Zurn Elkay Water Solutions (ZWS) Q2 Earnings call transcript Jul 31, 2024

In the recent earnings call for Zurn Elkay Water Solutions Corporation, management presented a solid performance for the second quarter of 2024, highlighting a 20% adjusted EBITDA growth and a 370 basis point margin expansion year-over-year. The company's financial health and growth prospects were the focal point of the discussion, with a particular emphasis on the successful integration of the Elkay transaction and the strong financial performance of the business.

Financial Highlights and Strategic Positioning

Zurn Elkay Water Solutions reported a sales increase of 300 basis points year-over-year on a pro forma core basis, with a 25.3% consolidated margin in the second quarter. This achievement is a testament to the company's ability to leverage core growth and deliver robust financial results. The company's balance sheet and cash flow profile are also noteworthy, with a net debt leverage of 0.9x and a strong free cash flow of $80 million in the quarter. These figures demonstrate a solid financial foundation for the company, enabling it to return capital to shareholders while pursuing strategic opportunities.

Growth Initiatives and Market Trends

The call also shed light on the company's strategic initiatives, including its focus on sustainability and the deployment of the Zurn Elkay business system. With a majority of sales coming from products that deliver sustainable attributes, Zurn Elkay is positioned to address water-related challenges and contribute to public health and conservation efforts. The company's approach to sustainability is not only environmentally conscious but also financially beneficial, with a strong market position and consistent growth.

Management's Confidence and Outlook

Todd Adams, the Chairman and CEO, expressed confidence in the company's performance and its ability to navigate market challenges, particularly in the commercial end market. Despite headwinds in this sector, the company is making steady progress on growth initiatives and is optimistic about its future prospects. The company's outlook for the third quarter projects a low single-digit year-over-year pro forma core sales growth and an approximate 25% adjusted EBITDA margin. These expectations reflect the company's resilience and strategic focus on driving growth and improving margins.

Conclusion

Zurn Elkay Water Solutions Corporation's second quarter earnings call provided a comprehensive overview of its financial performance and strategic initiatives. The company's solid financial results, focus on sustainability, and confidence in its market positioning are key takeaways from the call. As the company continues to navigate market challenges and pursue growth opportunities, it is well-positioned to deliver strong financial performance and create value for its shareholders. With a robust balance sheet, a focus on innovation, and a commitment to sustainability, Zurn Elkay Water Solutions Corporation is poised for continued success in the water solutions market.