WORTHINGTON ENTERPRISES, INC. (WOR)

Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, all Note references contained in this MD&A refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. All amounts are presented in millions except common share and per common share amounts.

Introduction

The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position should be read in conjunction with our consolidated financial statements and notes thereto included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. The 2025 Form 10-K includes additional information about our business, operations and consolidated financial position and should be read in conjunction with this Form 10-Q. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management.

Business Overview

We are a market-leading designer and manufacturer of innovative products and services, including manufactured metal products, organized around attractive end markets under two separate and distinct reportable operating segments: Building Products and Consumer Products. Our primary goal is to create value for our shareholders. Built on the successful foundation of the Worthington Business System, we apply a disciplined approach to capital deployment and seek to grow earnings by optimizing our operations and supply chain, developing and commercializing innovative products and applications, and pursuing strategic investments and acquisitions.

Our Building Products business is a market-leading provider of pressurized containment solutions, providing critical components in essential end markets, such as heating, cooking, cooling and water, HVAC systems and components, metal roofing clips and components and, through our unconsolidated joint ventures, WAVE and ClarkDietrich, ceiling suspension systems and light gauge metal framing products. Our pressurized containment solutions include refrigerant and LPG cylinders, well water and expansion tanks, and other specialty products which are generally sold to gas producers and distributors. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential, and automotive air conditioning and refrigeration systems. LPG cylinders hold fuel for residential and light commercial heating systems, barbeque grills and recreational vehicle equipment, industrial forklifts and commercial/residential cooking (the latter, generally outside North America). Well water tanks and expansion tanks are used primarily in the residential market with certain products also sold to commercial markets. Specialty products include a variety of fire suppression tanks, chemical tanks, and foam and adhesive tanks.

Our Consumer Products business has a diverse product offering in the tools, outdoor living and celebrations categories, including propane-filled cylinders for torches and related accessories, handheld torches, specialized hand tools and instruments, drywall tools, propane-filled camping cylinders, helium-filled balloon kits, and accessories and gas griddles and pizza ovens sold primarily to mass merchandisers, retailers and distributors. Sales to one customer in Consumer Products accounted for 12.1% of our consolidated net sales in the third quarter of fiscal 2026.

Activity outside of our two reportable operating segments is presented within Other and Unallocated Corporate, as described further below.

Other includes our share of the equity earnings of two of our unconsolidated joint ventures, SES and Workhorse and the related investments in these businesses.

Unallocated Corporate includes certain assets and liabilities (e.g., cash and cash equivalents and public debt) held at the corporate level as well as general corporate expenses that are not directly attributable to our business operations and are administrative in nature, such as public company and other governance-related costs that benefit the organization as a whole, have not been allocated to our operating segments and are held at the corporate level.

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Acquisitions and Divestitures

Fiscal 2026

On January 16, 2026, we acquired LSI, one of the largest U.S. manufacturers of standing-seam metal roof clips and retrofit components in the commercial roof market. The purchase price was $206.1, net of cash acquired, including an estimated tax equalization payment of approximately $3.0 million, subject to customary post-closing adjustments. Refer to “Note M – Acquisitions” for additional information.

On December 3, 2025, we acquired Hydrostat’s propane distribution and refurbishment assets. The purchase price was approximately $9.6 million, subject to customary post-closing adjustments. Refer to “Note M – Acquisitions” for additional information.

On October 16, 2025, we divested our 49% interest in the composite business of our SES joint venture. In exchange for our divested interest in the composite business, we received common shares of both Hexagon Composites and Hexagon Purus. The transaction aligns the core remaining capabilities of the SES joint venture – primarily Type 1 low-pressure, steel cylinder and storage infrastructure applications – with our long-term strategic priorities. Refer to “Note B – Investments in Unconsolidated Affiliates” and “Note O – Fair Value Measurements” for additional information.

On June 18, 2025, we acquired Elgen, a leading provider of HVAC parts and components. The purchase price was approximately $90.7 million, net of cash acquired. Elgen began operating as part of Building Products in the first quarter of fiscal 2026. Refer to “Note M – Acquisitions” for additional information.

Fiscal 2025

On June 3, 2024, we completed the acquisition of Ragasco, a leading global manufacturer of composite propane cylinders based in Norway. The purchase price consisted of cash consideration of $108.6 million, including an earnout that was settled in March 2025. Ragasco began operating as part of Building Products in the first quarter of fiscal 2025. Changes in the fair value of this earnout were reflected in Restructuring and other expense, net.

Demand Trends

General Economic Conditions

Demand for our products is closely tied to broader macroeconomic conditions and overall consumer and business sentiment. Shifts in inflation, interest rates, disposable income, and construction activity directly influence purchase behavior, capital investment, and distributor inventory management.

During the third quarter of fiscal 2026, we operated in a macroeconomic environment marked by moderating inflation and mixed housing and construction activity. The Federal Reserve reduced the federal funds target range to 3.50% – 3.75% in December 2025 and maintained that range through January and February 2026, signaling a transition from tightening to a more neutral stance. Although mortgage rates eased modestly during the quarter, the 30-year fixed rate remained approximately 6% at quarter end, continuing to pressure affordability and contributing to subdued existing-home sales and limited housing turnover. In Building Products, housing starts showed sequential stabilization but remained below prior-year levels, while builder sentiment remained depressed. Nonresidential construction activity leveled off, while forward-planning data reflects cautious project pipelines, particularly outside large-scale infrastructure and data center categories.

In Consumer Products, this macroeconomic environment is expected to continue pressuring discretionary spending, as elevated interest rates and cautious sentiment weigh on large-ticket purchases and project timing. As a result, we expect point-of-sale activity to remain uneven as consumers seek clearer direction on inflation trends, interest rate stability, and overall economic momentum.

Inventory Demand Cycles

Demand for our products is influenced by the inventory management strategies of our retail and distribution partners. Periods of customer destocking, when our customers reduce their own inventories, can lead to lower order volumes, even when consumer sell-through remains steady. Conversely, customers’ restocking can temporarily elevate shipments above underlying end-user demand. As a result, shifts in customers’ inventory levels can meaningfully impact our reported revenue and margin performance, particularly in Consumer Products, where a large volume of products flow through big box retailers.

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Throughout the first nine months of fiscal 2026, inventory levels at most key retailer and distributor customers remained aligned with end-consumer demand, and replenishment activity generally mirrored point-of-sale trends, with no material build-up in our distribution or retail channels.

End Market Trends

We offer a wide range of products and services to a diverse, primarily domestic, customer base across several end markets, including U.S. residential and non-residential construction, repair/remodel, which collectively drive overall demand for Building Products. These end markets also drive demand for many of our consumer products sold in the tools and outdoor living categories. Demand for our remaining consumer products, including helium-filled balloon kits sold into the celebrations category, is generally driven by the general health of the consumer, including the macroeconomic and geopolitical conditions discussed above. We actively monitor the following publicly available economic data and selected key indicators for our major end markets.

During the third quarter of fiscal 2026, conditions across our key end markets remained mixed. U.S. Residential Construction Spend was modestly below prior-year levels, while Authorized Housing Permits and U.S. Private Housing Starts both declined from a year ago, indicating that current activity remained soft and that the near-term pipeline from new residential construction was still under pressure. Existing Home Sales, by contrast, improved to a 4.09 million seasonally adjusted annual rate in February 2026, up 1.7% from January 2026, suggesting some stabilization in housing turnover that could modestly support downstream demand in some of our key end markets. Builder sentiment remained weak, with the HMI at 36 in February 2026,

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Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations

This MD&A contains forward-looking statements within the meaning of the PSLRA. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-K and “Part I - Item 1A. - Risk Factors” of this Form 10-K.

This MD&A should be read in conjunction with our consolidated financial statements and the related Notes in this Form 10-K. It is intended to provide insight into the financial condition and results of operations to allow investors to view our business from the perspective of management.

Business Overview

We are a market-leading designer and manufacturer of innovative products and services, including manufactured metal products, organized around attractive end markets under two separate and distinct operating segments: Building Products and Consumer Products. Our primary goal is to create value for our shareholders. Built on the successful foundation of the Worthington Business System, we apply a disciplined approach to capital deployment and seek to grow earnings by optimizing our operations and supply chain, developing and commercializing innovative products and applications, and pursuing strategic investments and acquisitions.

Our Building Products business is a market-leading provider of critical components in essential categories, including: (i) pressurized containment solutions for heating, cooking, cooling and water applications; (ii) HVAC systems; (iii) metal roofing clips; and (iv), through our unconsolidated joint ventures, WAVE and ClarkDietrich, ceiling suspension systems and light gauge metal framing products. Our pressurized containment solutions include refrigerant and LPG cylinders, well water and expansion tanks, and other specialty products which are generally sold to gas producers and distributors.

Our Consumer Products business has a diverse product offering in the tools, outdoor living and celebrations categories, including propane-filled cylinders for torches and related accessories, handheld torches, specialized hand tools and instruments, drywall tools, propane-filled camping cylinders, helium-filled balloon kits, and accessories and gas griddles and pizza ovens sold primarily to mass merchandisers, retailers and distributors.

Activity outside of our two reportable segments is presented within “Other” and “Unallocated Corporate” as described further below.

Other includes our share of the equity earnings of two of our unconsolidated joint ventures, SES and Workhorse, and the related investments in these businesses.

Unallocated Corporate includes certain assets and liabilities (e.g., cash and cash equivalents and public debt) held at the corporate level as well as general corporate expenses that are not directly attributable to our business operations and are administrative in nature, such as public company and other governance-related costs that benefit the organization as a whole, have not been allocated to our operating segments and are held at the corporate level, including direct and incremental costs incurred in connection with the Separation but not attributed to discontinued operations in fiscal 2024.

Separation of the Steel Processing Business

On December 1, 2023, we completed the Separation of our former steel processing business into a separate public company in a transaction intended to qualify as tax free to our shareholders, which was accomplished via the Distribution. Worthington Steel is an independent public company trading on the NYSE under the symbol “WS”. Following the Separation, Worthington Industries, Inc. changed its name to Worthington Enterprises, Inc. and its common shares continue trading on the NYSE under the ticker symbol “WOR.” In connection with the Separation, we received a one-time cash dividend of $150.0 million from Worthington Steel, the proceeds of which were used to pay off in full the 2024 Notes. The dividend was funded by cash drawn on the Worthington Steel Credit Facility of $175.0 million immediately prior to the Distribution.

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Acquisitions and Divestitures

Fiscal 2026

On January 16, 2026, we acquired LSI, one of the largest U.S. manufacturers of standing-seam metal roof clips and retrofit components in the commercial roof market. The purchase price was $206.6 million, net of cash acquired, including an estimated tax equalization payment of approximately $3.0 million, subject to customary post-closing adjustments. Refer to “Note P – Acquisitions” for additional information.

On December 3, 2025, we acquired Hydrostat’s propane distribution and refurbishment assets. The purchase price was approximately $9.3 million, net of cash acquired, subject to customary post-closing adjustments. Refer to “Note P – Acquisitions” for additional information.

On October 16, 2025, we divested our 49% interest in the composite business of our SES joint venture. In exchange for our divested interest in the composite business, we received common shares of both Hexagon Composites and Hexagon Purus. The transaction aligns the core remaining capabilities of the SES joint venture – primarily Type 1 low-pressure, steel cylinder and storage infrastructure applications – with our long-term strategic priorities. Refer to “Note C – Investments in Unconsolidated Affiliates” and “Note R – Fair Value Measurements” for additional information.

On June 18, 2025, we acquired Elgen, a leading provider of HVAC parts and components. The purchase price was approximately $90.7 million, net of cash acquired. Elgen began operating as part of Building Products in the first quarter of fiscal 2026. Refer to “Note P – Acquisitions” for additional information.

Fiscal 2025

On June 3, 2024, we completed the acquisition of Ragasco, a leading global manufacturer of composite propane cylinders based in Norway. The purchase price consisted of cash consideration of $108.6 million, including the acquisition date fair value of contingent consideration that was settled in March 2025 for approximately $11.5 million, resulting in incremental expense in restructuring and other expense, net in our consolidated statement of earnings of $4.5 million. See “Note P – Acquisitions” for additional information.

Factors Affecting Revenues

Demand Trends

General Economic Conditions

The U.S. macroeconomic environment during fiscal 2026 was characterized by uneven growth and a resurgence of inflationary pressure that complicated the Federal Reserve's policy path and dampened consumer and business sentiment. GDP expanded at an annualized rate of 1.6% in the first quarter of calendar 2026, meaningfully below the prior-year pace, as gains in government spending and business investment were partially offset by decelerating consumer spending. Inflation reaccelerated through the second half of fiscal 2026, with the CPI rising 4.2% year over year in May 2026, its highest level since April 2023, driven largely by an energy price surge tied to the outbreak of geopolitical conflict in the Middle East in late February 2026. The Federal Reserve, which had reduced the federal funds target range from 4.25% – 4.50% to 3.50% – 3.75% through a series of rate cuts in the second quarter of fiscal 2026, held rates unchanged through fiscal year end as policymakers weighed the resurgence of inflation against continued labor market stability.

We believe these dynamics, including persistent inflationary pressure, an extended pause in monetary easing, and elevated mortgage rates near 6.5%, continued to weigh on consumer and business sentiment throughout fiscal 2026 and may impact new activity across our key end markets entering fiscal 2027. In Building Products, elevated financing costs constrained new construction demand, while geopolitical uncertainty and energy price volatility introduced additional headwinds for contractor and distributor confidence. Within our Consumer Products segment, inflation-driven cost consciousness and elevated interest rates influenced discretionary purchases and contributed to cautious buying patterns. We expect demand within both operating segments to remain uneven in the near term.

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Inventory Management

Demand for our products is influenced by the inventory management strategies of our retail and distribution partners. Periods of customer destocking, when our customers reduce their own inventories, can lead to lower order volumes, even when consumer sell-through remains steady. Conversely, customers' restocking can temporarily elevate shipments above underlying end-user demand. As a result, shifts in customers’ inventory levels can meaningfully impact our reported revenue and margin performance, particularly in Consumer Products, where a large volume of products flow through big box retailers.

During fiscal 2026, inventory levels at most key retailer and distributor customers within Consumer Products remained aligned with end-consumer demand, and replenishment activity generally mirrored point-of-sale trends, with no material build-up in our distribution or retail channels. However, Building Products benefited from a load-in effect that began toward the end of fiscal 2025 and continued through the first nine months of fiscal 2026, driven by federal regulations requiring the use of A2L refrigerants in newly manufactured residential and commercial HVAC systems. As contractors, distributors, and dealers positioned inventory to adjust to the regulatory transition, order volumes were temporarily elevated above underlying demand. While this dynamic provided a near-term tailwind throughout most of fiscal 2026, it began to normalize in the fourth quarter, as channel inventories reached desired levels and the transition matured. As new and replacement HVAC systems utilizing A2L refrigerants continue to enter service, we expect the installed base to grow, supporting meaningful long-term opportunities for our business.

End Market Trends

We offer a wide range of products and services to a diverse, primarily domestic, customer base across several end markets, including U.S. residential and non-residential construction, repair/remodel, which collectively drive demand for the Building Products segment. These end markets also drive demand for many of our consumer products sold in the tools and outdoor living categories. Demand for our remaining consumer products, including helium-filled balloon kits sold into the celebrations category, is generally driven by the general health of the consumer, including the macroeconomic and geopolitical conditions discussed above.

We actively monitor publicly available economic data and leading indicators across our key end markets. The table and discussion that follow summarize select indicators that we monitor on a regular basis and that we believe are most relevant to our near-term outlook.

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