Worthington Enterprises, Inc.

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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Conditions across our key end markets remained soft and uneven throughout fiscal 2026, with improvement in some forward-looking indicators offset by continuing weakness in current activity. In residential construction, U.S. private housing starts fell 8.7% year over year in May 2026, reaching an annualized rate of 1.2 million, the lowest monthly pace since May 2020. Authorized housing permits registered 886,000 units on a seasonally adjusted annualized basis in May 2026, below prior-year levels and consistent with the cautious builder posture reflected across the market. The HMI finished the fiscal year at 37 in May 2026, marking 25 consecutive months below the 50-point threshold that signals favorable conditions, as elevated mortgage rates near 6.5% and geopolitical uncertainty continued to suppress buyer demand. In non-residential construction, the ABI registered 44.5 in May 2026, remaining below the 50-point expansion threshold for the 41st consecutive month; billings have not crossed into growth territory since January 2023. The DMI rose 5.9% in May to 275.7, and stood 33.8% above the May 2025 level, driven primarily by data center and healthcare planning activity. While the DMI's sustained elevation signals stronger construction activity in future periods, the gap between planning momentum and current billings reflects a non-residential market still working through a prolonged contraction cycle. Within repair and remodel, the LIRA projected approximately 2.1% year-over-year growth through the first quarter of calendar 2026, decelerating to 1.6% by the fourth quarter and only 0.5% by the first quarter of calendar 2027, reflecting slowing remodeling permit activity and persistently weak housing turnover. We believe near-term demand across our construction-facing end markets will remain constrained by the elevated rate environment, while the strengthening non-residential planning pipeline and recurring purchase patterns are expected to provide support to overall volumes as we enter fiscal 2027.

Factors Affecting Operating Costs

Raw Materials

Our largest raw material expenditures include cold-rolled and hot-rolled steel, propane, propylene, and aluminum. Fluctuations in the prices of these inputs have a direct impact on our cost of goods sold and financial performance.

Steel: Steel is our most significant direct material cost across both Building Products and Consumer Products. During fiscal 2026, hot-rolled steel prices averaged $919 per ton for the fiscal year, compared to approximately $755 per ton in fiscal 2025. Prices entered fiscal 2026 in the mid-$800s per ton and softened through the first half, reaching a low of approximately $808 per ton in September 2025, as demand conditions were relatively subdued. The market shifted meaningfully in the second half of fiscal 2026. Beginning in December 2025, prices rose each successive month, closing May 2026 at approximately $1,081 per ton. Cold-rolled steel prices followed a similar pattern, averaging approximately $1,093 per ton in fiscal 2026, compared to approximately $999 per ton in fiscal 2025, declining through the first half before rising through the balance of the fiscal year consistent with the trend in hot-rolled steel. The expansion of Section 232 tariffs on imported steel from 25% to 50%, effective June 4, 2025, contributed to domestic price appreciation, particularly as the tariff impact worked through the supply chain during the second half of the fiscal year.

Aluminum: Aluminum prices increased substantially in fiscal 2026, reflecting a combination of tightening global supply conditions and the expansion of Section 232 tariffs on aluminum imports, which increased from 25% to 50% effective June 4, 2025. Prices were relatively stable through the first half of fiscal 2026 before accelerating sharply in the second half as the tariff impact worked through the supply chain and global supply constraints intensified. By the end of fiscal 2026, prices had reached levels meaningfully higher than where the year began. These increases affected input costs across aluminum-intensive components, including fuel cylinder valves and other assemblies. Where possible, we mitigated the impact of rising aluminum costs through forward purchasing arrangements and supplier negotiations, though the overall commodity environment remained a headwind throughout the year.

Propane, propylene, and other gases: Propane represented a meaningful offset to higher metal costs during fiscal 2026. Prices softened through most of the fiscal year, reflecting ample domestic supply conditions, before partially recovering in the fourth quarter. Despite the recovery, propane ended the year meaningfully below prior year levels, providing a favorable tailwind to input costs in both Building Products and Consumer Products. Propylene prices also declined during fiscal 2026, driven by abundant Gulf Coast supply and softer downstream demand conditions in North America. A portion of our propane and propylene requirements are secured under fixed-price supply agreements, which limited our exposure to spot price fluctuations during the year. Costs for certain other industrial gases were lower compared to the prior year, providing a margin benefit in select product lines within Consumer Products.

We continue to actively monitor commodity markets and maintain a diversified sourcing strategy to ensure continuity of supply and cost discipline. Our approach to material procurement supports margin stability and helps mitigate the impact of input price volatility on our results.

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Seasonality

Historically, net sales in both Building Products and Consumer Products tend to be stronger in our fiscal third and fourth quarters. In Building Products, this seasonality is generally driven by weather conditions, customer business cycles, and the timing of renovation and new construction projects, while in Consumer Products, it is driven by our facilities performing at seasonal peaks, matching consumer demand.

Results of Operations

Fiscal 2026 Compared to Fiscal 2025

The tables throughout this section present, on a comparative basis, our consolidated results of operations for the periods presented. For a discussion of the non-GAAP financial measures presented in the following table, as well as a reconciliation of the differences between each non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP, refer to the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-K.

Net Sales

The following table provides a breakdown of consolidated net sales by operating segment for the periods indicated:

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Gross profit

Gross profit was $378.3 million in fiscal 2026, an increase of $59.3 million, or 18.6%, over the prior fiscal year, on higher overall volume, including contributions from our fiscal 2026 acquisitions, and higher average selling prices. While gross profit was up over the prior fiscal year, gross margin was relatively flat as the impact of higher overall volume and higher average selling prices was partially offset by higher amortization of the inventory step-up associated with the LSI and Elgen acquisitions.

SG&A