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- **Record financials**: Q4 2025 net sales $380.8M (+9.4% YoY), full-year $1.4B (+8.7% YoY). Adjusted EBITDA $326M (+14.6% YoY), EPS $1.31 (+37% YoY).
- **Margin expansion**: Q4 gross margin 36.8% (+500bps YoY), full-year 36.1% (+120bps YoY). 2026 EBITDA margin target 23.8% (+100bps YoY).
- **Strategic investments**: 2026 capex 4%-5% of sales for domestic capacity; new hydrant renewal product with leak detection tech to launch in 2026.
- **Leadership transition**: CEO Martie Zakas retiring in Feb 2026; Paul McAndrew to succeed, with Zakas as special advisor until end-2026.
- **Key risks**: Residential construction decline (high single-digits YoY), tariffs (3% cost impact), and warranty charges ($5.6M Q4).

**【CEO Summary Section】**
- **Record-breaking performance**: Q4 2025 net sales grew 9.4% YoY to $380.8M, with full-year sales reaching $1.4B (8.7% YoY). Adjusted EBITDA hit $326M (14.6% YoY), and adjusted EPS rose 37% to $1.31.
- **Gross margin expansion**: Q4 gross margin expanded 500bps to 36.8%, driven by manufacturing efficiencies and price-cost dynamics. Full-year gross margin was 36.1%, up 120bps YoY.
- **Transition announcement**: CEO Martie Zakas will retire in Feb 2026, with Paul McAndrew succeeding as CEO. Zakas will serve as special advisor until end-2026.

**【CFO Financial Commentary】**
- **Q4 financial highlights**: Adjusted EBITDA of $91.8M (26.6% YoY), margin 24.1%. Full-year free cash flow $172M (84% of adjusted net income). Net debt leverage below 1x, with $452M total debt and $432M cash.
- **2026 guidance**: Net sales $1.45B-$1.47B (1.4%-2.8% YoY), adjusted EBITDA $345M-$350M (5.8%-7.3% YoY). Capital expenditures 4%-5% of net sales for capacity expansion.
- **Tariff impact**: 3% of cost of sales, partially offset by pricing actions. 2026 guidance excludes new price actions, which will be announced pre-public disclosure.

**【Q&A Highlights】**
- **Market trends**: Residential construction expected to decline high single-digits YoY, offset by mid-single-digit growth in repair/replacement and specialty valves. Municipal market remains resilient.
- **Investments**: $47M in 2025 capex for foundry upgrades; 2026 capex 4%-5% of sales for domestic capacity. WMS segment to benefit from new hydrant renewal product with leak detection tech.
- **Acquisition strategy**: Focus on water infrastructure, leveraging existing channels. Recent Krausz acquisition (repair products) exemplifies successful integration.
- **Risks**: Tariffs, residential construction slowdown, and supply chain uncertainties. Warranty charge ($5.6M) related to metering products, reflecting long warranty periods.


Mueller Water Products, Inc.(MWA)-20251107-2025 Q4 Earnings call transcript

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