Worthington Q1 Sales Rise 13% as Data Center Tank Demand Accelerates

Worthington Enterprises, Inc. (NYSE: WOR) reported a 13% increase in fiscal 2027 first-quarter sales to $344 million, driven by 7% organic growth and $19 million in revenue from recent acquisitions. Adjusted earnings per share rose to $0.82 from $0.78 in the prior-year quarter, while adjusted EBITDA grew 10% to $74 million. The results arrived despite headwinds from the A2L refrigerant transition, muted new-home sales and constrained steel availability.

Cash generation strengthened significantly during the period. Operating cash flow increased to $67 million from $41 million a year earlier, and free cash flow nearly doubled to $54 million from $28 million. Chief Financial Officer Colin Souza noted that trailing 12-month free cash flow reached a record $196 million, representing a 116% conversion rate relative to adjusted net earnings. The company repurchased 335,000 shares for $18 million and paid a quarterly dividend of $0.20 per share, ending the quarter with net debt of $250 million.

Building Performance Solutions, formerly Building Products, posted a 16% sales increase to $215 million. Acquisitions contributed $19 million to that total, while organic sales rose 6% on strength in water and European businesses. Segment adjusted EBITDA remained essentially flat at $60 million, with a margin of 27.8%. Souza attributed the flat EBITDA comparison to the normalization of A2L refrigerant-cylinder demand following a period of unusually strong inventory building. He estimated this comparison reduced first-quarter adjusted EBITDA by approximately $7 million, more than previously expected. Management expects the second quarter to remain a difficult comparison but anticipates improvement in the seasonally stronger third and fourth quarters.

President and Chief Executive Officer Joe Hayek characterized the A2L situation as a timing issue rather than a structural change, noting that new residential equipment now largely uses A2L refrigerants. He also cited tight steel supply and extended lead times as factors that disrupted production schedules, stating the issue likely cost the company "a few million dollars" in the period.

Data-center demand emerged as a key growth driver. Revenue from ASME tanks used in liquid-cooling and thermal-management systems reached $13 million in the quarter, following approximately $13 million in shipments during fiscal 2026. Management expects this revenue stream to grow sequentially through fiscal 2027, with growth weighted toward the back half of the year. Hayek cautioned that the current opportunity pipeline is not yet revenue, as data-center projects can take 18 to 24 months to move from announcement to equipment demand. Industry sources indicate the market for these tanks could become more than 10 times the size of the legacy market over the next several years.

Trade and Specialty Solutions, formerly Consumer Products, saw sales rise 8% to $129 million. Adjusted EBITDA increased to $24 million from $16 million, expanding the segment's adjusted EBITDA margin to 18.6% from 13.6%. Souza credited the improvement to higher volumes, average selling prices, stronger manufacturing performance and a net pretax benefit of about $4 million, or $0.06 per share, from IEEPA tariff refunds. Portable propane and tools recorded broad-based growth, while Balloon Time saw lower volume due to a strong prior-year comparison and steel constraints.