Worthington Enterprises, Inc.

Good morning and welcome to the Worthington Enterprises third quarter fiscal 2026 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 Enterprises. 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, Regina. Good morning, everyone, and thank you for joining us for Worthington Enterprise's third 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 we 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 risks 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 financial 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. Good morning, everybody. Welcome to Winter Enterprises' fiscal 2026 third quarter earnings call. We performed very well in Q3 and generated strong earnings growth, which is a reflection of the tremendous effort that our team exhibits every day. Our colleagues all over the world continue putting our customers first, and our solutions and approach are resonating, helping us to grow. In Q3, in market conditions that continue adjusted EBITDA, and earnings per share. Our revenue in Q3 was up over 24% from last year, while our SG&A expenditure has declined by 70 basis points as a percentage of sales. Our adjusted EBITDA grew by 15% year-over-year, and in the last 12 months, our adjusted EBITDA is now $297 million, up $54 million from a year ago, and our adjusted EBITDA margin is 22.4%. This growth is driven by our teens. They optimize and grow our business by developing and launching new products, expanding production capacity in key value streams, providing excellent customer service, and through strategic acquisitions. We believe we are very well positioned to capitalize on our strengths and continue to grow our market share as our markets improve. T3 is a great example of how we leverage the Woodington business system and how it shows up in our financial performance. and profitability for leveraging the WBS and its three growth drivers, innovation, transformation, and M&A, to maximize both our near and long-term success. Innovation is a big part of our growth strategy. Our ASME water tanks used for liquid cooling and data centers are a great example. Our pipeline is rapidly growing as data centers increasingly utilize liquid cooling solutions. In addition, innovation and new products have led to new store placements for balloon time, driving growth in our consumer business. Transformation has been a cornerstone of our operating strategy for some time. As new technologies emerge and we conceptualize and implement new tools that help transform our business, we're always focused not on how we did things yesterday, but on how we can do them better or more efficiently tomorrow. Our 80-20 initiative is a good example of that thinking, and we're very happy with our progress to date and excited about how we can continue to leverage that discipline. AI is now embedded across many of our applications, and our focus is shifting from experimentation to operational impact, deploying AI in specific workflows where it can drive measurable efficiencies, not just individual productivity gains. We also continue investing in automation as we gain efficiency opportunities for our colleagues. We're focused on acquiring companies in niche markets with sustainable competitive advantages. In January, we completed our acquisition of LSI. LSI is the leading U.S. manufacturer of standing seam metal roofing clips, components, and retrofit systems that enhances our position in engineered building systems. LSI's products are engineered into OEM certified roof systems creating meaningful requalification requirements and high switching costs. We're very happy the LSI team is now part of Worthington. Our integration efforts are off to a good start, and we're excited about the growth prospects that we have together. At the core of the WBS and at the core of Worthington is our culture and our philosophy. Our company was founded and grew up embracing the notion that people are our most important asset. Today, as visibly as ever, our people power our success. Part of our opportunity and our obligation as a U.S. manufacturer is to invest in and develop the workforce of the future. This year, we launched our largest career accelerator program to date. Our high school seniors spend 10 weeks developing career readiness on the shop floor and in the classroom. When these young men and women complete the program, they'll have a certified manufacturing associate credential and a full-time job offer from us. Our teams do not seek recognition for its own sake, but it is gratifying when we are recognized by others. For instance, Newsweek recently named us one of America's greatest workplaces for culture, belonging, and community for 2026. We were also named one of the world's most productive companies by L&S Research. While these awards do not independently drive our success, they reflect a group of talented individuals and teams doing things well and the right way. Teams like that are the kind you build around and that make you proud to come to work every day. Global events seem to be unfolding daily, and consequently, economic growth forecasts are cloudy. But we believe our value propositions continue to improve and to resonate with our customers. The demand in our end markets is steady and will grow as market conditions improve. Our strategies are solid and we're executing well. As we approach the end of our fiscal year, we believe we're very well positioned to continue growing orientation enterprises and creating meaningful value for all of our stakeholders. 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 Q3, reporting gap earnings of $0.92 per share compared to $0.79 per share in the prior year period. The current quarter included 6 cents per share of restructuring and other non-recurring items, primarily related to acquisition costs and the non-cash amortization of a portion of the inventory step-up associated with our recent acquisition of LSI. The prior year quarter included 12 cents per share of restructuring and other expenses, Excluding these items in both periods, adjusted earnings were 98 cents per share, up from 91 cents in the prior year quarter, and marking our sixth consecutive quarter of year-over-year growth in adjusted ETF and adjusted EBITDA. Consolidated net sales for the quarter were $379 million, up 24% compared to $305 million in the prior year quarter. The increase was driven by higher overall volumes in both building and consumer products, combined with the impact of recent acquisitions, which contributed $32 million in net sales for Q3. Excluding the impact of acquisitions, net sales increased $42 million, or 14% over the prior year quarter. Gross profit increased to $109 million from $89 million in the prior year quarter. Gross margin was 28.9% compared to 29.3% a year ago, with the modest contraction primarily reflecting the purchase accounting impact of the inventory step-up at LSI. Adjusted EBITDA increased to $85 million from $74 million in the prior year quarter, with an adjusted EBITDA margin of 22.3%. On a trailing 12-month basis, adjusted EBITDA increased $54 million, or 22%, to $297 million compared to $243 million in the prior year TTM period. This performance reflects the strength of our differentiated portfolio and the positive impact of the Worthington business system, supporting improved operating discipline and sustainable earnings growth, both organically and through acquisitions. Turning to our cash flow and capital allocation, our focus remains funding growth through acquisitions and reinvesting in our business while returning excess cash to shareholders via dividends and share repurchases. Capital expenditures totaled $14 million in the quarter, including $4 million related to our facility modernization project and consumer products. We returned capital to shareholders through $9 million in dividends and the repurchase of 100,000 shares of our common stock. Our joint ventures continue to deliver strong cash generation, providing $35 million in dividends during the quarter, representing 113% of equity income. Operating cash flow was $62 million in the quarter, and free cash flow was $48 million. On a trailing 12-month basis, free cash flow is now $164 million, representing a 95% free cash flow conversion rate relative to adjusted net earnings. Our free cash flow reflects elevated capital expenditures associated with our facility modernization projects, which totaled roughly $27 million over the TTM period. We have roughly $25 million of modernization spend remaining, The modernization project is on track and on budget, and we expect to complete it by mid-fiscal year 2027. After this investment is complete, capital expenditure should return to more normalized levels, supporting continued healthy free cash flow conversion over time. Turning to our balance sheet and liquidity, we closed the quarter with net debt of $306 million, resulting in a net debt to trailing adjusted EBITDA ratio of approximately one time. Our leverage remains conservative and we maintain ample liquidity with $495 million of availability under our revolving credit facility at quarter end, providing significant financial flexibility. Yesterday, our board of directors declared a quarterly dividend of $0.19 per share, available in June of 2026. Let me now turn to our segment performance. Building products delivered another solid quarter, reflecting the quality of our business and the efforts of our teams. We were pleased to close the LSI acquisition in mid-January, expanding our offering in the building envelope, and are excited to welcome LSI's team to Worthington. Q3 net sales grew 36% year over year to $224 million, up from $165 million in the prior year quarter. Growth was driven by higher overall volumes and contributions from acquisitions, which contributed $32 million in net sales. Excluding acquisitions, net sales increased 16% year-over-year, reflecting strong organic growth across multiple value streams, in particular our water and cooling construction businesses. Adjusted EBITDA for the quarter was $59 million compared to $53 million in the prior year quarter, with an adjusted EBITDA margin of 26.3%. The $6 million increase was driven by improved performance in our wholly-owned businesses, including approximately $5 million from recent acquisitions, partially offset by lower combined equity earnings from our joint ventures. WAVE continued to perform well, delivering year-over-year growth and contributing $27 million in equity earnings, while Clark-Dietrich's results were lower year over year in a challenging non-residential construction environment. Clark-Dietrich contributed $6 million compared to $9 million last year and improved modestly sequentially from Q2. Our integration plans for Elgin and LSI are on track, and the building products team remains well-positioned to continue to deliver value as we move forward. Consumer products achieved strong sales and earnings growth in the quarter, driven by the strength of our brands, discipline, execution, and continued demand across key categories. Net sales in Q3 were $155 million, up 11% over the prior year quarter, driven by improved volumes and higher average selling prices. Balloon Time continues to perform well, showing its agility with expanded retail placement paired with innovations like the Balloon Time Mini. Adjusted EBITDA increased to $35 million from $29 million in Q3 a year ago, with margins expanding 22.9% from 20.5%. The consumer team is poised to continue delivering value-added solutions that strengthen our customer relationships and position the business for sustainable growth moving forward. We delivered strong financial results in Q3. Our differentiated product solutions and discipline execution, leveraging the Worthington business system, are driving stronger operations, solid cash flow and returns, and resilient earnings growth, both organically and through acquisitions. At this point, we're happy to take any questions.

We will now begin the question and answer session. To ask a question, press star, then the number one on your telephone keypad. To withdraw your question, press star one again. Our first question will come from the line of Dan Moore with CJS Securities. Please go ahead.

Good morning. This is Will on for Dan.

Up 14%.

More than 14% organic revenue growth in the quarter, very strong. Can you talk about volume versus price? Was price much of a factor for either building products or consumer products?

Yeah, good question, Will. So we're very pleased on the organic growth rate overall, 14%. Organic, which you mentioned, building products was up 16%. Organically, that's the second quarter in a row. Building products up 16% organically. Consumer was up 11%. It was a mix of different factors there across the different value streams. Volume played a key role. Pricing played a role as well there. But overall, we continue to think about where we're heading organically In terms of the margins, we're trying to get to 30% and we've been in the high 20s over the past couple quarters. We continue to try to make progress toward that 30% gross margin range. And then just as important is making sure we control our SG&A and getting that below 20% as a percent of sales. A number of value streams were up from a volume, and then some were up from a pricing standpoint. I talked about in consumer products just volume and higher average selling prices, so the pricing factor was there more than others.

Yeah, and Willis, Joe, the only thing I would add is that volumes are definitely – increasing at the same time. And as Colin mentioned, there are some pricing dynamics in there as well. What sometimes gets lost is the benefits from the new products and NPD that we're seeing in the organic growth side. We talked about We talked about balloon time. Their store counts up 64% from a year ago. They're in 55,000 stores. That's driving a lot of growth. And we talked about the AFME tanks in data centers. That's just not... us raising price we're having more value of the same thing that's having new products that are available to either you know defend our existing businesses to increase the mode around our businesses or candidly to appeal to new customers and we're having success with all three which makes us pretty happy and pretty optimistic about the future thank you that's super helpful and looking forward can you add some color on the type of organic growth

you're expecting to generate in Q4 and over the next few quarters. And if you could break it out by building products and consumer products in the JVs. Thank you.

Yeah, that sounds suspiciously like giving guidance, Will, so we're not going to be able to do that. But we do believe that a lot of the trends that we have been seeing will continue. You know, we're always mindful in our businesses that there are pockets of strength. One of the things that really makes us feel good about our business is that we do have businesses and end markets that are influenced by different things. We're not over-indexed to a certain vertical or a certain industry. And so, yeah, we'll continue to drive organic growth as we optimize and grow the business. And we're certainly always looking for opportunities to grow through acquisitions as well.

Thank you.

Our next question will come from the line of Brian Beros with Thompson Research Group. Please go ahead.

Hi, good morning. This is Stephen Ramsey on for Brian. The comments on the tank business in the data center is certainly an interesting topic and one that our channel checks point to a stunningly bright picture for this segment over the next year or two at least. I'm curious, on two fronts there. Number one, how the pipeline is forming and your visibility into that demand for new data centers. And then secondly, is there much opportunity now or that's coming in the retrofit side of existing data centers?

Steven, it's still a great question. You know, for a lot of our value streams, Data centers are an important and a growing end market. You know, Wave, Clark-Dietrich, Elgin, LSI, and Amtrol, which is our water business, you know, to name a few. Specifically, on that water side, on the ASME side of business, the ASME cooling tanks that we provide are gaining significant traction as data centers increasingly embrace liquid cooling, and there are lots of things like chipsets and things like that that are driving that dynamic. You know, for us, Our business this year will probably triple. Importantly, next year we see additional incremental growth, and we honestly don't think it's a year or two. We think it's several years. We also don't think it's all coming at once because when you look at the announced data centers and the announced changes, there is a lag between those announcements and then when things get built and certainly when our solutions become part of the overall construction project. And so visibility-wise, we continue investing in people and process and engineering capabilities And so we feel really good about that business for the foreseeable future. You know, it's not just in the tech side of the business. I mentioned we have lots of other businesses that are benefiting from exposure and solutions going to data center. You know, we also don't want to over index to data centers either. it's not like this is half of our revenue but it is growing and we feel really good about it and and we feel good about the investments that we have made that have led to our success thus far and that we're continuing to make that's great color it all makes sense maybe a follow-on question on the same topic how do you feel about your capacity

producing all the various products that go into data centers and how do you think about managing that capacity given the outlook for multiple years is so bright?

Yeah, that's a great question. Certainly, we're not the only company that needs to sort that out, that the entire supply chain and ecosystem around data centers continues to be pretty dynamic. From our perspective, we continue to feel like we have capacity and we can grow and we have the ability to continue to think about the best ways to make sure that we are engineering these products and getting them into the hands of our customers on an efficient basis.

Okay, that's helpful. And then last quick one for me. One of the topics from the recent war issues is helium shortages. I'm curious if this is any impact for you guys.

Yeah, that is a great question. In the near term, as a domestic sort of supplier, what we do, our sources of helium are also domestic. And so never say never, but for right now, I think we're in good shape.

Okay, that's great. Thank you.

Our next question will come from the line of Walt Liptak with Seaport Research Partners. Please go ahead.

Hi, thanks. Good morning. Great quarter, guys. I wanted to ask about, I wanted to do some follow-ons to the data center question that was just asked. You ran through a couple of businesses. Wave, LSI, Amtrol, and I think there might have been another one that have exposure to data center. I wonder if you could, you know, maybe talk about them collectively. You know, how much, you know, how much revenue is there today? How much, what's the growth rate on all of those? And what do you think your best opportunity is, you know, from those multiple, you know, spots where you can go after data center projects?

Well, so as Joe mentioned, we play in a number of different verticals, different businesses to support the growth there. With Wave, it's more of the structural grid and then containment. And they have really solid teams in place and capabilities to capture the demand that they're seeing there, which is you know, fast and growing and feeling really good about that. Clark-Dietrich, more on the structural side, the products that they provide, they're seeing increased volume there, and they're able to capture that and feel really good there. On Elgin, we've talked about it with, you know, HVAC components and then strut products. You know, they've seen big increases in their demand over the past couple years related to data centers. And then on LSI, the metal roofing clips. So they're all, you know, growing quickly within each of these businesses. I mentioned last quarter, you know, it's less than 10%. of each of these businesses individually but uh in all cases it's the fastest growing area of these businesses so you would expect that to you know continue moving forward based on what we can see uh each of these businesses in different ways they're either making you know small investments in just resources to help capture the the demand And in some cases, small investments in equipment to make sure we can capitalize on the solutions that these data centers need. So, you know, Joe talked about our water business with Amtrol and we're excited about that opportunity. And our teams are just setting up their strategies to make sure we can capitalize on this moving forward. So we feel really good about that and touches a number of businesses and The teams are focused there for sure.

Okay, great. Okay, I'll change gears here and go into, you know, maybe just one, you know, during the quarter we had the situation in the Middle East change with U.S.-Iran. It didn't seem like it had much of an impact that was negative because the results were really good, especially the organic growth. But did you see any customer behaviors change in February, March? And, you know, how are things trending, you know, towards the end of March?

Sure. So, yeah, Middle East specifically, well, you know, things are pretty fluid at the end of Last week, things looked a certain way, and this week they look a bit more optimistic from the standpoint of getting the Strait of Hormuz open and getting goods and oil flowing to the world. It's a little difficult to forecast any tangible impacts that a prolonged closure would have beyond the obvious, which is that interruptions of global shipping are inflationary. And that just is what it is. And so specifically, energy costs are up, including oil, diesel, gas. Natural gas, other derivatives, that's true globally. This will have an impact on everybody, whether it's trucking, ocean freight, or anything else. There are other inputs that come out of the Middle East. Those will be impacted. And then specifically to us, our European LPG business has some customers in the Middle East, and right now we're unable to ship to those customers. So we're certainly hopeful that the situation gets resolved sometime in the near future, but... I would say, first of all, we're not at all over-indexed to the Gulf for oil prices, generally, since we're predominantly a U.S. manufacturer, but we will take steps to mitigate potential headwinds or price increases with fuel as they present themselves to us.

Okay, great. And then kind of along those same lines, in the consumer product segment, it looks like a really nice quarter. I wonder if you could talk about inventories, market share. You talked already about the selling price increases, but it seems, did they take their inventories down too low and then just bring them back up to a normal level? And you mentioned Bloonton market share gains. Are there other market share gains as a U.S. manufacturer that's helping the organic revenue?

Yeah, well, so as you said, consumer had a fantastic quarter. They were up 11%, you know, growth organically and a number of factors there. You know, the celebrations business, our balloon time business volume was up there. We've continued to gain share, gain new placements and layer on innovation. So a lot of initiatives, working well there and compounding on each other for good results on the celebrations category Our outdoor business volumes were up and we were able to capitalize on demand there. The tools businesses continue to perform okay, not up significantly, not down significantly. And we talked about some of the demand drivers within kind of repair and remodel activity that are key factors there. But Margins for consumer, they were up 240 basis points year over year versus the prior year quarter. That was factors I mentioned, higher volumes, improved pricing, favorable mix, and really good Q3 overall. Q3 and Q4 are seasonally strongest quarters in consumer products. We don't see any sign of overstocking. from an inventory perspective at our retailers. So feel good about just the demand dynamics there and things to come. Q3 being, you know, our strongest quarter typically.

Okay, great. Okay, thanks so much.

Our next question will come from the line of Susan McClory with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone.

Hey, good morning, Susan.

Good morning. Can you hear me okay?

Yeah.

Can you hear me? Okay. Okay. Perfect. I wanted to talk a bit about the state of the consumer with everything that's happened and going on in the world. Have you seen any change as you think about the spring and just how you're thinking about inventories and positioning, especially around the new products and all that momentum that you're seeing?

Sure. So say the consumer generally, for us consumer, for our consumer business, we're not broadly correlated with overall consumer trends that a lot of people focus on. Many of our consumer products are actually geared towards contractors or professionals. And in those value streams, demand is actually more akin to what you might see in building products, which is stable, steady conditions with a little bit of growth. In the more traditional consumer-focused value streams, Our products are a lot of times used to elevate the experiences that people are having as they replace more expensive experiences. And so our demand tends to be a bit more resilient than in other categories that you might see in consumer. From an inventory perspective, we're relatively steady. We approached the winter season with taping gas in March. in a pretty good spot, and we've partnered really well with our retail customers, and they exited Q3 in a pretty good spot, and we don't believe that they're kind of over-indexed or that the channel is overly full. But the one other dynamic, Susan, I'd point out is that we do continue to benefit from the innovation engine. We have opened new doors in gaining shares. We've talked about the things that are happening with balloon time. It's also true in the tools business. And overall, we've got a lot of things that probably won't launch in the next quarter. But over the next year, we've got a number of new products that are also coming to market that we feel pretty good about.

Yeah, okay, that's great color. Can you also talk a bit about the JVs? It seems like obviously with the macro coming through, you're still seeing some of those pressures in Clark-Petrick, but can you just give us an update on how things are moving there and also within WAVE, how you're seeing the dynamics and supply-demand in that part of the business? And anything as it relates to steel versus the pricing that you put earlier this year?

Sure. So, Susan, I think I understood your question. You're echoing quite a bit, but I think what your question is around the JVs and a lot of the dynamics there. And so I'll give it a shot, but if I miss anything that you're asking about, make sure you remind me. Take Clark Dietrich first. It's a great business. They are a market leader, but they're operating in a pretty tough environment. That environment will improve over time as market conditions allow. They improve sequentially in Q3. We do expect them to be relatively flattish to that number in Q4. But as we kind of look out and we think about interest rates and uncertainties, and that's headwinds. This is a time period where the team at Clark Dietrich is operating exceptionally well, and they have leaned out their processes. They have learned an awful lot about how to deal with different challenging environments that their customers are having. I think their customers are feeling better about them than they have in quite a while, and they really prioritize doing business with Clark Dietrich. And so we've got one more, I think, challenging comp for Clark Dietrich, but thereafter, you know, we expect them to continue to do all the things that they're doing and they'll, you know, increasingly contribute to EBITDA growth over the course of time and certainly getting into fiscal 27. And Wave, as you know, continues to be a great business. With the commercial market having less opportunities to grow, we are starting to see some green sheets there. We continue to see strength there in data centers and healthcare and education. The verticals, and people talk a lot about data centers, and their data centers generally are representative. representing a lot of the growth that's available in commercial. But that will ultimately change. And so when those markets turn and get better, the entire industry, I think, is poised to grow. They continue to do a fantastic job on their own with NPD. That's a great management team and a great leadership team. And our partner at Armstrong, we're very happy with that. Wave and all the work that continues to go in there and a relatively quash demand environment. They continue to do a fantastic job.

Okay, that's a great color. I'm just going to squeeze one more in, which is, is there any impact from the weather building products in a third quarter?

Again, great question. And so in Q3, you know, weather is actually a little bit of a mixed bag for us. So the cold and the storms that the eastern half of the country experienced, those starting in December, did drive demand for our camping gas and our other heating products. Those are used for emergency and supplemental heat and some cooking fuel in cases of emergency or lost power. At the same time, the cold and storms caused some delays on construction sites, which has an impact on a number of our businesses. And we actually lost several production days in our building product facility in the Northeast and a couple in the Midwest because of those storms. And in some cases, you can make up some of that production and shipping with some expensive overtime. Sometimes you simply lose those days. And in a roughly 60-day shipping quarter, those kinds of disruptions aren't needle-moving by themselves, but they do matter and they can put some pressure on customers. manufacturing and conversion costs. So overall, I would say that the weather, as is seasonally normal, was a modest positive for us overall.

Okay. Thank you.

Good luck with the quarter.

Thanks, Susan.

Again, to ask a question, simply press star 1 on your telephone keypad. Our next question is a follow-up from the line of Dan Moore with CJS Securities. Please go ahead.

Hi, this is Will, and again, just one more follow-up that I don't think was asked yet. Can you provide maybe more color and update on the LSI acquisition? How is performance and synergy realization tracking relative to expectations?

Yeah, Will, thanks for the follow-up.

So really excited about LSI. You know, we closed it midway through the quarter, so there's really just about six weeks of results left. in the quarter, but meeting expectations so far. We're in early days of integration, but really, really excited about that business. And the more we spend time with that team, the more is, you know, validating in our conviction you know, increases for what we can do together. You know, as a reminder, you know, they're a leading player in commercial metal roofing clips. This was an attractive, you know, niche driven by the re-roofing cycle and, you know, really strong margin profile and, you know, opportunities for us to really, you you know, capitalize on coming together and making this business better under our ownership. So really excited about that. And lastly, the team there is such a good cultural fit with ours. So we enjoy spending time with them and look forward to the things we can do together.

Thank you.

Our next question will come from the line of Brian McNamara with Canaccord. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. You know I'm going to ask about tariffs and tariff advantages. So I'm curious where you guys stand in your tariff advantage product relative to peers on a market share basis or however kind of way you want to posit it. I remember last quarter you guys said you needed to hire 40 more people at your plants to kind of meet increased demand for those products. And I think I partly drilled part of the gross margin degradation last quarter. So where are we as it relates to kind of tires and kind of your perceived advantage there? Thanks.

Sure. Brian, good morning. You know, a lot has changed, but there has not been a lot of resolution around tariffs in the last couple months. But, you know, from our perspective, we still think that we're a net beneficiary of the tariffs that are announced and in place. And as you know, in a lot of our value streams, we are the only domestic manufacturer of certain products. And so potential poor competitors need to navigate the Section 232 tariffs, which was not at issue with the Supreme Court. So a level playing field is always a good thing for us. I believe we have taken market share in multiple value streams and we did absolutely chat in December about the fact that we have added some manufacturing colleagues to meet demand in those businesses. And so we continue to feel like our solutions are resonating and that the competitive dynamic is such that we have the opportunity to compete on the merits and the value that we bring to our customers and that makes us feel really good we've talked about this but we do have some tariffs impacts that are negative to us whether it's you know commodity costs or certainly in the consumer business the products that are manufactured overseas and so there's the three minutes that we always leverage are asking our suppliers to partner with us and offset some of those additional costs you know we could continue to try and leverage tools and take costs out of our own supply chains everywhere we can. And then if we need to, we contemplate pricing actions. And we do feel like we're where we need to be in all three of those areas right now. And so you think about aluminum and brass, there's also been talk of these various potential refunds and things like that. We actually don't think that Those are going to happen anytime soon. It's just me personally. I'm not sure that the government's going to readily suggest that they want to give a couple hundred billion dollars back. And so there have been some states or some companies that have actually filed suits. But from that IEPA dynamic, we're going to wait and see how that plays out. But yeah, we continue to think about our business and what we can control and our teams are doing a phenomenal job there and actually brian if you think about it for a second when we talk about our strategy and action you know there there are there are a few numbers that that might help to tell the story you know the nine months ended in q3 uh you know we've grown our top line by 175 million dollars In between increases in our gross margin and a decrease in our SG&A percentage of sales in that same nine-month period, our adjusted EBITDA margin is up 220 basis points in the wholly owned businesses. And so you've got a little bit of a decline contribution from the JVs. But overall, I think that's – if you think about what our strategy really is, which is to optimize and grow our businesses and to keep our SG&A flat as we grow, as Colin mentioned, that's what we're seeing. And then the environment, back to your tariffs question, the environment that we're in, we believe it's steady and it's likely to continue this way unless something unforeseen – and look, there's a lot going on in the world –

based on what we can see right now we think steady as she goes from a demand perspective with with some green sheets in some places so it makes us pretty optimistic great that's really helpful i appreciate the the color on the data centers it's becoming a bigger topic for you guys and obviously the market in general i think when you guys split it was a pretty small part of your business i was hoping you guys could contextualize kind of where you are if you I understand if you don't want to quantify per se, I think Colin mentioned it's less than 10% of some of your business lines. But like, how big is it today on a qualitative or quantitative business? And how big do you think you can get over the next couple of years?

Yeah, Brian, so I'll start there and appreciate the question. I mean, it's I think all we can say there is it is it's

you know, helping grow a number of our businesses and offsetting, you know, some softness in other markets. And then we're doing our best to develop strategies to support this demand. You know, it's unique in each of these value streams. And so I mentioned earlier, whether it's people or equipment or capabilities or partners, You know, we are leveraging all of those tools to develop the best solutions to capture this demand. It is a focus of ours, you know, because we we see the growth opportunity. But to Joe's point, we're not over indexed to it by any means. So we're trying to be smart about how we spend our time and resources. But it is it is an opportunity to capture more incremental growth for us and You know, if, you know, if things play out as we expect, you know, the percentage share across these businesses will increase to data centers as we move forward. And, you know, that's the best way we could characterize it, you know, on top of what Joe shared specifically about our water business.

Yeah. And I mean, Colin did a really nice job of. of kind of trying to frame size-wise what this is for us. I do think it'll be bigger a year from now than it is right now. We have made investments. Our solutions are resonating, and we are developing. In some places, these are buildings, and buildings need certain things. In other environments, these are very purpose-built buildings that need very specific things. And so our solutions have been customized in a lot of cases. The other thing that people sometimes focus a lot on data centers, but data centers are, in fact, representing a lot of commercial construction. And so as commercial construction improves, Generally speaking, volumes in a lot of these spaces will go up because commercial conditions normalize and you still have the data center growth that really we expect to continue for five plus years. I think that'll add a lot of specific activity around construction and retrofit.

This concludes our question and answer session. I will now turn the call back over to Joe Hayek for closing comments.

Thanks, everybody, for joining us this morning. We appreciate your time. Have a great week. We look forward to speaking with everybody again soon.

This concludes today's conference call. Thank you all for joining. You may now disconnect.