On Wednesday, Worthington Enterprises (NYSE:WOR) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/812708534
Summary
Worthington Enterprises reported a 13% year-over-year increase in sales for Q1 fiscal 2027, with a 7% organic growth component. Adjusted EBITDA rose 10% to $74 million, and free cash flow nearly doubled to $54 million.
The company faced challenges in its Building Performance Solutions segment due to cooling and construction headwinds, steel availability issues, and lower demand for A2L refrigerant cylinders, but saw strong performance in Specialty Solutions and its water business.
Worthington is leveraging the Worthington Business System transformation for growth, focusing on disciplined M&A, innovation, and 80/20 optimization to improve productivity and allocate resources effectively.
The company highlighted significant growth opportunities in the data center market, particularly with their ASME tanks for liquid cooling, projecting substantial market expansion in this area.
Management expressed confidence in their strategy and future growth, citing a strong balance sheet, effective cash flow generation, and a healthy M&A pipeline, while acknowledging ongoing market uncertainties.
Full Transcript
OPERATOR
The Worthington Enterprises Fiscal Year 2027 First Quarter Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Marcus Rogier, Treasurer and Investor Relations Officer. Marcus, please go ahead.
Marcus Rogier, Treasurer & Investor Relations Officer
Thank you, Paige. Good morning everyone and thank you for joining us for Worthington Enterprises first quarter fiscal 2027 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 risks 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 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.
Joe Hayek, President and Chief Executive Officer
Thank you, Marcus. Good morning everyone. Welcome to Worthington Enterprises fiscal 2027 first quarter earnings call. We had a strong start to fiscal 2027. While we faced some market and operating headwinds, our team continued to execute, serve our customers and make progress on our strategic initiatives. I want to thank my colleagues around the world for the focus, creativity and grit they bring to Worthington every day. In Q1 we grew sales by 13% year over year, including 7% organically.
Adjusted EBITDA increased by 10% to $74 million, and we generated $54 million of free cash flow, nearly double the prior year quarter. Adjusted EPS was $0.82 compared with $0.78 a year ago. We continued to deploy capital thoughtfully in the quarter, including the repurchase of 335,000 shares of our common stock. While we're pleased with our progress, the quarter was not without challenges. Building Performance Solutions, as we anticipated, faced headwinds in our cooling and construction business as channel inventories are right-sized and new home sales are muted.
Demand for newly mandated A2L refrigerant cylinders is lower than it was a year ago, creating a difficult comparison. Additionally, steel availability across the industry remains tight and lead times in the quarter were extended. That dynamic created some disruptions in production and scheduling for both cooling and construction and for our balloon business. Our teams are actively working through these issues every day, prioritizing our customers and ensuring that we are the best partner that we can be.
While we faced some headwinds in the quarter, our performance was a reflection of our businesses and our people: resilient, creative. Specialty Solutions delivered strong sales and EBITDA growth as that team continues executing at a high level. Our water business is performing very well as our 80/20 work matures and helps us focus resources on the products and opportunities that create the most value. WAVE and ClarkDietrich also delivered higher equity earnings and were important contributors in the quarter.
When we optimize and grow Worthington, our strategy is not complicated. We're leveraging the Worthington Business System transformation to improve our businesses, disciplined M&A to add capabilities and strengthen our portfolio, and innovation to grow organically where we have attractive opportunities. We continue to use 80/20 to optimize our businesses as we sharpen our focus, improve working capital and allocate resources where they matter most.
We've seen meaningful progress in our water business and are now extending that discipline into our portable fuel and torch businesses. We're also continuing to improve productivity through automation, AI-enabled tools and other transformation initiatives. We remain disciplined about growth through M&A and we're focused on opportunities where we believe we can bring unique advantages as an owner and create long-term value. Our integration of LSI continues to progress well and there we're focused on reaching more prospective customers and introducing them to LSI's compelling value proposition.
I want to spend a little more time this morning on organic growth because we're increasingly seeing our innovation capabilities translate into meaningful commercial opportunities. One of the most topical examples of the kind of organic growth opportunities we're trying to create and develop at Worthington is our engineered ASME tanks. These engineered tanks have played an important role in commercial buildings across the world for decades. Increasingly, as new ship sets generate significantly more heat, data center designers and operators are embracing liquid cooling.
Engineered tanks like ours help manage the cooling fluids used in liquid cooling systems and, as such, are a critical component of those data centers and the cooling infrastructure. We've been a market leader in these engineered ASME tanks for years, a market we believe has consistently been plus or minus $200 million a year for some time. Given the projected growth in data centers and the increasing adoption of liquid cooling in those data centers, industry sources suggest the market for liquid cooling and thermal management in ASME tanks alone could be more than 10 times the size of the legacy market in the next few years.
To grow in and with this important end market, we took capabilities we already had, listened closely to our customers, leveraged our engineering and innovation expertise, and created an emerging suite of liquid cooling and thermal management solutions. As a result, what started as a promising new application for us has quickly developed into an increasingly meaningful growth opportunity. As a reminder, in fiscal 26 we shipped roughly $13 million of ASME tanks for data centers.
In the first quarter of fiscal 27, we generated an additional $13 million of revenue from that value stream, essentially matching what we did in the entire prior fiscal year. Near term, we believe that our ASME tank revenues will continue to grow sequentially quarter over quarter through the balance of this fiscal year. In addition, while this market is in the early stages of development, our pipeline suggests that (1) our solutions can play a meaningful role in this evolving architecture and (2) the market's growth is continuing to accelerate.
To be clear, a pipeline is not revenue, and there is always some uncertainty around the timing and conversion of these opportunities. But the size and the quality of the opportunities in front of us is encouraging, and we are investing in equipment, engineering talent and production capacity to support the customers we're servicing today and the opportunities we see ahead. Solid financial results we're generating and the great opportunities ahead of us are a credit to our people.
Worthington has always believed that people are our most important asset. That is as true today as it has ever been. As an example, we were recently named one of America's Most Innovative Businesses for 2027 by Business Insider. Criteria included the number and impact of companies' technological innovations, the reputation among peers for fostering innovation, and how a company's investment in R&D compares to others in their industries. We were also recognized in the quarter by USA Today and Points of Light as one of America's most charitable companies.
This honor reflects our deeply rooted commitment to communities where we live and work, including volunteerism and support from the Worthington Companies Foundation. Much is being asked of our teams every day as we navigate volatile markets, geopolitical instability, inflation, elevated interest rates, supply constraints and operational challenges. We're very grateful for the way our colleagues continue to prioritize our customers and one another.
We're proud of how we started our fiscal year. There's more work to do, but we continue to see tangible evidence that our strategy is working. We see it in organic growth driven by innovation, in productivity gains through transformation and successful M&A integration, and ultimately in cash generation. In addition, our end markets, brands, capabilities and strategy position us exceptionally well to continue driving profitable growth. Most importantly, we have a talented team that cares deeply about each other, our customers and our company.
Before I turn it over to Colin, who will spend a few more minutes on our financial performance in the quarter, we'd like to remind everyone that we'll be hosting our Investor Day in New York on November 10th. We're looking forward to discussing our businesses, the opportunities we see for profitable growth, and how we're positioning Worthington Enterprises to create long-term value. We hope you'll join us.
OPERATOR
We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question, and to allow for optimum sound quality, if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Biros with Thompson Research Group.
Your line is open. Please go ahead.
Brian Biros, Analyst at Thompson Research Group
Hey, good morning, everyone. Thanks for taking my questions today.
Joe Hayek, President and Chief Executive Officer
Morning, Brian.
Brian Biros, Analyst at Thompson Research Group
Brian, I want to—morning. I want to start with a question just about the steel market overall. You know, you mentioned it's tight, lead times extended, not the ideal supply chain setup, but Worthington should be in a position to, I guess, navigate that better than almost every other competitor you guys have. So maybe help us understand kind of where things stand today in the field and kind of what Worthington can do that others can't to navigate that.
Joe Hayek, President and Chief Executive Officer
Sure, Brian, it's a very topical, good question. And the steel market has absolutely tightened. You know, we are seeing longer lead times and certainly, you know, the price of steel has come up in certain areas. You know, it probably did start last fall when 232 tariffs on imported raw steel doubled. That really chilled imports. And since then, you've seen the price of steel creep steadily up, and the market started to see some lead times get extended.
That was certainly the case in Q1. But as you say, tight markets can create challenges, but they are also environments where we think some of our capabilities really do matter. We're a pretty sophisticated buyer of steel. We have very strong supplier relationships, and we have a broad manufacturing footprint that gives us additional options to manage through periods of constrained supply. So we've been actively managing in that environment by looking across suppliers, products, and our network to be sure that we're serving customers and maintaining access to materials.
When it's been appropriate, we have taken pricing actions as well, since input costs have increased the way that they did. So the availability was a headwind for us in Q1, particularly, as we mentioned, in cooling and construction and lead time. We do think that we're better positioned going forward, certainly through the end of the calendar year. Beyond that, we have limited visibility. That doesn't mean we necessarily think that it'll get worse again beyond that, but as I said, we just don't have a lot of great visibility kind of into the new calendar year.
We ultimately think about that as it probably cost us a few million dollars in the quarter.
Brian Biros, Analyst at Thompson Research Group
Okay, thank you. And then follow-up, I guess, would be on maybe on the JV. WAVE up 8%—great to see on an already pretty strong comp anyway. So maybe some more clarity on kind of what the driving factor for that was. If that's data center demand starting to flow through distribution yet, is that pricing just from steel, just strong core end markets? More commentary on kind of the demand for that would be helpful. Thank you.
Joe Hayek, President and Chief Executive Officer
Sure, Brian. So Wave, as you mentioned, another really excellent quarter, delivering record equity income of $35 million. And we continue to be very pleased with the performance of that business and the team there. The end markets at Wave remain generally stable, although performance varies by sector. So education, healthcare, transportation, and, as you mentioned, data centers continue to remain healthy and drive volume, while channels like retail and office are a little more muted.
Wave also does benefit from meaningful exposure to repair and remodel activity, which tends to be more resilient than the new commercial construction space. So they're a little insulated there, which is good. The team continues to really innovate around solutions that help contractors reduce labor and improve installation efficiency, and that's always going to be valuable in the market. They continue to create meaningful value for their customers that way, and that supports the attractive economics of the business.
More broadly, Wave is just a great example of the types of businesses that we like to own. They're a market leader in an attractive niche with strong customer relationships, differentiated products, and the ability to perform very well across different market environments. As we look into Q2, there is normal seasonality to the business. Q1's a strong quarter for them, always during the year, but we would expect, as we look into Q2, some sequential moderation.
Overall, they remain very healthy and we're very confident in the team there.
Brian Biros, Analyst at Thompson Research Group
Great, thank you.
OPERATOR
Your next question comes from the line of Walt Liptak with Seaport Research. Your line is open. Please go ahead.
Walt Liptak, Analyst at Seaport Research
Hi, thanks. Good morning, guys, and good quarter. I wanted to ask about the data center product, and it sounds like you hit the targets that you set out to get the 13 million. I wonder if you can talk about just the experience during the quarter, any ramp costs or productivity that you're working through, and as you've been able to maintain and come out with new ASME products, are you able to get more visibility beyond what you've talked about in the past, which is getting to that run rate of $13 million in revenue per quarter?
Joe Hayek, President and Chief Executive Officer
Sure, Walt. Good morning. We're talking here about ASME tanks. ASME stands for the American Society of Mechanical Engineers. It's a certain code and approval process. These are tanks that are used in liquid cooling systems that support next-gen computing infrastructure. They're purpose-built vessels used for liquid cooling and thermal management. We've actually been in this business for a long time. We've been innovating in pressure and hydronic systems for 80 years.
In fact, Amtrol invented the first pre-pressurized, not to get too technical on you, diaphragm expansion tank seventy years ago. So this isn't new to us. But as we listened to customers and understood what they needed to accomplish, we knew we could be helpful. So we leveraged our core competency, our engineering and innovation expertise, and created this emerging suite of solutions that really do help our customers solve problems they're trying to solve.
You said it: $13 million last year, $13 million in Q1. We do think that we should grow sequentially in Q2, Q3, and Q4, with more of that growth being weighted to the back half of the year. Keep in mind that this market is still developing, and these opportunities are sometimes 18 to 24 months removed from an announcement that you might hear about a data center being greenlit. We do think that we'll have some variability from quarter to quarter, but this is a multi-year opportunity.
We think it's accelerating, and as I mentioned before, we think that the liquid cooling and thermal management market just for data centers could be 10x what the legacy market was in the next few years. We absolutely have invested and are continuing to invest in engineering talent, in new equipment, and in production capacity, as we really are trying to be—and believe that we're very well positioned to be—part of the solution. If you think about the way people describe this market, they talk about hyperscalers, data center builders, and then ultimately we get into the picks and shovels that make those data centers work.
It's oversimplifying, but you can think of our solutions as types of picks and shovels. We make various kinds of tanks and separators, but what really sets us apart are the services that we can provide around these solutions: our engineering expertise, our design expertise, ultimately helping our customers design or refine their designs for these fluid management solutions. Ideally, if we're good, we get spec'd in—think about things like the basis of design.
We like to get spec'd into some of these designs as we go forward, and I think we'll be able to grow in and grow with this market pretty nicely.
Walt Liptak, Analyst at Seaport Research
Okay, thanks for that. Appreciate it. And yeah, good luck with that rapidly expanding market. I wonder if you could talk about the strategy that you guys are going after. I think you've talked about some capacity expansions. You just mentioned engineering and production. I wonder if you can talk about what you're doing there.
Joe Hayek, President and Chief Executive Officer
Sure. It is a pretty fulsome approach, heavy on design, engineering, and process. A lot of capacity expansion and investments in our own facilities, but in cases where it makes sense for somebody else to manufacture these, we've got a group of partners that we are relying on and partnering with to help us essentially expand our own capacity—do the design work, do the commercial work, do all the things that need to happen—but ultimately take advantage of some capacity that's already in the ground.
Walt Liptak, Analyst at Seaport Research
Okay, great. Okay, thanks. I'll get back in queue. Thank you.
OPERATOR
As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Susan Maklari with Goldman Sachs. Your line is open. Please go ahead.
Susan Maklari, Analyst at Goldman Sachs
Thank you. Good morning, everyone. My first question is around the broader state of the consumer and what you're seeing there. It sounds like, from what we're hearing from the homebuilders, things certainly moderated in the quarter as rates rose and the geopolitical environment. Can you just talk a bit about what you're seeing now and what that implies as we think about growth in the next couple quarters?
Joe Hayek, President and Chief Executive Officer
So, within Trade and Specialty, one of the reasons that we decided to realign and rename those, Susan, as you know, is an awful lot of our products that were sold through what's historically been consumer end up in the hands of contractors. They're working on commercial buildings or in residential buildings. For us, it's really around that team continuing to execute exceptionally well. They've got good pricing discipline, they've done a really good job commercially, and there's a lot of energy around NPD and new products that we expect to see in the back half of our fiscal year.
I would say generally, yeah, you're right, interest rates are still high, but people are still repairing and remodeling. Unemployment is still pretty low, and we've always used unemployment as a pretty good indicator for us. We haven't seen any material weakness in our customers. Point of sale is hanging in there, and we think that our products are awfully resilient and have typically shown that way. It's not as though the market's worse than it was in the past three years, so it's been relatively steady from that perspective.
Susan Maklari, Analyst at Goldman Sachs
Okay, that's helpful. And then can you also give us an update on the integration of the recent acquisitions that you've done and any comments on the M&A pipeline in general, given the operating conditions and the move in rates?
Colin Souza (Chief Financial Officer)
Yeah, thanks, Susan. So I'll take the pipeline question first. We continue to see a healthy pipeline of opportunities— a slight uptick, if anything, more recently with activity there, which is good. As you know, we're focused on businesses where we see strong strategic and cultural fit. These are in attractive niches and where Worthington Enterprises has a clear opportunity to create some additional value. We've got a strong balance sheet, really good free cash flow generation like we talked about earlier, and low leverage.
That creates significant financial flexibility for us to pursue these opportunities when they make sense. Our capital allocation framework is balanced, as you know, with a bias towards growth, and we're actively evaluating opportunities. We feel good about what we're seeing there. On the recent acquisitions, we continue to feel pretty good about our most recent acquisitions, both Elgin and LSI. In the quarter, the acquisitions contributed approximately $19 million of sales.
With Elgin specifically, we've made good progress on that integration—it's been over a year at this point. We're focused heavily on the operations and deploying the Worthington Business System to really realize the full potential of the business. The commercial HVAC end markets that they serve remain pretty healthy, and we continue to believe Elgin has significant opportunity over time. On LSI, that's our most recent acquisition—we closed in January.
It's earlier in the integration process, but we are very pleased with performance there. It's a high-quality business with really attractive margins and a strong position in a very specialized niche. They're a critical component of the overall metal roofing system, which is an attractive market to be in. We're increasingly focused on LSI with how we can deploy Worthington's capabilities to accelerate growth. We think that's the real unlock for LSI.
Most importantly, both of those businesses, Elgin and LSI, are great cultural fits. People are our most important asset, and with acquisitions we'd much rather spend our time improving operations and expanding commercial opportunities than trying to change the culture. In both cases, we feel pretty good about the teams there and the culture at those businesses.
Joe Hayek, President and Chief Executive Officer
Yeah. And Susan, the only thing I would add—Colin's absolutely right—when you talk about the increase in rates and the rate environment, that's actually a good thing for us. We, as you know, have a pretty good balance sheet and have a fair amount of liquidity. If competitive situations arise for acquisitions that are borrowing-based, our borrowing base is probably going to be better than a lot of the folks that we might be in competition with. So environments like this are actually better for us, relatively speaking, than when interest rates are very, very low and capital is everywhere.
Susan Maklari, Analyst at Goldman Sachs
Yeah. Okay, that's very helpful. Thank you both for the color and good luck with the quarter.
Joe Hayek, President and Chief Executive Officer
Thank you, Susan.
OPERATOR
Your next question comes from the line of Walt Liptak with Seaport Research. Your line is open. Please go ahead.
Walt Liptak, Analyst at Seaport Research
Okay, thanks. I've got a couple of follow-ups. One on the free cash flow, as you guys pointed out, was very strong. I wonder if you could talk about some of the programs that you guys are doing to improve working capital, and is that a one-time inflow of cash from working capital accounts, or can you continue to generate high levels of free cash flow?
Marcus Rogier, Treasurer & Investor Relations Officer
Yeah, so thanks, Walt. This has been an important point for us and we're really pleased with the cash flow generation. As you mentioned, as we talked about earlier, up 26 million year over year from operating and free cash flow standpoint, 196 million in free cash flow on a trailing 12-month basis. That's the highest it's been. The working capital measures we've been very intentional about have been helping us drive that free cash flow generation, and we believe it is sustainable.
We've been working hard with our teams to continue to pull levers to really compound our cash flow, and in particular it's showing up, as we talked about, in our working capital. And so just from a cash conversion cycle standpoint, just over the last year I think we're down about eight or nine days, which we're really pleased with over that period. And then just from a net working capital as a percent of sales, we're down I think almost 3% just over the last couple of years.
And so that's a lot of, you know, incremental things: working around customer terms, working around our supply base, and then just more efficiently and effectively managing inventory. Things like 80/20 always play a role in that as well. And so we're really pleased with the performance and do view it as sustainable as we move forward. You know, we're going to continue to drive that free cash flow generation. And you know, there is some normal kind of cyclicality or seasonality to it.
We do have an extra tax payment in Q2, which is normal course, but outside of that, we feel pretty good from a free cash flow standpoint.
Walt Liptak, Analyst at Seaport Research
Okay, all right, thanks for that insight. And then just the last one for me, the A2L, tough comparison. You know, we saw that last quarter, you know, it's here again. How, you know, that inventory correction that's going on, how long do you think it'll take to clear? Do you expect more, especially in the second quarter going into the end of the calendar year? And at what point do you think we start getting onto a positive comp?
Joe Giannetti — General Manager - Cooling, Construction and Specialty
Yeah, so Walt, that transition did have an impact in the quarter. The unfavorable mix was primarily driven by the cooling construction business, and the difficult comparison there related to A2L. Just a little more background there: the prior year benefited from this unusually strong demand as manufacturers, distributors, contractors simultaneously established inventory ahead of this regulated transition. And that included kind of heavy demand on our products, obviously.
And we estimate the year-over-year impact to adjusted EBITDA this quarter was approximately $7 million, which is more than we anticipated a quarter ago. And Joe mentioned this earlier, channel inventories are taking a little longer to normalize, and particularly against the backdrop of the muted housing environment. We expect Q2 to remain a difficult comparison because that prior-year quarter benefited from the A2L-related volumes. But as we move to the second half of the year, Q3 and Q4 are seasonally stronger in this market, including in construction, so we do expect normalization there.
And importantly, we continue to view this primarily as more of a timing and comparison issue rather than a change in the long-term fundamentals of the business. Nearly all the new residential equipment now utilizes A2L refrigerants, and so every new installation expands the installed base for our products, and over time that should create a growing service and repair opportunity for the products that we sell into the space.
Walt Liptak, Analyst at Seaport Research
Okay. All right, thanks very much.
Joe Giannetti — General Manager - Cooling, Construction and Specialty
Thanks, Walt.
OPERATOR
Your next question comes from the line of Brian McNamara with Canaccord Genuity. Your line is open. Please go ahead.
Brian McNamara, Analyst at Canaccord Genuity
Hey, good morning, guys. Thanks for taking the question. Just one for me as all my other questions have been addressed. Can you characterize or quantify the growth you're seeing in data centers outside of ASME tanks, whether it be WAVE, Elgin, or LSI? And specifically, are you bundling your solutions there to win business, or has it largely been kind of a la carte to this point?
Joe Hayek, President and Chief Executive Officer
It's a great question, Brian. Good morning. The way that we think about data centers, we talked a lot about the ASME tanks, but yeah, absolutely, every data center is a commercial building and a number of our value streams provide building performance solutions that are integral to the way those buildings function and setting them up to do what they're supposed to do. That certainly includes WAVE, Elgin, and LSI across those value streams. Data centers are very important parts of the growth that we're seeing, and I would say our revenues are growing commensurate, maybe a bit better or a bit worse depending on the application, with the proliferation of data centers. Because of the market and the way data centers operate, it's relatively decentralized from a construction perspective. And so the bundling would be an overstatement. But we are increasingly collaborating across value streams and talking about opportunities and prioritizing and ultimately kind of making the case that we can refer or otherwise make warm introductions for other pieces of our business that we probably couldn't a couple years ago.
Brian McNamara, Analyst at Canaccord Genuity
Maybe just a quick follow-up on that. I think in Q3 last year, you said that your data center business was expected to triple in fiscal '26. It sounds like the ASME tanks are about to quadruple, at least if they sequentially grow each quarter this year. Can we at least characterize the other businesses exposed to data centers that you guys own kind of multiplying this year? Is that a fair way to characterize the growth you're seeing there?
Joe Hayek, President and Chief Executive Officer
So the... Now, your question, Brian — the non-ASME... Thanks. Yeah, ask that again. I just, I misunderstood it. Maybe... say that again. I think I misunderstood your question. Can you ask it again?
Brian McNamara, Analyst at Canaccord Genuity
Yeah. So I think in Q3, I think you said your data center business overall last year was expected to triple. I don't know where that landed. Are we expecting that kind of same, maybe doubling, tripling kind of this year? It sounds like the ASME tanks are going to at least quadruple if you grow sequentially quarter after quarter this year.
Joe Hayek, President and Chief Executive Officer
Yeah. Right. So yes, we have $13 million was effectively 3x what it had been the year before. We did that in Q1, which on a run rate would have it being 4x. But we think that, and we said this much, that we're going to grow sequentially. So yeah, we do absolutely believe that this market is accelerating.
Brian McNamara, Analyst at Canaccord Genuity
All right, apologize for the confusion there. Thanks for taking the question.
Joe Hayek, President and Chief Executive Officer
My fault. Thank you.
OPERATOR
Your next question comes from the line of Will Gildea with CJS Securities. Your line is open. Please go ahead.
Will Gildea, Analyst at CJS Securities
Hey, good morning. Thanks for taking our questions. Can you add some more color on the really solid growth in Trade and Specialty Solutions? I think you described it as volume- and price-driven. Just wondering, are there any product lines or customers where you saw more strength in the quarter?
Joe Hayek, President and Chief Executive Officer
Yeah. So, thanks, Will. The Trade and Specialty Solutions segment had really good performance in the quarter. Sales increased approximately 8%, driven by a combination of higher overall volumes and selling prices. We saw some good broad-based growth across most of the portfolio, particularly portable propane and tools. Those were driven by higher volumes, expanded distribution, and then both those segments had some pricing actions as well, which was helpful.
The Balloon Time business was the primary exception — volumes were down — but that was more a function of a really strong prior-year comparison which impacted the current quarter. So more broadly, really pleased with the performance of the segment, and they had good margin expansion, even excluding the tariffs, kind of positive in the quarter as well.
Will Gildea, Analyst at CJS Securities
That is very helpful, thank you. And then just one more. I think you described increasing raw material prices as a headwind of a few million dollars. How quickly can you mitigate that, and how are you thinking about mitigating that? And does that headwind get worse through the end of the calendar year? Does it improve?
Joe Hayek, President and Chief Executive Officer
So I'll just make sure I clarify, Will. My comment on, you know, a few million dollars was around steel being late and ultimately us needing to prioritize and think about shipments and manufacturing and things like that. We do think that near term we'll be in better shape there. Steel is more expensive than it was a year ago, but also, as we mentioned, that's not ideal, but we have taken price actions where we thought we needed to. These are environments where we ultimately can separate ourselves from others.
And so with our relationships and our capabilities and our optionality, it's something that we'll continue to address, and I think we'll address it successfully, with the caveat obviously that, you know, things are certainly more expensive than they were a year ago from a raw material perspective. And that's true across the board.
Will Gildea, Analyst at CJS Securities
All right. Thank you very much.
OPERATOR
There are no further questions at this time. I will now turn the call back to Joe for any closing remarks.
Joe Hayek, President and Chief Executive Officer
Hey, thank you. And thank you all for joining us this morning. Look forward to potentially seeing some of you at our Investor Day in November. Hope you have a great day.
OPERATOR
This concludes today's call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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