Worthington Enterprises, Inc.

and Investor Relations Officer. Mr. Raji, you may begin.

Thank you, Rob. Good morning, everyone, and thank you for joining us for Worthington Enterprise's first quarter fiscal 2026 earnings call. On the call today are Joe Hayek, our President and Chief Executive Officer, and Colin Souza, our Chief Financial Officer. Before I begin, I'd like to remind everyone that certain statements made during today's call are forward-looking in nature and subject to risk and uncertainties that could cause actual results to differ materially from those expressed or implied. For more information on these risk and uncertainties, please refer to our earnings release issued yesterday after the market closed, which is available on the investor relations section of our website. Additionally, our remarks today will include references to non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures can also be found in the earnings release. Today's call is being recorded, and a replay will be available later on our website at WorthingtonEnterprises.com. With that, I'll turn the call over to Joe for opening remarks.

Thank you, Marcus, and good morning, everyone. Welcome to Worthington Enterprises' fiscal 2026 first quarter earnings call. We had a very solid start to our fiscal year. due to the collective efforts of our teams. And I want to start by saying thank you to all my colleagues for their dedication to each other, our company, our customers, and our shareholders. In the quarter, we delivered strong year-over-year growth in sales, adjusted EBITDA, and earnings per share. Our sales in Q1 were up 18% over last year and up 10% year-over-year, excluding sales from recently acquired eligible. The gross margin was 27.1% in Q1 versus 24.3% last year. This improvement is after the adverse impact of a $2.2 million purchase accounting charge related to inventory acquired from Elgin. The adjusted EBITDA margin in the quarter was 21.4% versus 18.8% in Q1 a year ago. I said this related to our Q4 results when we were together in June, but our results in Q1 again reflect our strategy and action. Despite numerous headwinds, including cautious consumers and a hot summer that impacted outdoor activities, and tariff costs and high interest rates that are impacting residential and commercial repair, remodeling, and construction activity, we grew our year-over-year adjusted EBITDA by 34%. Our FCNA expenses were $4.5 million in the quarter, but flat, excluding the addition of Elgin, despite our organic growth in sales and gross profit. As we continue our efforts to optimize our current businesses and grow Worthington, we do so not just as stewards of Worthington's proud history, but as drivers of innovation and strategies that will power our future. We're committed to building a sustainable growth platform, and we will continue to leverage the Worthington business system and its three growth drivers, innovation, transformation, and acquisitions to maximize both our near and long-term success. We've generated tremendous momentum with new product launches, including the Balloon Time Mini, A2L refrigerant cylinders, and new Halo griddles. These new products are enabling us to take market share, grow new markets, and win new customers. Transformation efforts continue to be driven by value stream analysis, automation, and new ways of thinking, but our goals do not change. We prioritize safety, asset utilization, and cost optimization. The ongoing 80-20 initiative in our water business is having a positive impact, and we're planning for additional 80-20 work streams in other areas of our business. We believe our culture is a differentiator, and we're focused on acquiring companies with great teams that have developed sustainable competitive advantages in niche markets. Our acquisition of Elgin in June is an example of that. We're pleased with our integration of Elgin thus far, and we're excited about its growth prospects. That team has embraced our safety culture, and we're focused on capturing synergies and pursuing growth opportunities in multiple areas. Last June, we acquired Regasco, the pioneer and world leader in lightweight composite LPG cylinders. Regasco recently celebrated 25 years in business and has manufactured and sold over 25 million cylinders into over 100 countries around the world. Their people, culture, and ongoing initiatives around safety, innovation, and quality are second to none. We're very happy that they're part of Worthington, and a group of us is looking forward to celebrating with that team in person in Norway next week. Earlier in September, we published our second sustainability report as Worthington Enterprises, and the content of that report makes us proud. For instance, we continue to outperform our industry benchmarks in safety, with the total incident case rate 40% lower than our peers. We're constantly trying to improve, and in fiscal 25, we renamed our safety culture Live Safe. It is based on proactive mindsets, processes, and actions that ensure our teams can be the best version of themselves at work and at home. While many of our end markets continue to face headwinds, we're performing very well and believe our best days are ahead of us. Leveraging our people-first, performance-based culture, market-leading brands, a startup mindset, the Worthington business system, and our strong balance sheet, we will continue to improve everyday life by elevating spaces and experiences in a way that creates meaningful value for our employees, customers, and investors. I will now turn it over to Colin, who will take you through some details related to our financial performance in the court.

Thank you, Joe, and good morning, everyone. We delivered strong financial results in Q1, getting our fiscal year off to a solid start. On a gap basis, we reported earnings of 70 cents per share compared to 48 cents per share in the prior year quarter. The current quarter included pre-tax restructuring and other expenses of $2 million, or 4 cents per share, compared to similar charges of 2 cents per share in the prior year quarter. Excluding these items, adjusted earnings were 74 cents per share, up from 50 cents per share in the prior year quarter. Q1 also included a one-time pre-tax purchase accounting charge of $2.2 million related to the stepped-up value of inventory at Elgin, which negatively impacted profitability in the quarter. Consolidated sales for the quarter were $304 million, up 18% compared to $257 million in the prior year quarter. The increase was primarily driven by higher volumes in our building product segment, along with the inclusion of Elgin, which contributed $21 million following its acquisition in June. Gross profit increased significantly to $82 million, up from $62 million, with gross margin expanding approximately 280 basis points to 27.1%, despite the $2.2 million purchase accounting charge at Elgin. Adjusted EBITDA for the quarter was $65 million, up from $48 million in Q1 of last year, and adjusted EBITDA margin in the quarter was 21.4% compared to 18.8% in the prior year quarter. On a trailing 12-month basis, adjusted EBITDA now stands at $280 million with a TTM adjusted EBITDA margin of 23.3%. Turning to our cash flow and capital allocation, we continue to invest in our operations while maintaining a disciplined and balanced approach. During the quarter, we invested $13 million in capital expenditures, including $9 million related to our ongoing facility modernization project. We also returned capital to shareholders, paying $9 million in dividends and repurchasing 100,000 shares of our common stock for $6 million at an average price of $62.59 per share. Our joint ventures provided $36 million in dividends, representing a 100% cash conversion rate on equity income. Cash flow from operations for the quarter was $41 million, and free cash flow was $28 million. On a trailing 12-month basis, free cash flow totaled $156 million, representing a 94% free cash flow conversion rate relative to our adjusted net earnings. As a reminder, this figure includes elevated capital expenditures related to our facility modernization project, which totaled $29 million over the same period. We have approximately $35 million of modernization spend remaining, with the majority expected to be completed during fiscal 2026, and capital expenditures returning to more normalized levels thereafter. As that spend tapers down, we expect to see further improvement in pre-cash flow conversion over time. Turning to our balance sheet and liquidity, we closed the quarter with $306 million in long-term funded debt, carrying an average interest rate of 3.6% and $167 million in cash. Our leverage remains extremely low with ample liquidity supported by a $500 million undrawn credit facility. Net debt at quarter end was $139 million, resulting in a net debt to trailing adjusted EBITDA ratio of approximately a half turn. Yesterday, our board of directors declared a quarterly dividend of 19 cents per share payable in December 2025. Let me now turn to our segment performance, where both businesses delivered results, solid results, to start the fiscal year. In consumer products, sales in Q1 were $119 million, up 1% compared to the prior year quarter, as a favorable shift in product mix was mostly offset by lower volumes. Adjusted EBITDA was $16 million with a 13.6% margin compared to $18 million and 15.1% in Q1 last year. The year-over-year decline was primarily driven by lower gross margin due to tariff charges and lower volumes. The broader consumer environment remains cautious and demand continues to be closely correlated to point-of-sale activity. That said, our brands are strong, our channels are stable, and our products are not large ticket items. They are affordable, essential, and play a meaningful role in elevating everyday experiences around outdoor living, celebration, and home improvement. We're proud of how our consumer products team continues to perform and deliver value for customers despite macro headwinds. Looking ahead, we believe the business is well-positioned to benefit as consumer sentiment improves and demand returns to more normalized levels, supported by our market-leading brands, strong customer relationships, and a transformational mindset. In building products, Q1 sales grew 32% year-over-year to $185 million, up from $140 million in the prior year quarter. Growth was driven by higher volumes and contributions from Elgin, which closed in June and contributed $21 million in sales for Q1. Excluding Elgin, net sales were up 17%, reflecting continued strength in our cooling and construction products, where we are supporting the refrigerant industry's transition to more environmentally friendly refrigerants, along with growth in our heating and cooking products, where we've enhanced our capacity and throughput as a result of the facility modernization investments made over the last year. Adjusted EBITDA for the quarter was $58 million with an adjusted EBITDA margin of 31.3%, compared to $40 million and 28.4% in Q1 last year. The improvement was primarily driven by volume growth in our wholly owned businesses, along with the modest year-over-year increase in equity income. Elgin's contribution to adjusted EBITDA was nominal, as expected, due to the previously mentioned non-recurring purchase account in charge. WAVE delivered another solid performance, contributing $32 million in equity earnings, up from $28 million in the prior year quarter. Clark-Petrick, operating in a more challenging environment, delivered a respectable $6 million in equity earnings compared to $9 million last year. The building product team is executing well and continues to do a great job delivering value-added and innovative solutions for our customers. We're also very pleased with our integration efforts thus far at Elgin. We remain excited about the potential growth at Elgin and believe their capabilities strengthen our presence in commercial HVAC and broaden our reach within the building envelope. At this point, we're happy to take any questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question today comes from the line of Catherine Thompson from TRG. Your line is open.

Hi, thank you for taking my questions today. Good morning, Catherine. Good morning. I have a couple of operational and a bigger picture questions. For your wholly owned building product, Segment margins, again, we're up in the quarter. You know, I know that that's an initiative that you've been working on, but could you help us understand what drove the margin in the quarter and really kind of the glide path of where you see it going and what would be a normalized level based on your current portfolio?

Sure. Catherine, it's Joe. You know, in building products, excluding the wave in architecture for a minute, I have no doubt that you or somebody else will get to those. But it's really a story of really nice execution in markets that are normalizing and normalized. We had really solid growth in our heating and cooking business and really solid growth in our cooling and construction business as well. The water business also improved. The only business that was flattish was our European business, and that has more to do with some big orders and the general economic environment in Europe. But you know when we look at building products we've talked about i think um ebitda margin for the whole businesses was ten and a half percent this quarter we've talked about that getting over time you know upwards uh you know to sort of 12-ish 13 um not right away but that's the trend that we continue to see you know we're still a little seasonal right and when it's cold uh there are more things going on but it's it's really of a credit to those teams. In fact, last week, for the first time in six years, we had our all-employee banquet and awards where we got together to celebrate some service anniversaries and some MVPs, both on the personal side. But we gave away the first John H. McConnell Philosophy Award. And we gave that. drove this award to be given to a team or a group or a facility that went above and beyond in our fiscal year related to safety and performance and really made a difference getting more towards our first corporate goal, which is to earn money for our shareholders and increase the value of their investment. And we were very, very happy to give that award to our facility in Paducah, Kentucky. That's fewer than 100 people. They made 900,000 A2L refrigerant cylinders last year, almost triple what they did the year before. And so it's those kinds of market-driven opportunities that we're trying really hard to take advantage of, and that's what you're really seeing in a lot of momentum in building products.

Okay, that's helpful. Shifting to WAVE, another great quarter, and still about $30 million in terms of contribution. touch again on the drivers for this outperformance, and is this a level to be expected for the next, you know, for outquarters?

Yeah, Kathryn, this is Colin. So, again, we continue to perform very well, you know, up year over year in terms of equity contribution for us and, you know, down slightly from Q4. For us, Q4 and Q1, those are their stronger quarters. But overall, within the business, their end markets, in particular, when they serve areas like education, healthcare, transportation, data centers, those are still very healthy, very strong, and offsetting some of the weakness in areas like office and retail and You know, you know, Waze operating model and how they go to market, and it's really driving value to contractors and really working hard to take labor and time and ultimately cost out of the equation for those installs. And they do that extremely, extremely well, and they continue to show value to those customers. And it flows through to their performance. you know, steady as she goes with in terms of wave and how they're going to perform, we're very happy with how that's going so far.

Okay, thanks. And the final question of the day, this is the bigger picture question. So Worthington is often the only domestic manufacturer of some of your product lines, and tariffs are complicating the supply chain this year. And theoretically, Worthington should be in a better position relative to competitors with that domestic manufacturing footprint. In the last quarter, you touched briefly on having more conversations with customers, but it's difficult to quantify. Can you give an update on how that dynamic is progressing? Are there any further wins where they can tie back to tariffs?

and uh just broader implications going forward thank you and uh best of luck thanks thanks catherine it's joe i'll take a shot at it and certainly calling that in the yeah tariffs are complex for everybody and they have multiple touch points for us you know in our consumer business where We have some of those tools that are manufactured for us. We had to effectively write a check for a couple million dollars in the quarter to Uncle Sam. But as you point out, in a lot of our business, some in consumer and a lot within building products, we are the primary or only domestic manufacturer for those products, and we compete with imports. And so having a more level playing field with respect to pricing is helpful. And we've always prided ourselves on trying to be commercially excellent and trying to be really easy to do business with. And so we have absolutely had and continue to have good conversations with our customers domestically. Our supply chain is going to be tighter than somebody that's manufacturing overseas. But we've always... really strive to create value and understand our customers' pain points, try and make their lives easier so that they can better serve their customers. A lot of our products, two-thirds-ish, end up in the hands of contractors, and whether it's a distributor or whether it's a retailer, we try really hard to help our customers better serve their own customers which really are what they and we care about and so it is hard to pinpoint but your value candidly um is easier to to drive when your prices are competitive and people are sensitive to to prices and so we're able to you know keep prices at a very kind of reasonable level historically because we aren't subject to the tariffs that other people might be. And so those conversations are ongoing, and we hope when we execute well that that makes our value proposition that much more compelling.

Great. Thank you very much.

Thank you. Your next question comes from the line of Daniel Moore from CJS Securities. Your line is open.

Thank you. Good morning, Joe. Good morning, Colin. Thanks for taking the questions. Good morning, Dan. So shift back to building products just for a second. Very healthy organic growth. Can you just elaborate a little bit more on the pockets of strength? You mentioned cooling construction products, some of the heating products. How much of it is market growth? How much of it is share gains? And as we think about moving forward, talk about the potential to outpace the market over the next one, two, three years.

Sure, I think it's a mix, Dan. Some of it is kind of market normalization. Some of it is, and that would probably be more in heating and cooking and in water. Some of it is market share gains. We saw some of those in the heating and cooking business and some in cooling and construction. But then the markets are behaving differently more normally, maybe a bit more of a catch-up in heating and cooking, a little bit of growth in water. But then in refrigerants, right, in our cooling and construction business, if you go all the way back to 2021, you know, the American Manufacturing Act, late 2020, 2021, really mandated a shift in refrigerant to more environmentally friendly gases. And so you're seeing some of that load in and roll out over the past six or eight months. And these things happen periodically. And so I do think that that market has grown enough to continue to grow maybe more than it historically would have due to some of those shifts.

Okay, that is helpful. And then shifting to consumer. Maybe just talk about the progress you're making in terms of new product lines and expanding distribution at retail. I'm thinking specifically about Balloon Time Mini, but you've got some of the other new products and initiatives. Where are you seeing the biggest increases in terms of retail customer penetration and what's the runway for growth look like?

So with respect to consumer, revenue is up a little bit, you know, profitability down. You know, we did have a tariff impact that was effectively, I'll call it more than the miss, if you will, relative to last year. We've seen point of sale drop. tracking and really mirroring our own orders and so our camping gas business uh and the tools business you know down a little bit offset in large part by our celebrations business our helium business which uh we continue to to execute very well in uh in part because of some of the shifts that have gone on with uh you know party city not being part of the mix and our customers getting more of those customers, you know, Walmart, Target, other people like that. But then you mentioned a couple of things on the new product side, Dan. And so with Balloon Time Mini specifically, that continues to enable us to have great conversations with new customers. And we talked about Target, talked about CVS. Walgreens is a recent win, and you'll soon be able to find in a couple thousand Walgreens stores our products both the balloon time mini and the standard legacy balloon time product we're delighted about that and then halo griddles in walmart we talked about that historically small numbers but that's going well in fact in the spring of 2026 that's kind of the beginning of i'll call it grilling or griddle season you'll be able to find halo griddles at even more stores than you could in these past few months. So that team is working really hard and doing a fantastic job, really understanding our markets, understanding our consumers, trying to reach consumers both independently and through our retail partners. And so we're really pleased with that. And consumer is probably more impacted sometimes than pieces of building products around people's ability to be mobile and to move. And so we get lower interest rates that translate into lower mortgage rates, which, as you know, have more to do with the longer end of the curve there. We expect that that would add to our revenues and growth as well.

Very helpful. And, you know, Catherine touched on Wave. Maybe just quickly, Clark Dietrich, their contribution pulled back to kind of lowest level since the start of the pandemic. Obviously, the environment is a little challenged there. Just talk about, you know, whether if this is the new normal, at least for now, you know, where do we go from here over the next few quarters?

Yeah, no, you're exactly right. And, you know, the way that we think of our portfolio of businesses, a lot of our businesses really are right in the middle of repair, remodel, maintenance, And so we don't depend on new construction spending as much as some folks might. In Clark-Dietrich, it is a little dependent on new construction spending. And the U.S. Census Bureau suggested recently that 14 months have passed since construction spending peaked in May of 2024. And so you do have... that number and that growth figure a little depressed. Clark-Dietrich is a market leader and they have continued to do well, but you have fewer opportunities that are out there, especially on the smaller contracting side. You do have infrastructure projects and data center projects and mega projects continuing to get green-lighted and to go, which is great. but you'd like to have that mix of smaller projects as well. And, you know, you'll see lower steel prices. And so you'll see people being very competitive, trying to, in a lot of cases, keep the lights on at some of these smaller companies. And so all that tends to lead to some margin compression for Clark Dietrich. You know, we do see, you know, Dodge Momentum finally kind of picking up and looking good. That is, a very leading indicator. A lot of times you see a spike there. It takes 18 months plus for those to translate into sales for folks like Clark Dietrich. And so pretty well positioned, but we think it's flat to potentially down a little bit in the next quarter or two. And just because you've got to get through this period of uncertainty where people aren't willing to or able to get construction projects going. We know that will change. It always changes. And Partitric tends to come out better on the other side. But we do have to get through this period. And it's hard for us to be able to forecast whether it lasts, you know, two weeks or a couple months or six or eight. But that's kind of where we are with that business.

Okay. Last one. I'll jump back in queue. Just maybe talk about the M&A pipeline. as you described, free cash flow solid and poised to inflect higher as the capex cycle winds down. So, you know, priorities for capital allocation and, you know, the outlook for potential, whether it's bolt-ons around eligible manufacturing, you know, other areas that, you know, could be potential opportunities to deploy capital over the next kind of 12-plus months. Thanks again for all the color.

Sure. And we are – Our capital allocation priorities continue to center around being balanced with a bias towards growth. You see we paid $9 million in a dividend and we continue to buy back shares selectively, but we have a bias for growth. And when we think about M&A and we think about our ability to continue to seek and add businesses that are high margin, low asset intensity, leaders in niche markets. We're pretty excited about it. And I'll let Colin maybe comment a bit more sort of some details around the pipeline and how we're thinking about it.

Yeah, and thanks, Joe. We feel like the pipeline, it's a solid right now. The M&A markets are softer, but we're still finding those opportunities that are out there and spending time to really build those relationships and are excited about what that could become as we progress throughout the year. Our criteria, we're looking for leaders in niche areas across consumer and building products, and that can demonstrate a sustainable competitive advantage. And that's when we deploy our diligence process. That's what we're really looking to test. And a lot of those are in channels where we already have a big presence and a leadership position. And that gives us some some ability to add value, whether it's through channel expertise or through manufacturing expertise or purchasing or price risk capabilities. So you're absolutely right, Dan. You know, the acquisition of Elgin was a great one for us, and we're excited about that. And that also gives us opportunity to look around their business and to adjacencies to see where there may be some more value ahead. So excited about M&A in the future. It's going to be an important lever for us in terms of capital allocation and growth.

Super. Look forward to hearing more out here in New York in a couple weeks. Thanks again. Likewise.

Thanks, Dan.

Your next question comes from the line of Brian McNamara from Canaccord Genuity. Your line is open.

Hey, good morning, guys. Thanks for taking the question.

Absolutely. Good morning, Brian.

I don't... I don't think you guys disclosed volumes in the release, but you mentioned them qualitatively. Can you give us an idea of price versus volume growth for both segments in the quarter?

I'll take a quick shot at it. Volumes up in building products, price pretty stable. In consumer, volumes were down, but mix shifted more heavily towards our celebrations business, which per unit cost more, and that was really the driver there.

Yeah, and Brian, we did not disclose volumes. It becomes very complex given the size of the products we're offering and then some of our recent acquisitions, different types of products. We're not just selling cylinders anymore. We're selling tools. We're selling components. So the volume data points become a little too cloudy to be able to speak to and lumpy.

Got it. Okay. I know you got a tariff question earlier. I'm just curious, are you seeing tariff impacts and pricing in your markets? I think back around Liberation Day, there was a reasonable school of thought that there was kind of enough inventory in the channel to get us to the fall, and we're kind of here now. Your home center customers are also being careful with their comments on pricing, but are you seeing price increases on the shelf from your internationally sourced competitors and price gaps widen there? And is that helping the company?

Yeah, Brian, not yet. You know, the tariffs are driving impact. Joe mentioned it, a couple million dollars in our business that we paid on the consumer side related to tariffs. I think a lot of companies are still trying to work through how to handle that and what to do and also kind of waiting and seeing how things unfold. So, you know, we're seeing that impact in our business, but at the shelf, it's a bit mixed.

Great. And then finally, I know there's a $2.2 million purchase accounting charge in there, but, you know, gross margins are lumpy. I know you're targeting kind of 30% over the medium term. How should we think about gross margins in the coming quarters and any puts and takes there?

Yeah, Brian, we did 27% this quarter, up from 24%. You know, there was purchase accounting in both periods for the acquisition for Melgen and then on Rogasco. You know, strong volumes within building products we talked about earlier, you know, drove some of the volume increase as well as some of the incremental initiatives across the company that are, are paying off. Sequentially, gross margin was down. Q1 and Q2 are seasonally weaker for us compared to Q3 and Q4, so that wasn't unexpected. But as you said, our goal over time here is to drive gross margins north of 30% and driving our holding our costs flat and SG&As of percent of sales down to 20%. So we feel like we're still on track with that and our initiatives are are driving some momentum and want that trend to continue.

Yeah, and Brian Collins is absolutely right. Those numbers, right, that we're striving towards and trying to get to, those are sort of annual numbers, and they'll be a little bit of puts and takes. When you have seasonally slower periods like Q1 and Q2, your conversion costs will be naturally a bit higher, and so you'll probably overperform that in Q3 and Q4, relatively speaking. But our goal for that is more of an annual number.

Great. Thanks a lot, guys. Best of luck.

Thanks. Your next question comes from a line of Susan McClary from Goldman Sachs. Your line is open.

Thank you. Good morning, everyone. Good morning. My first question is going back to the operational efficiencies that you mentioned in your prepared remarks. You noted that you've seen some nice progress in the water business. I guess, can you talk a bit more about that? And how do we think about where else those efforts can go to across the business and what they could mean over time?

Yeah, Susan, I think as Joe mentioned in his remarks, just 80-20 initiatives, we piloted that in the water business about seven months ago. It's going very well. A lot of the focus there is how do we reduce complexity, increase focus, and drive better results. So we're in the middle of that. We're excited, and the teams are very, very engaged. You know, we've been pleased with what we've seen so far, and to Joe's comments earlier, you know, we're starting to evaluate where could this apply next across our portfolio so we can continue to build that muscle and really drive this way of operating.

Yeah, and Susan, just a couple of other thoughts. We do really like how that way of thinking is challenging. our historic norms. You know, we've been at it for almost six months, and so we've seen enough to know a couple things. One, it's going to have a positive impact, and two, we'd like to do more of it, and so I think you'll see us be thoughtful about how best to roll it out. We don't want to kind of try and sort of boil the ocean, but we want to be thoughtful about it, and it's going to be a great tool in our kit as we go forward. But then the other piece, broader maybe than 8020, is our constant evergreen initiatives on holding costs down. And in our facilities, there are goals every single month, every single quarter, every single year in terms of taking costs out. And across our facilities, and certainly within the corporate organization. You know, look, our healthcare costs continue to go up. Obviously, people get merit increases, but if you look at Q1 versus Q1 last year, we grew revenue, we grew gross profit, But absent the inclusion of Elgin's SG&A, our SG&A was flat year over year. And so that's a great testament to the work our teams are doing. That might not happen every single quarter, but it's something that we are very conscious of in that we believe we have a great platform and we can grow our revenues and gross profits and keep the same kind of infrastructure and base. And we hope that over time that is consistent with being able to grow margins.

Yeah. Okay. That's helpful, Collar. And then turning to Elgin, can you talk a bit about how that business can actually help in terms of getting some of these targets that you've laid out, growing the business overall, and especially in thinking about perhaps the less discretionary nature of HVAC and what that could mean in a tougher macro, and especially if things slow further from here?

Yeah, Susan, it's, we're very pleased with Elgin so far. It contributed, as I mentioned, $21 million in revenue and relatively breakeven from an EBITDA standpoint, which included the $2.2 million in purchase accounting. The stats we released on the business right when we acquired it, $115 million of revenue annually, $13 million in adjusted EBITDA. At the end of the day, this is a good example of our M&A strategy in action and our goal in expanding our portfolio in commercial HVAC and the structural framing. And we found this fantastic business that so far has been a great fit for us. Integration, we believe, we're 90 days in. It's going very, very well. We have our operations teams together working side by side, the commercial teams, the purchasing teams. And what we're very pleased with is just the more time we spend with that business, we find a lot of really, really good talent at the company. And we're very pleased with how that's gone so far. And to your point, Susan, you know, the commercial HVAC market we believe is attractive and it's resilient over time and provides above GDP type growth. That's why it was a key target market of ours. And we found this opportunity with Elgin where we can bring some value and sophistication from a steel manufacturing standpoint and purchasing and operational expertise. And we're getting to work with how we can continue to increase value with them at that company over time. And, you know, this is one of hopefully many that we do over time as an example here.

Yeah, and Susan, your question is really a good one relative to growth opportunities and to the resiliency of that market. We certainly agree with the latter point. We think there are growth opportunities organically within Elgin, but also we look at cross-selling opportunities in our water business, some crossover with Clark Dietrich, some things related to WAVE. Anytime we continue to be able to add value with this sort of two-step distribution market into HVAC and things that are above the ceiling or behind the walls, people are looking for kind of creative, innovative ways to consolidate their own spend, save money, and we think we can be a part of that solution for them.

Yeah. Okay. That's helpful, Joe. And then one more question, which is just, when you think about the business broadly, how are you balancing the investments and the growth and the cost efforts relative to the potential that we do end up in a tougher macro next year? And maybe, you know, we see the consumer still really being under pressure there. And just how are you thinking about those various factors that are all coming through And noting that there's a lot of uncertainty around there, but just any thoughts generally on that positioning and how you're thinking, how you're approaching that?

Yeah, it's a great question. And uncertainty is really a watchword that, you know, you see, we see that there are a lot of things out there. In a lot of ways, what lower interest rates are meant to, do is to stimulate growth. And you've seen interest rates at the very, very short income down, but not on the kind of 5, 10, 30 year. And so people are still a little hesitant to, even though reshoring is a priority, people are still a little hesitant to spend money and to put things into the ground and to invest in CapEx, et cetera. And so our, the advantage we have in a lot of our businesses is we're pretty good at being, trading down is the wrong way to think about it, but some of the things in our consumer business that we're really good at are substitutes. If somebody isn't able to go on a trip or to stay in a hotel or travel internationally, they will spend more time outside. They will spend more time camping. And We're also doing a lot of work around direct-to-consumer initiatives and really sort of thinking about our placement in bricks and mortars because our solutions can, in fact, enable the DIYers who are going to think about those projects instead of something different or instead of hiring somebody. more macro piece of that, you know, and again, a lot of our portfolio is repair, remodel, maintenance, a bit more insulated, but not totally insulated. And so we are continuing to invest in being a smarter, more nimble company that's around AI, that's around automation, that's around analytics, while absolutely kind of keeping an eye on, a lid on sort of expenses that we think might not have the kinds of returns that we're looking for. And I think that's probably what a lot of people would do in an environment like this is not that your cost of capital goes up, but your hurdle rate goes up because your risk quotient is higher. But all things being considered, we go back through and look at where our business sits. And we feel really good about what we're doing right now. And if the economy is then we'll I think do just fine and probably outperform. But as markets recover, which they always will, we feel great about how we're positioned and what our solutions will mean kind of going forward into the mid to longer term.

Yeah. Okay. Thank you for all the color and good luck with the quarter.

Thank you, Susan. Again, if you'd like to ask a question, press star 1 on your telephone keypad. Your next question comes from a line of Walt Liptack from Seaport Research. Your line is open.

Hi, thanks. Good morning, guys. Good morning, Walt. Thank you. Yeah, great call so far. A lot of questions answered. I would like to try a follow-on on the HVAC refrigerant containers. And so I think it's been a couple of periods so far where you've been maybe doing well with your customers, increasing penetration. Is this the kind of thing where it's like a one-year bump where you start getting into more difficult comparisons at some point? Or is there enough customers, a big enough market where you can just continue to serve those customers really well? And, you know, increase that penetration, you know, beyond like, you know, a one year bump in sales.

Yeah, you know, it's hard to predict what the future looks like. Well, it's a very fair question. We think it's probably more the latter than the former. You know, there are lots of things happening in these. mandates for more environmentally friendly gases will continue to kind of proliferate. It's up to us to continue doing our level best to service our customers and service their customers. And so we're able to meet this increased demand. And, you know, if ultimately you see things change in a year, it's likely that you would have something to potentially, you know, replace a load in that runs its course. So, you know, never say never, but we're feeling relatively good about the future of that business while understanding that these types of things don't happen every quarter.

Okay, great. And then I wonder, you know, you talked a lot on this call about the different forms of seasonality and how they impact the business. You know, so as we're going, so I wonder if you could just go through, you know, maybe not in a huge amount of detail, but some detail about, you know, the fall and winter and especially going into kind of the spring selling season. You know, when do you start selling products into this, the spring selling season, you know, when's their inventory left, and what are the indications in consumer, you know, from your large customers? And then, you know, maybe in building products, too, what does the seasonality look like over the next couple of quarters?

Yeah, so, Walt, I'll take a shot at it, and Joe can fill in. I think just generally, it's It can vary from year to year, obviously, depending on what's happening throughout the year. Q1 and Q2 are typically seasonally weaker than Q3 and Q4. And it varies a little bit across consumer and building. And then in particular, as you get into Q2 and Q3, it could depend just on if there's weather-related events, if it's If it's colder sooner or if there's hurricanes or snowstorms, that would drive activity. And those, obviously, we can't predict from year to year, but they do happen in those time periods. So that's the high-level way we think about it. And then you'd have to go kind of category by category.

OK, great. OK, well, thanks so much.

OK, well.

And that concludes our question and answer session. I will now turn the call back over to the company for some closing remarks.

Thank you all for joining us this morning. Have a wonderful rest of your week, and we'll look forward to speaking with everybody soon. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.