Executive Summary

Q3 FY2025 delivered broad-based strength: revenue rose sequentially to $304.5M and adjusted EPS to $0.91, with consolidated adjusted EBITDA margin expanding to 24.2% on favorable mix, share gains and improved gross margins in wholly owned businesses . Management cited “Q3 records in production and shipments” and gross margin of 29.3% (vs ~27% in Q2), underscoring execution and mix tailwinds .
Against Wall Street: WOR beat S&P Global consensus on both revenue and EPS in Q3 FY2025 (Revenue: $304.5M vs $289.1M estimate; Adjusted EPS: $0.91 vs $0.706 estimate) as mix and operational execution offset JV headwinds (ClarkDietrich) and restructuring costs . Values retrieved from S&P Global.*
Headwinds were concentrated in JV equity income: ClarkDietrich declined ~$8M YoY, but WAVE remained steady; core Building Products and Consumer Products offset JV pressure via mix and returning seasonal demand .
Balance sheet optionality remains high: $223M cash, undrawn $500M revolver, net debt ~ $71M and ~0.25x net debt/TTM EBITDA; Board declared $0.17 dividend; repurchased 150k shares ($6.2M) .
Potential stock catalysts: sustained “high-20s” gross margins target, pending price increases, “AI” and automation initiatives, Walmart distribution for Halo griddle, WAVE’s data center opportunity, and tariff dynamics favoring domestic manufacturers .

What Went Well and What Went Wrong

What Went Well
- Mix and execution drove profitability: Adjusted EBITDA rose to $73.8M (24.2% margin) vs $66.9M (21.1%) a year ago, with core, wholly owned businesses showing gross margin improvement and mix gains .
- Segment performance: Consumer Products net sales +4.9% YoY to $139.7M with adjusted EBITDA +$3.0M to $28.6M (20.5% margin); Building Products net sales +11.2% to $164.8M with adjusted EBITDA $53.2M (32.3% margin) despite JV headwinds .
- Management tone and strategy: “We had a great quarter and set Q3 records in production and shipments… year‑over‑year and sequential growth in adjusted EBITDA and EPS,” with innovation highlights (Sure Sense IoT propane sensing; Balloon Time mini) and AI adoption across operations .
What Went Wrong
- JV equity income pressure: Equity income fell $11.2M YoY to $32.1M, primarily from ClarkDietrich (down $8.3M YoY) amid steel price-driven margin compression and weather-related jobsite disruptions .
- Non-GAAP adjustments: $5.374M restructuring/other expense in Q3 (includes ~$4.536M Ragasco earnout fair value increase) weighed on GAAP results (GAAP diluted EPS $0.79 vs Adjusted $0.91) .
- Bankruptcy-related charge: ~$1M SG&A charge from a customer bankruptcy in Consumer, and lingering macro uncertainty for the consumer end-market .

Financial Results

Consolidated results by quarter (oldest → newest):

Metric	Q1 FY2025	Q2 FY2025	Q3 FY2025
Net Sales ($USD Millions)	$257.3	$274.0	$304.5
GAAP Diluted EPS – Continuing Ops ($)	$0.48	$0.56	$0.79
Adjusted EPS – Continuing Ops ($)	$0.50	$0.60	$0.91
Adjusted EBITDA ($USD Millions)	$48.4	$56.2	$73.8
Adjusted EBITDA Margin (%)	18.8%	20.5%	24.2%
Operating Cash Flow ($USD Millions)	$41.1	$49.1	$57.1
Capital Expenditure ($USD Millions)	$9.6	$15.2	$12.7

Q3 FY2025 vs prior-year quarter and vs estimates:

Metric	Q3 FY2024	Q3 FY2025 (Reported)	Q3 FY2025 Consensus*
Net Sales ($USD Millions)	$316.8	$304.5	$289.1*
GAAP Diluted EPS – Continuing Ops ($)	$0.44	$0.79	—
Adjusted EPS – Continuing Ops ($)	$0.80	$0.91	$0.706*

Values retrieved from S&P Global.*

Segment breakdown (Q3 FY2025 vs Q3 FY2024):

Segment	Net Sales ($USD Millions)	Adjusted EBITDA ($USD Millions)	Adjusted EBITDA Margin (%)
Consumer Products – Q3 FY2025	$139.7	$28.6	20.5%
Consumer Products – Q3 FY2024	$133.2	$25.6	19.3%
Building Products – Q3 FY2025	$164.8	$53.2	32.3%
Building Products – Q3 FY2024	$148.2	$53.1	35.8%

Key KPIs and JV contributions:

KPI	Q3 FY2024	Q3 FY2025
Volumes – Consumer Products (000s units)	19,010	20,761
Volumes – Building Products (000s units)	3,422	3,560
Equity Income – WAVE ($USD Millions)	$26.0	$25.0
Equity Income – ClarkDietrich ($USD Millions)	$17.8	$9.5
Equity Income – Other ($USD Millions)	$(0.6)	$(2.4)
Free Cash Flow ($USD Millions)	$40.1	$44.4

Notes: Q3 gross margin was discussed at ~29.3% on the call (620 bps YoY expansion), driven by SES deconsolidation, mix, and a non-repeating sourcing effect last year .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Quarterly	$0.17 (Dec 2024 declaration)	$0.17 (Mar 2025 declaration; payable Jun 27, 2025)	Maintained
Effective Tax Rate (ETR)	FY2025 (Quarterly estimate)	24.1% (Q2 estimated annual ETR)	24.4% (Q3 estimated annual ETR); Adjusted ETR 22.2%	Slightly higher vs Q2
Gross Margin Objective	Multi‑quarter	—	Aim to sustain consolidated gross margins in “high 20s” over time	New qualitative objective
Capex (Facility Modernization)	Next 6–8 quarters	—	~$50M over next 6–8 quarters; bulk in FY2026	New detail
Pricing Actions	Near term	—	Pending price increases announced on many products	New detail
Liquidity	Current	$500M undrawn revolver (Q2)	$500M undrawn revolver; no borrowings as of Feb 28, 2025	Maintained

No formal revenue/EPS guidance was provided; management commentary focused on margin sustainability, capex cadence, pricing actions, and capital allocation priorities .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2025)	Previous Mentions (Q2 FY2025)	Current Period (Q3 FY2025)	Trend
AI/technology initiatives	Not highlighted	Not highlighted	Embracing AI across facilities and back office; automation; facility modernization projects advancing	Emerging positive
Supply chain/inventory	Destocking impacted Building Products; macro/headwinds	Mild macro headwinds; strong focus on service	Better seasonality, supply aligned with POS; limited restocking tailwind; ~+$0.05 EPS weather benefit	Improving
Tariffs/macro	Rate recalibration; long-term positive view	Macro headwinds persist	Domestic footprint a competitive strength; announced price increases; generally net beneficiary from tariffs	Potential tailwind
Product performance	Consumer earnings up on margin; Building down on weak heating/cooking	Consumer margins improved; Ragasco accretion; WAVE up	New launches (Sure Sense IoT; Balloon Time mini); Walmart distribution for Halo	Strengthening
JV performance	ClarkDietrich down YoY; WAVE steady	ClarkDietrich down YoY; WAVE up YoY	ClarkDietrich down ~$8M YoY; WAVE steady; volatility in steel pricing could favor ClarkDietrich ahead	Mixed
Regulatory/legal	—	—	PHMSA unsafe cylinder advisory supports compliance narrative; WOR as U.S. producer	Supportive
R&D/ops excellence	—	—	80/20 project launched in water business to optimize portfolio/manufacturing	Positive

Management Commentary

“We had a great quarter and set Q3 records in production and shipments… We delivered year‑over‑year and sequential growth in both adjusted EBITDA and earnings per share.”
“Adjusted EBITDA margin in the quarter was 24% versus 21%… excluding SES, our revenues grew by over 8% in Q3.”
“We’re investing in automation… embracing AI across our facilities and in our back office… substantially completed one facility modernization project and are on track with the other.”
CFO: “Adjusted EBITDA for the quarter was $74 million… adjusted EBITDA margin over 24%… TTM adjusted EBITDA margin 21%... Net debt to trailing EBITDA ~0.25x.”
On tariffs: “We’re primarily a domestic manufacturer… we’ve announced pending price increases on many of our products… generally would be a net beneficiary from tariffs.”

Q&A Highlights

Tariffs and pricing: Domestic footprint and diversified sourcing provide flexibility; pending price increases to offset cost pressures; potential to benefit competitively from tariffs .
Margin sustainability: Consolidated gross margin at ~29.3% in Q3 (vs ~27% in Q2) aided by SES deconsolidation, positive mix; goal to sustain “high-20s” gross margins over time; seasonally strongest quarters are Q3/Q4 .
Consumer demand vs restocking: Orders tracking POS; limited restocking; weather added ~+$0.05 EPS; Q3 Consumer stronger YoY with careful retailer prep .
Free cash flow and capex: TTM FCF $144M with >100% conversion; ~$50M facility modernization spend over 6–8 quarters, bulk in FY2026; balanced capital allocation with bias to growth/M&A .
M&A pipeline: Healthy; focus on market-leading businesses accretive to margins/FCF; uncertainty not “chilling” but valuation/terms remain key .

Estimates Context

Q3 FY2025 S&P Global consensus vs actuals: Revenue $289.1M estimate vs $304.5M reported; Adjusted EPS $0.706 estimate vs $0.91 reported . Values retrieved from S&P Global.*
Implications: Beat on both top-line and adjusted EPS, despite JV equity income headwind (ClarkDietrich) and restructuring charges; estimate revisions likely to move higher on margin trajectory (mix, gross margin) and Consumer/Building product execution .

Key Takeaways for Investors

Core earnings power improving: sequential and YoY gains with consolidated adjusted EBITDA margin at 24.2% on mix and operational execution, while Consumer and Building Products margins strengthened .
JV headwinds manageable: ClarkDietrich’s YoY decline was offset by strong wholly owned performance; WAVE remains steady with data center growth opportunities .
Balance sheet flexibility: $223M cash, zero revolver draw and modest net leverage provide capacity for organic investments (automation/AI, modernization) and M&A .
Price and policy tailwinds: Pending price increases, domestic manufacturing edge, and compliance/regulatory focus around cylinders could support pricing and share gains .
Near-term trading setup: Positive estimate revision risk on EPS and margins; watch tariff headlines, steel price volatility (ClarkDietrich sensitivity), consumer macro, and seasonal Q4 execution .
Medium-term thesis: Sustain “high-20s” gross margins, execute modernization/AI, expand distribution (e.g., Walmart for Halo, Sherwin-Williams for Level 5), and pursue accretive M&A to raise consolidated margins/FCF .

Footnote: Consensus values retrieved from S&P Global.*

WORTHINGTON ENTERPRISES, INC. (WOR)·Q3 2025 Earnings Summary