Worthington Enterprises Signals Growth Despite Margin Pressure

Worthington Industries, Inc. ((WOR)) has held its Q2 earnings call. Read on for the main highlights of the call.

Worthington Enterprises’ latest earnings call painted a generally upbeat picture, with management emphasizing strong year-over-year growth in revenue and adjusted EBITDA, underpinned by recent strategic acquisitions and ongoing innovation. While profitability was pressured by integration issues and a tough backdrop for joint venture ClarkDietrich, executives underscored the company’s robust balance sheet, solid cash generation, and confidence in its long-term growth trajectory.

Revenue and Earnings Growth Regain Momentum

Worthington delivered a more than 19% increase in revenue for the quarter compared with the same period last year, even after a strong prior-year base. Stripping out the recently acquired Elgen business, organic revenue still rose a healthy 10%, signaling broad-based demand across core end markets. Adjusted EBITDA climbed 8% year over year, reflecting both higher sales and operational efficiencies, although the gains were partially offset by margin pressure elsewhere in the portfolio.

Strategic Acquisitions Bolster Growth Platform

Management highlighted acquisitions as a key driver of the quarter and a central part of its long-term strategy. The company announced the planned $205 million purchase of LSI, which is expected to strengthen Worthington’s position in engineered building systems. The deal is projected to be accretive to adjusted EBITDA margins, adjusted EPS, and free cash flow, signaling management’s confidence that the acquisition will not only scale revenue but also enhance the quality of earnings and cash generation.

Innovation and Market Expansion Drive New Opportunities

Innovation and product development remain central themes for Worthington. The company cited new product launches in data center cooling solutions—an area benefiting from secular growth in digital infrastructure—as well as refurbishment offerings for large-format propane tanks. These initiatives extend Worthington’s reach into higher-value niches and recurring service opportunities. The company also continued to broaden its retail footprint, adding further placements with major customers such as Costco, which should support volume growth and brand visibility.

Cash Flow Strength and Prudent Balance Sheet Management

Worthington underscored its strong cash generation and conservative balance sheet as key competitive advantages. Operating cash flow reached $52 million for the quarter, with free cash flow of $39 million, providing ample flexibility for reinvestment and shareholder returns. The company’s net debt to trailing adjusted EBITDA ratio stands at just 0.4x, reflecting low leverage and substantial financial capacity to fund acquisitions, capital projects, and dividends without stretching the balance sheet.

Corporate Recognition Supports Talent and ESG Narrative

Beyond financial metrics, Worthington leaned into its reputation as an attractive employer and responsible corporate citizen. The company was named one of the Best Places to Work in IT for 2026 by Computerworld, highlighting its ability to attract and retain key digital and technology talent. It was also recognized by Newsweek as one of America’s Most Responsible Companies, which supports the company’s ESG narrative and may enhance its appeal to both employees and long-term investors seeking sustainability-focused businesses.

Gross Margin Compression from Integration and Growth Investments

Not all trends were positive. Management acknowledged that gross margins slipped to 25.8% from 27% a year ago, as integration challenges at newly acquired Elgen weighed on profitability. In addition, growth investments—such as ramp-up costs for new products and capacity—pressured near-term margins. While executives framed these issues as transitory and linked to building a stronger platform, they represent a key operational execution area investors will watch in coming quarters.

ClarkDietrich Remains a Headwind

The ClarkDietrich joint venture was another soft spot. Equity earnings from the business dropped sharply, from $10 million in the prior year to $4 million this quarter, reflecting a challenging market environment in its core construction-related segments. This decline also contributed to the overall compression in earnings, even as the rest of the portfolio performed well. Management reiterated its long-term confidence in ClarkDietrich but acknowledged that near-term results are likely to remain pressured by cyclical conditions.

Tariff Pressures and Mitigation Strategies

Tariffs continued to present a headwind, influencing input costs and complicating pricing. Worthington discussed mitigation efforts including tighter supplier negotiations, more rigorous cost controls, and targeted pricing actions to protect margins where possible. While these measures helped reduce the impact, tariff-related volatility remains a risk factor, particularly in parts of the portfolio exposed to global supply chains and commodity steel.

Forward Outlook: Growth, Integration, and Capital Discipline

Looking ahead, Worthington’s guidance and commentary signal cautious optimism. The company expects to build on its more than 19% revenue growth and 8% adjusted EBITDA increase, aided by both organic initiatives and contributions from acquisitions such as Elgen and the planned LSI deal. Over the last 12 months, adjusted EBITDA reached $284 million, even after a $15 million drag from weaker ClarkDietrich equity earnings, and adjusted EBITDA margins improved to nearly 23% from 20% a year earlier. Management emphasized continued focus on integrating acquisitions to restore and expand margins, while keeping SG&A lean—already reduced by 320 basis points as a share of sales. Capital allocation will remain disciplined, with measured capital expenditures, ongoing dividends, and a strong free cash flow conversion rate of 96% relative to adjusted net earnings, all supported by the company’s low leverage and ample balance sheet flexibility.

Overall, Worthington Enterprises’ earnings call reflected a company in solid health, using strategic acquisitions and innovation to drive growth while navigating integration challenges, margin pressure, and cyclical softness at ClarkDietrich. With strong cash flow, a conservative balance sheet, and a pipeline of growth initiatives, the company appears well-positioned for long-term value creation, though investors will be monitoring execution on integration and margin recovery in the quarters ahead.