equivalents ($M, end of period)	$244.225	$178.547	$193.805
Long-term Debt ($M)	$298.133	$300.009	$295.721

Notes: Gross margin commentary ~27% in Q2 FY2025 (+580 bps YoY) from CFO remarks (not a tabular disclosure) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue/EPS/Segment outlook	FY/Q3	None provided	None provided	Maintained: no formal quantitative guidance
Tax rate (qualitative)	FY2025	N/A	Estimated annual ETR 24.1% (Q2 actual estimate)	Not formal guidance
Dividend per share	Next payable	$0.17/qtr	$0.17 payable Mar 28, 2025 (record Mar 14, 2025)	Maintained

Company provided narrative outlook only; no numeric revenue, EPS, margin, or segment targets were issued .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2024)	Previous Mentions (Q1 FY2025)	Current Period (Q2 FY2025)	Trend
Gross margin/mix	Volumes lower; adjusted ops impacted by SES; JV mix helped; adjusted EPS $0.74	EBITDA margin 18.8%; CP margins improved YoY	Gross margin ~27% (+580 bps YoY); margin improvement from recall comp, SES deconsolidation, Ragasco, and mix	Improving
JV performance (WAVE/ClarkDietrich)	WAVE strong (+$3.3M YoY); ClarkDietrich down on margin compression	WAVE steady; ClarkDietrich down YoY, pressured	WAVE $25M vs $21M YoY; ClarkDietrich $10M vs $14M YoY but up sequentially	WAVE strong; ClarkDietrich stabilizing seq
Ragasco integration	Closed June 3, 2024; expected benefits	Included; +$1.9M inventory step-up cost in BP	Added ~$18M BP sales; ~$4M EBITDA; strengthens portfolio	Executing; accretive
Heating/cooking (propane)	Demand softer; mix unfavorable	BP volumes down; destocking impacts	Large-format returned to growth; small tanks constrained by modernization (now completed, with automation)	Recovery expected post-modernization
Bad debt/credit	Not highlighted	Bad debt income modest	~$2M bad debt reserve increase (two bankruptcies)	Transitory headwind
Price/cost (steel)	N/A	N/A	Steel deflation largely flat YoY; focus on efficiencies; limited pricing increases	Stable input cost view
Trade/tariffs	N/A	N/A	Seeks level playing field; mostly domestic manufacturing; could benefit from fair-trade actions	Potential tailwind
Capital allocation	Dividend raised to $0.17; strong cash	Buybacks initiated (150k shares)	200k repurchased; M&A priority; buybacks toggle vs M&A	Balanced, growth-biased

Management Commentary

“We delivered solid financial results for the quarter despite mild but persistent macro headwinds, achieving year over year and sequential growth in adjusted EBITDA and adjusted EPS.” – CEO Joe Hayek .
“Gross margin was up 580 basis points… we layer on the inclusion of Ragasco… and some positive mix shift… margins at 27% is about what we would expect at this time.” – CFO Colin Souza .
“We’re thinking more like a startup… pursuing initiatives to optimize our margins as we grow Worthington.” – CEO Joe Hayek .
“Building Products… sequential improvement… Ragasco added ~$4M [EBITDA]… WAVE delivered $25M… ClarkDietrich $10M this quarter.” – CFO Colin Souza .
“As we look forward… [small-tank] modernization project is done… we upgraded with robotics and automation.” – CEO Joe Hayek .

Q&A Highlights

Margin drivers: 580 bps expansion YoY to ~27% gross margin driven by prior-year recall comp, SES deconsolidation, Ragasco inclusion, and favorable mix; management sees ~27% as appropriate near term .
SG&A/operating model: “Thinking like a startup” to optimize margins and lower SG&A as a % of sales over 12–24 months, positioning for operating leverage when markets recover .
Segment dynamics: Large-format heating tanks returned to growth; small propane (gas grill) constrained by modernization but expected to improve post-automation; market share wins cited .
JVs: WAVE strong on value proposition in education/healthcare/data centers/transportation; ClarkDietrich pressured YoY but steady sequentially .
Capital allocation/M&A: M&A remains priority to enhance margins/FCF; buybacks at least to offset dilution, toggle vs M&A given valuations and activity pickup expected in 2025 .
Credit/tax: ~$2M bad debt reserve increase (two bankruptcies); Q2 tax rate estimate ~24.1% .
Trade policy: Seeks level playing field; domestic production footprint positions WOR well under various scenarios .

Estimates Context

S&P Global consensus estimates for Q2 FY2025 (revenue and EPS) were unavailable through our tool at this time; we are unable to present vs-consensus comparisons. As a result, we anchor on company-reported actuals and management’s qualitative outlook [GetEstimates tool error].

Actual vs consensus (informational)

Metric	Actual Q2 FY2025	S&P Global Consensus
Revenue ($M)	$274.046	N/A
GAAP Diluted EPS – Continuing	$0.56	N/A
Adjusted EPS – Continuing	$0.60	N/A

Key Takeaways for Investors

Margin story improving: sustained ~27% gross margin commentary and 20.5% adjusted EBITDA margin suggest mix/portfolio shift and cost actions are working; watch for persistence into H2 .
Building Products momentum: Ragasco accretion plus WAVE strength offset weaker ClarkDietrich; sequential EBITDA improvement indicates better run-rate exiting Q2 .
Consumer Products resilient: EBITDA and margin up YoY despite mix pressure and ~$2M bad debt headwind; volumes rising; modernization in small tanks should aid throughput and cost going forward .
Strong balance sheet optionality: $194M cash, no revolver borrowings, net debt/TTM adj. EBITDA <0.5x; capacity for accretive M&A and buybacks .
JV stability is key: WAVE remains a standout (contractor labor-saving proposition); ClarkDietrich stabilizing sequentially—continued monitoring of commercial construction mix/steel spreads warranted .
No formal guidance: Near-term narrative constructive but macro remains “flat/steady”; focus on execution, mix, and M&A pipeline as potential catalysts .
Watchlist catalysts: successful ramp post-modernization (small tanks), incremental Ragasco synergies, JV dividends/cash conversion, and any portfolio-enhancing acquisitions .

Appendix – Additional Data Points

Consolidated Q2 FY2025 details: Operating income $3.5M; adjusted operating income $6.1M; equity income $34.6M; cash from operations $49.1M; capex $15.2M; total debt $295.7M; cash $193.8M .
Dividend: $0.17 per share payable Mar 28, 2025; record Mar 14, 2025 .
Non-GAAP recon: restructuring and other expense added back ($2.620M pretax; +$0.04 to adjusted EPS) .

WORTHINGTON ENTERPRISES, INC. (WOR)·Q2 2025 Earnings Summary