Exchange: NYSE | Sector: Industrials | Industry: Manufacturing Metal Fabrication
Q2 2025
Published: Jan 10, 2025
Earnings Highlights
Revenue of $274.05M down 74.8% year-over-year
EPS of $0.56 increased by 16.3% from previous year
Gross margin of 27.0%
Net income of 28.26M
"we're thinking more like a startup and we're pursuing initiatives to optimize our margins as we grow Worthington." - Joe Hayek
Worthington Industries Inc. (WOR) QQ2 2025 Results â Margin Expansion Driven by Portfolio Mix Shifts, Strategic Acquisitions, and Operational Leverage
Executive Summary
Worthington Industries reported a solid QQ2 2025 performance with a notable step-up in gross margins and sustained cash generation, underscoring the resilience of its diversified industrial portfolio even as reported revenue declined year-over-year. Consolidated net sales were $274 million, down 8.1% YoY largely due to the deconsolidation of the Sustainable Energy Solutions (SES) segment, which contributed $28 million in the prior-year quarter. Despite the revenue headwind, gross profit rose to $74.0 million and gross margin expanded to 27.0%, a roughly 580-basis-point improvement driven by the elimination of SES margin drag, the inclusion of the Ragasco acquisition, and higher-margin product mix. Adjusted EBITDA stood at $56 million, with margins tracking to 20.1% on a trailing-twelve-month basis. The quarter also featured a $3 million pre-tax restructuring charge, primarily tied to an executive retirement, which partially offset a $0.04 per share drag; excluding these items, adjusted earnings per share were $0.60, up from $0.57 in Q2 2024. Free cash flow reached $34 million, supported by $49 million in operating cash flow and a modest capex program (~$15 million). The balance sheet remains robust: liquidity is ample (undrawn $500 million credit facility), net debt stood at $102 million, and cash balances were $194 million at quarter-end, producing a net debt to trailing adjusted EBITDA ratio of <0.5x. Management articulated a clearly defined path toward margin optimization and growth, including ongoing integration of Ragasco, execution of the Worthington Business System, and disciplined capital allocation toward growth (and selective buybacks to offset dilution). Looking forward, executives stressed a
Key Performance Indicators
Revenue
274.05M
QoQ: 6.51% | YoY:-74.79%
Gross Profit
74.06M
27.02% margin
QoQ: 18.50% | YoY:-40.14%
Operating Income
3.52M
QoQ: 174.93% | YoY:159.36%
Net Income
28.26M
QoQ: 16.52% | YoY:16.29%
EPS
0.57
QoQ: 16.33% | YoY:16.33%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $274.0 million in QQ2 2025, down 8.1% YoY from $298.0 million, driven by deconsolidation of SES in the prior year. QoQ performance not disclosed in quarterly figures; four-quarter data implies a material YoY decline but improving sequential dynamics as SES effects wane.
Gross Profit: $74.1 million, up 18.5% QoQ and up from $63.0 million YoY; gross margin expanded to 27.0% (vs. ~21.0% prior-year period). The YoY margin drag from SES and a prior-quarter recall was cited as a key comparator in communications.
EBITDA and margins: Adjusted EBITDA of $56.0 million; EBITDA margin implied by headline metric is ~20.1% on a trailing basis. Q2 sequential improvement from Q1 2025 (approx. +17% in EBITDA) reflects operating leverage and higher-margin mix.
Net Income and EPS: GAAP net income of $28.3 million; diluted EPS $0.56; GAAP EPS from continuing operations $0.56, versus $0.36 in the prior-year quarter. Excluding unusual items (e.g., $3 million pre-tax restructuring charge and prior-year adjustments), adjusted EPS was $0.60 vs $0.57 a year ago.
Cash flow: Operating cash flow of $49.1 million; free cash flow of $33.9 million. Capex net of $15.2 million; dividends of $9.0 million; share repurchases of $8.0 million to acquire 200k shares.
Financial Highlights
## Revenue and profitability
- Revenue: $274.0 million in QQ2 2025, down 8.1% YoY from $298.0 million, driven by deconsolidation of SES in the prior year. QoQ performance not disclosed in quarterly figures; four-quarter data implies a material YoY decline but improving sequential dynamics as SES effects wane.
- Gross Profit: $74.1 million, up 18.5% QoQ and up from $63.0 million YoY; gross margin expanded to 27.0% (vs. ~21.0% prior-year period). The YoY margin drag from SES and a prior-quarter recall was cited as a key comparator in communications.
- EBITDA and margins: Adjusted EBITDA of $56.0 million; EBITDA margin implied by headline metric is ~20.1% on a trailing basis. Q2 sequential improvement from Q1 2025 (approx. +17% in EBITDA) reflects operating leverage and higher-margin mix.
- Net Income and EPS: GAAP net income of $28.3 million; diluted EPS $0.56; GAAP EPS from continuing operations $0.56, versus $0.36 in the prior-year quarter. Excluding unusual items (e.g., $3 million pre-tax restructuring charge and prior-year adjustments), adjusted EPS was $0.60 vs $0.57 a year ago.
- Cash flow: Operating cash flow of $49.1 million; free cash flow of $33.9 million. Capex net of $15.2 million; dividends of $9.0 million; share repurchases of $8.0 million to acquire 200k shares.
- Balance sheet and liquidity: Cash at $194 million; long-term debt $296 million; net debt $102 million; undrawn revolver of $500 million; leverage <0.5x; current ratio 3.56, quick ratio 2.50.
- Key segment highlights: Consumer products net sales $117 million (-2% YoY) with EBITDA $15 million (13.3% margin); Building products net sales $157 million (+4% YoY) helped by the Ragasco contribution (~$18 million) and elevated margins (30% EBITDA margin). WAVE equity earnings of $25 million (up from $21 million YoY). ClarkDietrich and other JV contributions remained constructive. The sustainable energy JV (SES) is now deconsolidated; management expects SES to be roughly flat to modestly accretive or neutral to margins going forward.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
274.05M
-74.79%
6.51%
Gross Profit
74.06M
-40.14%
18.50%
Operating Income
3.52M
159.36%
174.93%
Net Income
28.26M
16.29%
16.52%
EPS
0.57
16.33%
16.33%
Key Financial Ratios
currentRatio
3.56
grossProfitMargin
27%
operatingProfitMargin
1.28%
netProfitMargin
10.3%
returnOnAssets
1.71%
returnOnEquity
3.1%
debtEquityRatio
0.35
operatingCashFlowPerShare
$0.99
freeCashFlowPerShare
$1.19
dividendPayoutRatio
31.7%
priceToBookRatio
2.22
priceEarningsRatio
17.91
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the QQ2 2025 earnings call:
- Strategy and growth posture: Joe Hayek emphasized a startup-like mindset to accelerate margins and growth within a 70-year-old company, stating, "we're thinking more like a startup and we're pursuing initiatives to optimize our margins as we grow Worthington." This underpins ongoing margin optimization, capex discipline, and selective M&A.
- Innovation and partnerships: The company highlighted the collaboration with 3M on the PowerCore engineered cylinder and the HALO Versa pizza oven, with product launches planned for 2025. Sustainability investments were underscored by Amtrol-Alfa's green propane cylinder initiative using ArcelorMittal steel with a 73% lower carbon footprint, aligning with ESG-driven value creation.
- Acquisitions and portfolio traction: Management called out the successful integration of Ragasco in Building Products, expanding the European LPG solutions platform, and noted ongoing strength in WAVE equity earnings ("WAVE continued its strong performance, delivering $25 million in equity earnings for the quarter, up from $21 million in the prior year quarter"). They also highlighted the West Africa Clean Cooking Fund and ongoing portfolio optimization across segments.
- Financial discipline and capital allocation: Management reaffirmed a balanced approach to capital allocation, prioritizing growth and selective buybacks to offset dilution, with a framework to pursue acquisitions that enhance margins and free cash flow. The board declared a quarterly dividend of $0.17 per share.
- Market backdrop and guidance stance: The CEO characterized macro headwinds as "mild but persistent" but expressed confidence in sustained margin expansion and cash generation, aided by a diversified end-market mix and resilient operations. The team signaled M&A as a potential catalyst in 2025 given a more active environment for dealmaking.
we're thinking more like a startup and we're pursuing initiatives to optimize our margins as we grow Worthington.
â Joe Hayek
WAVE continued its strong performance, delivering $25 million in equity earnings for the quarter, up from $21 million in the prior year quarter.
â Joe Hayek
Forward Guidance
Management narrative for the next 12-24 months centers on sustaining 27% gross margin, further reducing SG&A as a percentage of sales, and leveraging a renewed M&A environment to accelerate growth and margin expansion. The company intends to continue leveraging the Worthington Business System to optimize operations, while evaluating acquisitions that complement existing platforms (notably in Building Products and consumer tools segments). They expect SES to remain roughly flat to modestly accretive in the near term as integration progresses. In terms of targets, leadership indicated a bias toward growth via organic margin expansion and strategic acquisitions, with a long-run top-line objective of growth that may be supported by a 6-8% growth trajectory in favorable cycles, though current market conditions imply a non-linear path with potential catch-up periods.
Key factors investors should monitor:
- End-market demand trends in consumer, building products, and infrastructure-related sectors; potential upside from government stimulus and infrastructure spend.
- Steel and input costs, given the deflationary backdrop and ongoing price-cost dynamics; management expects price realization to be modest and cost-control to be a primary lever.
- M&A activity and integration risk, especially in European LPG and consumer products segments; valuation discipline and capital allocation framework will drive deployment of the $5-30 million pace of run-rate Capex and potential additional buybacks.
- SG&A evolution and margin leverage, including the impact of the Ragasco integration and WAVE JV performance in offsetting macro headwinds.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WOR Focus
27.02%
1.28%
3.10%
17.91%
CRS
26.20%
17.60%
4.90%
25.33%
RYI
17.80%
1.57%
1.13%
16.64%
MLI
27.30%
21.00%
6.29%
9.88%
ATI
20.80%
12.60%
6.04%
20.60%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall investment thesis remains constructive for WOR due to: (1) substantial margin upside from mix shifts and ongoing cost discipline, (2) durable cash generation with strong liquidity and a low leverage profile, (3) a strategic growth plan anchored by Ragasco integration, WAVE/JVs, and sustainable energy initiatives, and (4) a potentially more active M&A environment in 2025 providing optionality to accelerate top-line growth and margin expansion. Risks include macro demand softness, integration challenges, and commodity price volatility. The stock offers attractive upside if WOR can sustain 27% gross margins, maintain efficient SG&A leverage, and execute on accretive acquisitions while deploying capital to offset dilution and fund growth.
Key Investment Factors
Growth Potential
- Margin expansion through ongoing mix-shift, higher-margin product sales, and disciplined SG&A management; potential upside from M&A in high-margin platforms (Building Products, Consumer Tools).
- Accretive acquisitions (e.g., Ragasco) that extend European LPG solutions and strengthen value proposition across end-markets.
- Strong cash flow generation and deleveraging headroom (Net debt to EBITDA <0.5x) enable ongoing buybacks and selective capex for growth.
Profitability Risk
- Macro and construction cycle exposure; persistent headwinds in large-ticket equipment and residential building spend.
- Commodity price volatility (steel) and potential tariff/trade policy shifts affecting cost structure and competitive positioning.
- Integration risk with newly acquired platforms (Ragasco) and previously deconsolidated SES; execution risk on WAVE and ClarkDietrich synergy realization.
- Elevated competition in tools and consumer outdoor living segments; potential pricing pressure in a deflationary input environment.
Financial Position
- Robust liquidity: $194 million cash, $500 million undrawn revolver; net debt $102 million; leverage <0.5x; current ratio 3.56; quick ratio 2.50.
- Trailing Adjusted EBITDA of $235 million and margin around 20.1% indicate solid cash generation and financial flexibility to fund growth and capital returns.
- Capex discipline (~$25â$30 million annualized) supports free cash flow growth and margin expansion without compromising core capabilities.
SWOT Analysis
Strengths
Diversified end-market exposure across Consumer Products, Building Products, and LPG/Sustainable Energy segments, reducing single-cycle risk.
Strong balance sheet with ample liquidity, net debt well below historical levels, and undrawn $500 million credit facility.
Margin resilience driven by higher-margin product mix, successful integration of Ragasco, and JVs such as WAVE delivering steady equity earnings.