Worthington Industries delivered a resilient QQ3 2025 performance, supported by strategic acquisitions and ongoing transformation initiatives. Consolidated net sales reached $304.5 million, down 3.9% YoY primarily due to the deconsolidation of the Sustainable Energy Solutions (SES) segment, which contributed $35 million in the prior-year period. Excluding SES, revenues grew over 8%, aided by the Ragasco acquisition and higher volumes. Gross margin expanded to 29.3% (up ~620 basis points YoY), with a GAAP operating margin of 6.85% and adjusted EBITDA margin above 24%. Net income was $39.7 million, and GAAP earnings per share (EPS) were $0.80, with adjusted ongoing earnings of $0.91 per share excluding restructuring charges and legacy items. Free cash flow stood at $44.4 million for the quarter, and trailing-12-month free cash flow reached $144 million, reflecting a 104% FCF conversion relative to adjusted net earnings.
Segment dynamics show Consumer Products delivering 5% net sales growth to $140 million and Building Products up 11% to $165 million, underpinned by share gains, favorable product mix, and the Ragasco contribution. However, equity earnings from joint ventures moderated YoY due to ClarkDietrich margin compression from lower steel prices, while WAVE remained steady in a flat market. Management underscored a continuing program of automation, AI adoption, and facility modernization, with early results from transformative initiatives such as 80/20 targeting in the Water segment and ongoing capacity to pursue accretive acquisitions. The company ended the quarter with a healthy balance sheet, reporting $223 million cash, $294 million long-term debt, and net debt of $71 million, with a leverage ratio of ~0.25x trailing EBITDA and an undrawn $500 million credit facility. Management signaled continued focus on M&A and a balanced capital strategy, including a quarterly dividend of $0.17 per share and a $6 million buyback of 150,000 shares.
Looking ahead, management highlighted that Q4 tends to be seasonally stronger and reiterated a target to sustain margins in the high-20s with an aspirational long-term gross margin near 30% and SG&A in the mid-60% range as a percentage of sales, supported by ongoing cost takeout and productivity programs. The company expects to fund capex (~$50 million in the next 6–8 quarters, most of which will occur in fiscal 2026) through cash flow as it advances modernization projects and seeks accretive bolt-on acquisitions. Overall, Worthington remains well-positioned in the Industrials space, with a diversified portfolio, strong cash generation, and a disciplined pursuit of growth through organic expansion and M&A.
Key Performance Indicators
Revenue
304.52M
QoQ: 11.12% | YoY:-3.86%
Gross Profit
89.25M
29.31% margin
QoQ: 20.51% | YoY:24.87%
Operating Income
20.87M
QoQ: 492.67% | YoY:229.20%
Net Income
39.66M
QoQ: 40.35% | YoY:80.29%
EPS
0.80
QoQ: 40.35% | YoY:77.78%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $304.5 million in QQ3 2025, down 3.86% YoY; QoQ up 11.12%. Excluding SES, organic revenue grew >8% YoY due to Ragasco and higher volumes (management commentary). YoY revenue decline largely reflects SES deconsolidation; Ragasco contributed positively to top line in Building Products.
Gross profit and margin: Gross profit $89.25 million; gross margin 29.3%, up from 23.0% prior year (YoY increase ~620 bps). Approximately 300 bps of the YoY margin expansion are attributed to SES deconsolidation, with the remainder driven by favorable mix and pricing actions across Building and Consumer segments.
Operating income and EBITDA: Operating income $20.87 million (operating margin ~6.85%); Adjusted EBITDA $74.0 million with an adjusted EBITDA margin above 24% (TTM EBITDA margin ~21%). Trailing-12-month EBITDA stands at $242 million.
Net income and earnings per share: Net income $39.66 million; GAAP EPS $0.80; diluted $0.79. Excluding items, adjusted EPS was $0.91 in the quarter, up from $0.80 in the prior year.
Cash flow and liquidity: Cash flow from operations $57.1 million; free cash flow $44.4 million; trailing-12-month free cash flow $144 million (FCF conversion ~104%). Cash at period-end $223 million; net debt $71 million; long-term funded debt $294 million; leverage ~0.25x trailing EBITDA. Dividend declared: $0.17 per share payable June 2025. Buybacks: 150k shares repurchased for $6 million.
Financial Highlights
Revenue performance and profitability highlights:
- Revenue: $304.5 million in QQ3 2025, down 3.86% YoY; QoQ up 11.12%. Excluding SES, organic revenue grew >8% YoY due to Ragasco and higher volumes (management commentary). YoY revenue decline largely reflects SES deconsolidation; Ragasco contributed positively to top line in Building Products.
- Gross profit and margin: Gross profit $89.25 million; gross margin 29.3%, up from 23.0% prior year (YoY increase ~620 bps). Approximately 300 bps of the YoY margin expansion are attributed to SES deconsolidation, with the remainder driven by favorable mix and pricing actions across Building and Consumer segments.
- Operating income and EBITDA: Operating income $20.87 million (operating margin ~6.85%); Adjusted EBITDA $74.0 million with an adjusted EBITDA margin above 24% (TTM EBITDA margin ~21%). Trailing-12-month EBITDA stands at $242 million.
- Net income and earnings per share: Net income $39.66 million; GAAP EPS $0.80; diluted $0.79. Excluding items, adjusted EPS was $0.91 in the quarter, up from $0.80 in the prior year.
- Cash flow and liquidity: Cash flow from operations $57.1 million; free cash flow $44.4 million; trailing-12-month free cash flow $144 million (FCF conversion ~104%). Cash at period-end $223 million; net debt $71 million; long-term funded debt $294 million; leverage ~0.25x trailing EBITDA. Dividend declared: $0.17 per share payable June 2025. Buybacks: 150k shares repurchased for $6 million.
- Capital allocation and JV contributions: Joint ventures contributed $35 million in dividends in the quarter with a cash conversion rate of 110% on equity income. WAVE equity earnings were $25 million; ClarkDietrich contributed $9 million but faced margin pressures from steel price declines.
- Segment highlights: Consumer Products net sales $140 million, up 5% YoY; Building Products net sales $165 million, up 11% YoY; margin progression in wholly-owned segments (Heating, Cooling, Water) to 20.5% EBITDA margin versus 19.3% prior year; Governing dynamics include mix shifts, volume growth, and ongoing integration of acquired assets (Ragasco).
- Cash conversion and working capital: DSO ~61 days; days inventory ~69 days; payables ~35 days; CCC ~95 days; 80/20 initiative launched in Water stream to improve prioritization and margins.
- Key driver commentary: Management cited automation, AI deployment, and ongoing modernization as catalysts for sustainable margin progression and productive capacity expansion.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
304.52M
-3.86%
11.12%
Gross Profit
89.25M
24.87%
20.51%
Operating Income
20.87M
229.20%
492.67%
Net Income
39.66M
80.29%
40.35%
EPS
0.80
77.78%
40.35%
Key Financial Ratios
currentRatio
3.51
grossProfitMargin
29.3%
operatingProfitMargin
6.85%
netProfitMargin
13%
returnOnAssets
2.36%
returnOnEquity
4.23%
debtEquityRatio
0.34
operatingCashFlowPerShare
$1.16
freeCashFlowPerShare
$0.9
dividendPayoutRatio
21.2%
priceToBookRatio
2.21
priceEarningsRatio
13.07
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the QQ3 2025 earnings call, grouped by themes:
- Strategy and growth framework:
- Joe Hayek emphasized the plan to accelerate profitable growth through innovation, transformation, and M&A, stating, 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. This motif framed the quarter’s performance and the outlook: the company is betting on a balanced mix of product innovation and acquisitions to extend market reach.
- Product launches and market penetration:
- SureSense and Balloon Time Mini were highlighted as evidence of the company’s product-development cadence and channel expansion (SureSense IoT propane-level sensing; Balloon Time Mini at Target). Quote: "During Q3, our Building Products team launched our latest IoT-enabled product SureSense, a wireless propane-level sensing technology... Balloon Time Mini helium tank, which is now available at Target stores nationwide."
- Margin drivers and mix:
- Colin Souza highlighted strong gross margin expansion (29.3%), noting, Gross profit increased significantly to $89 million, up from $73 million in the prior year quarter, reflecting an expansion in gross margin of approximately 620 basis points to 29.3%. This was aided by a positive mix and the deconsolidation of SES which contributed roughly 300 bps of margin improvement YoY.
- Electricals, supply chain and tariffs:
- Joe addressed tariffs and the company’s domestic manufacturing base as a strategic advantage, noting, We’re primarily domestic manufacturer and that is a competitive strength for us... we understand the potential impacts on us of various trade policies... in most scenarios we feel the approach is the right one. These notes underscore the company’s focus on cost management, supplier offsets, and price realization as tariff dynamics evolve.
- Joint ventures and market volatility:
- Management acknowledged that ClarkDietrich margin compression reflected steel price declines, while WAVE benefited from data-center exposure and ongoing JV contributions. Quote: WAVE continued to execute in a flat market, contributing $25 million in equity earnings, down slightly from $26 million in the prior year quarter. ClarkDietrich’s results were negatively impacted by the decline in steel prices, which led to margin compression, but remains a solid contributor with a nationwide footprint.
- Capital allocation and balance sheet:
- The company emphasized prudent capital allocation and a strong liquidity position, citing a $500 million undrawn credit facility and a low net debt to EBITDA ratio (~0.25x). The board approved a $0.17 quarterly dividend and the company repurchased 150k shares for $6 million. Management also pointed to ongoing modernization investments (~$50 million capex in 26Q1–Q3) and a robust M&A pipeline as part of its growth strategy.
"We had a great quarter and set Q3 records in production and shipments."
— Joe Hayek, President & CEO
"Gross profit increased significantly to $89 million, up from $73 million in the prior year quarter, reflecting an expansion in gross margin of approximately 620 basis points to 29.3%."
— Colin Souza, Chief Financial Officer
Forward Guidance
Outlook and assessment:
- Near-term trajectory: Management indicated Q4 tends to be seasonally stronger and reiterated confidence in sustaining gross margins in the high-20s, aided by ongoing cost initiatives, favorable product mix, and volume gains in key value streams. While tariffs and macro uncertainty persist, the company believes its domestic manufacturing base and diversified end-markets mitigate downside risk and support pricing opportunities where appropriate.
- Margin targets and profitability: Longer-term guidance aims to push gross margins toward 30%+, with SG&A as a percentage of sales in the mid-60% range (stability of SG&A on a percent-of-sales basis, with ongoing efficiency programs). The company also aims to improve operating leverage as volumes recover and automation initiatives take hold.
- Capital allocation and growth optionality: Capex around $50 million is anticipated over the next 6–8 quarters, predominantly in fiscal 2026, driven by facility modernization. The M&A pipeline remains healthy, with management signaling willingness to pursue accretive acquisitions that can expand margins, free cash flow, and competitive positioning.
- Key factors for investors to monitor: (1) Realization of margin expansion from ongoing WBS-driven improvements and 80/20 program, (2) stability of JVs’ contributions (ClarkDietrich, WAVE) amid steel-price volatility, (3) progress on Ragasco integration and the pace of payback from the 80/20 initiative in the Water segment, (4) efficacy of price actions in response to tariff dynamics, (5) execution of the M&A pipeline and any transformative bolt-on deals, (6) sustainability of free cash flow generation and the ability to maintain dividend and buyback cadence given capex needs and potential debt financing considerations.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WOR Focus
29.31%
6.85%
4.23%
13.07%
CRS
27.60%
19.00%
5.35%
23.83%
RYI
17.90%
0.47%
-0.79%
-24.70%
MLI
27.60%
20.70%
6.30%
11.90%
ATI
21.40%
13.50%
4.62%
26.03%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Positive long-term investment thesis supported by a diversified, resilient business model, disciplined capital allocation, and ongoing margin expansion initiatives. The QQ3 2025 results demonstrate solid top-line recovery excluding SES, meaningful gross-margin expansion, and robust free-cash-flow generation that funds both shareholder returns and strategic investments. The key catalysts are: (1) realization of higher-margin mix from Building and Consumer segments, (2) continued margin progression driven by WBS, 80/20, and automation, (3) accretive M&A that enhances scale and pricing power, and (4) sustained FCF generation to support minimal leverage and continued buybacks. Risks to monitor include steel-price volatility impacting JV earnings, tariff dynamics affecting input costs and pricing, and the pace at which consumer demand normalizes. Overall, WOR trades around a mid-to-high single-digit multiple on earnings with a strong balance sheet and a clear path to sustained profitability improvements through 2026 and beyond.
Key Investment Factors
Growth Potential
Diversified industrials portfolio with elevated growth through strategic acquisitions (Ragasco, potential future bolt-ons), continued expansion of consumer and building product lines (SureSense, Balloon Time Mini), and scalable JV contributions (WAVE, ClarkDietrich). The 80/20 optimization in Water and the broader automation program provide a path to higher margins and improved operating leverage over time.
Profitability Risk
(1) Steel price volatility affecting JV earnings (ClarkDietrich). (2) Macro cyclicality and consumer spending uncertainty impacting Building and Consumer segments. (3) Tariff policy and trade policy developments creating pricing and sourcing pressures. (4) Execution risk in integrating acquisitions and achieving anticipated synergies (Ragasco, Level5, HALO-related product expansions). (5) Dependency on ongoing capex to sustain modernization and productivity gains.
Financial Position
Strong liquidity and conservative leverage: $223M cash, $294M long-term debt, net debt of $71M, trailing EBITDA ~ $242M, net debt/EBITDA ~0.25x, undrawn revolver of $500M. FCF generation robust ($44M in the quarter; $144M TTM), with dividend and buyback programs supporting shareholder value. Capex cadence aligned with modernization and growth opportunities.
SWOT Analysis
Strengths
Diversified, value-added product portfolio across Steel Processing, Consumer, Building, and Sustainable Energy segments
Strong cash flow generation and very low leverage (net debt to trailing EBITDA ~0.25x)
Robust capital returns: dividend ($0.17/sh) and share repurchases; long undrawn credit facility
JV network delivering steady dividends and earnings (WAVE, ClarkDietrich)
Strategic M&A pipeline and proven Worthington Business System (WBS) for transformation and efficiency
Weaknesses
Steep exposure to cyclical end-markets (construction, manufacturing)
JV equity earnings sensitivity to steel prices (ClarkDietrich margin pressure)
Early-stage 80/20 initiatives may take time to fully materialize across all segments
Some one-time items (restructuring charges) can obscure ongoing comparability
Opportunities
Ragasco integration driving volume and mix gains
80/20 optimization in Water and other businesses to lift margins
AI and automation to reduce costs and improve throughput
Data center and commercial construction demand (JV expansion)
Healthy M&A pipeline with potential accretive bolt-ons
Threats
Steel price volatility and macroeconomic softness impacting construction and industrial demand
Tariff and trade-policy developments creating cost pressures or demand shifts
Customer bankruptcies or supply-chain disruptions (historical reference with Party City)
Regulatory changes affecting manufacturing costs or environmental compliance