Worthington Enterprises, Inc.

Welcome to the Worthington Industries first quarter fiscal 2024 earnings conference call. All participants will be able to listen only until the question and answer session of the call. This conference is being recorded at the request of Worthington Industries. If anyone objects, you may disconnect at this time. I'd now like to introduce Marcus Roge, Treasurer and Investor Relations Officer. Mr. Roge, you may begin.

Thank you, Julianne. Good morning, everyone, and welcome to Worthington Industries' first quarter fiscal 2024 earnings call. On our call today, we have Andy Rose, Worthington's president and chief executive officer, and Joe Hayek, Worthington's chief financial officer. In addition, we also have Tim Adams, who is currently the vice president of strategy and corporate development for our steel processing business, and who will become the CFO of Worthington Steel after we complete the planned business separation. Before we get started, I'd like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risk and uncertainties that could cause actual results to differ from those suggested. We issued our earnings release yesterday after the market closed. Please refer to it for more detail on those factors that could cause actual results to differ materially. Today's call is being recorded, and a replay will be made available later on our worthingtonindustries.com website. At this point, I will turn the call over to Joe for a discussion of the quarterly financial results.

Thank you, Marcus, and good morning, everyone. We started the fiscal year with a strong quarter, reporting Q1 earnings of $1.93 per share versus $1.30 a year ago. There were a few unique items that impacted our quarterly results, including the following. We incurred pre-tax expenses of $6 million, or 9 cents a share, related to the planned separation of our steel processing business into a new public company, which we are now targeting to complete as early as December of 2023. We took advantage of our strong cash balance, using $244 million to pay off our 2026 bonds. The early extinguishment of debt resulted in a $2 million pre-tax, or 2 cent per share, non-cash charge, as the debt was called at par. We recognized $1 million in pre-tax or $0.02 per share of impairment charges in steel processing related to idle equipment that we no longer use, as compared to a $0.02 per share restructuring gain in the prior year. In addition, the prior year quarter was negatively impacted by $0.33 per share due to several items, including a loss on the divestiture of Artiflex, a pension settlement charge, and expenses related to an earn-out at Level 5. Excluding these unique items, we generated earnings of $2.06 per share in the current quarter compared to $1.61 per share in Q1 of last year. In addition, in Q1, we had inventory holding gains estimated to be $15 million or $0.24 a share compared to inventory holding losses of $2 million or $0.03 per share in Q1 2023. Consolidated net sales in the quarter of $1.2 billion decreased 15% from the prior year due to lower average selling prices in steel processing combined with lower volumes across most of our segments. Our gross profit for the quarter increased to $197 million from $169 million in the prior year, and our gross margin increased to 16.6% from 12%, primarily due to improved spreads in steel processing. Our adjusted EBITDA in Q1 was $165 million, up from $140 million in Q1 of last year, and our trailing 12-month adjusted EBITDA is now $539 million. With respect to cash flows in our balance sheet, cash flow from operations was $60 million in the quarter, which we achieved despite the $73 million increase in working capital levels, primarily in our steel business. Free cash flow was $30 million in Q1. During the quarter, we invested $29 million on capital projects and paid $16 million in dividends. We also received $65 million in dividends from unconsolidated JVs during the quarter, a 119% cash conversion rate on that equity income. Looking at our balance sheet and liquidity position, funded debt at quarter end of $448 million was down $244 million sequentially due to the payoff of our 26 bonds that I mentioned earlier. Net interest expense of $3 million was down by $6 million, primarily due to interest income we earned on our cash balances and, to a lesser extent, lower average debt levels. We continue to operate with extremely low leverage, and our net debt-to-trailing EBITDA leverage ratio remains under 0.5 times. We believe that we're well-positioned for the future with ample liquidity, ending Q1 with $201 million in cash and $500 million million in availability on our revolving credit facility, which was recently amended to extend the maturity to September of 2028. Yesterday, the board declared a dividend of 32 cents per share for the quarter, which is payable in December of 2023. We'll now spend a few minutes on each of the businesses. In consumer products, net sales in Q1 were 149 million, down 21% from 189 million a year ago. The decrease was a result of lower volumes, which was partially offset by favorable product mix and higher average selling prices. Adjusted EBIT for the consumer business was $9 million, and adjusted EBIT margin was 6% in Q1, compared to $21 million and 11% last year. Consumers' earnings during the quarter suffered as volume was down 24% from the record volumes achieved in Q1 of last year due to a number of factors. We have seen consumer demand moderate in the past several months, and this summer's poor air quality caused by hot, smoky weather conditions depressed outdoor activities for many Americans. We've also seen some additional stocking at our customers. While the quarter presented significant headwinds for our consumer business, that team continues to execute well and remains laser-focused on delivering new and value-added products for consumers over the long term. While there is significant uncertainty related to the outlook for consumer spending, we do expect volumes and margins to gradually improve and anticipate that they will return to more seasonally normal patterns. Building products generated net sales of $134 million in Q1, down 11% from $150 million a year ago. The decrease was driven by lower volumes combined with lower average selling prices. Building products generated adjusted EBIT of $54 million for the quarter, and adjusted EBIT margin was 40% compared to $53 million and 35% in Q1 of last year. The increase in adjusted EBIT was driven by higher equity earnings from Wave, which increased by $5 million year-over-year and contributed a record $28 million during the quarter. The increase in Wave's equity earnings was partially offset by strong but lower equity earnings from Clark-Dietrich, which contributed $17 million during the quarter. Despite lower volumes in our wholly-owned businesses, higher gross margins drove margin improvement, and those businesses generated operating income of $9 million in the quarter. The team in building products continues to do an outstanding job executing in the current environment while focusing on long-term growth as they continue to partner with customers to develop new and innovative solutions in their markets. In sustainable energy solutions, net sales and Q1 of $29 million were down 7% or $2 million from the prior year, primarily due to lower volumes as the economy in Europe remains challenged. SCS reported an adjusted EBIT loss of $5 million in the current quarter as volumes were simply too low to absorb the fixed costs in the business. This compares to a loss of $1 million in Q1 of last year. We believe our business is well-positioned and one of only a handful of companies globally with the scale and expertise to effectively serve the hydrogen ecosystem and adjacent sustainable energies like compressed natural gas. That said, this market is unlikely to develop quickly, and until then, sustainable energy solutions results will be impacted. The SES team is talented and experienced, and we're confident in their ability to navigate the current environment and set the business up for long-term success. That team recently took action to reduce costs as we focus on aligning our costs with both legacy market demand and the coming growth driven by the transition to low and zero emission transportation. At this point, I will turn it over to Tim, who will discuss steel processing results.