Investor Day 2026 - WORTHINGTON ENTERPRISES INC

Explicit Guidance:

• Revenue Growth: Maintains long-term sales growth target of 6–8% annually (driven by ~9% CAGR organic growth and disciplined M&A).
• EBITDA Margins: Raised consolidated adjusted EBITDA margin target from 24% to 25% (current ~21%); expects margin expansion over a 3–5 year horizon.
  • Building Performance Solutions (BPS): Targets segment margin of 15%.
  • Trade and Specialty Solutions (TSS): Targets segment margin of 21%.
  • Gross Margin: Targets 30% (current ~27.2%).
  • SG&A: Targets 20% (current ~21.2%).
• Free Cash Flow (FCF): Establishes new long-term FCF conversion target of 100% or better (measured against adjusted net earnings; current TTM is 116%).
• Return on Assets: Introduces new long-term Adjusted Return on Assets (ROA) target of 30% (current TTM is 26.8%).
• Capital Expenditures: Expects run-rate CapEx to normalize to ~3% of sales once modernization spending (currently elevated) winds down; recent CapEx was 3.9% of sales.
• Leverage: Maintains net debt level of 0.8x trailing 12-month adjusted EBITDA.

Business-Segment Outlook:

• Building Performance Solutions (BPS):
  • Data Centers: Anticipates market expansion 10x the legacy ASME tank market over the next several years; pipeline value for data center tanks has more than doubled in the past six months.
  • Growth Trajectory: Sequential revenue growth expected for ASME data center tanks throughout Fiscal 2027 (following $13M Q1 2027 sales); no material volume growth required for long-term targets beyond current organic/inorganic plans.
  • Margin Expansion: Path to 15% segment margin driven by operating leverage, product mix, and working capital improvements.
• Trade and Specialty Solutions (TSS):
  • Innovation Rollouts: "Balloon Time Mini" and "FireShot" torch launches; "FireShot" availability in ~5,000 stores by Spring 2027.
  • Capacity: New fill building at Chilton, Wisconsin, scheduled to be operational by Spring 2027.
  • Margin Progress: Long-term target of 21% segment margin (currently 18.7%); driven by volume expansion and category growth rather than just price/mix.
• Joint Ventures (Wave & Clark-Dietrich):
  • Wave: Continued organic growth dependent on macro conditions; expansion into structural grid and advanced manufacturing; high-margin asset-light profile maintained.
  • Clark-Dietrich: Modeling assumes steady, nominal growth from current earnings levels rather than a massive recovery step-up; upside anticipated if commercial construction cycle improves; data centers expected to remain a meaningful, faster-growing portion of business (albeit lower margin profile).

Market and Competitive Outlook:

• Demand Dynamics: Anticipates continued reliance on non-discretionary repair, replacement, and maintenance work (57% of consolidated EBITDA) as a buffer against new construction volatility.
• Category Growth: Belief that professional trades (TSS) will see category expansion with "FireShot" (buyers adding to existing torches) and "Balloon Time Mini" (expanding into drug, office, and grocery channels).
• Competition: Leverages domestic manufacturing footprint to compete on supply chain responsiveness and engineering expertise rather than price alone; expects to capture market share in the 10x growing liquid cooling sector due to technical barriers to entry.

Macro / Industry Outlook:

• Construction: Acknowledges sustained headwinds in commercial construction (ABI in contraction, elevated rates) but views demand as resilient due to the installed base and repair needs; believes long-term goals do not depend on a broad macro recovery.
• Policy & Election: States it is "too early" to predict tangible impacts from the election; anticipates no meaningful long-term change to market drivers or strategy; notes potential for state-level policy shifts (e.g., Texas) to aid data center permitting/construction through 2027–2028.
• Inflation & Costs: Expects inflationary pressures (steel, diesel, freight, labor) to persist; plans to manage via supply chain efficiency, price actions, and shared increases with partners.
• Reshoring: Highlights that >80% of revenue is sourced/manufactured/sold domestically as a structural advantage for responsiveness and supply chain reliability.

Strategic Initiatives:

• Innovation Model: Shifting toward asset-light production via outsourced partners for new innovations (e.g., data center tanks) to accelerate time-to-market; open to insourcing only if demand justifies it long-term.
• Transformation: Expanding the "80-20" process (focusing on high-value customers/products) to additional value streams beyond the water business; leveraging AI to free up ~25,000 hours annually (FY2026) for higher-value tasks.
• Automation & Modernization: Continuing facility modernization (e.g., Chilton fill building) to reduce inventory utilization (-13%) and repair costs (-24%); automating back-office functions.
• M&A: Discipline to acquire market-leading niche businesses; no acquisitions planned solely to meet growth targets; every deal must demonstrate a path to value creation via the Worthington Business System (WBS).

Risks and Headwinds to Outlook:

• Construction Cyclicality: Clark-Dietrich earnings remain exposed to new commercial construction cycles (office/retail weakness); recovery is an upside case, not a baseline requirement for the 25% margin target.
• Project Timing: In data centers, quote pipeline does not guarantee order conversion; project timing remains variable.
• Macro Uncertainty: Inflationary input costs and potential shifts in government policy regarding data center construction/powering.
• Execution Risk: Realizing the 25% margin target relies on successfully executing operating improvements (80-20, automation, pricing) without reliance on macro tailwinds.

Management Tone on the Future:

• Confidence Level: High confidence in "proven strength and greater ambition"; management states they are "very excited" and "super excited" about the future, particularly regarding data center liquid cooling.
• Strategic Certainty: Emphasizes a "virtuous cycle" where better businesses generate cash to fund reinvestment; management views their strategy as "not complicated" and repeatable.
• Balance Sheet: Confident in financial flexibility to pursue opportunities without compromising investment-grade credit status; net debt of 0.8x and $550M liquidity provides runway.
• Hedges: Explicitly states that long-term targets are built on "actions we can control" (productivity, innovation) rather than assumptions of market recovery; acknowledges the "20% non-leader" portfolio offers "offense" opportunities to grow.

Miscellaneous:

• Share Capital: Maintained quarterly dividend (raised June); repurchases are opportunistic based on risk-adjusted returns; no immediate plan to split the company (TSS and BPS viewed as stronger together).
• Joint Venture Dividends: Historically received >$500M (Wave) and >$275M (Clark-Dietrich) in dividends since FY2022; expects continued cash distributions from JVs to support reinvestment.