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- **Strong 2025 Performance**: 10% organic sales growth, $317M free cash flow, and 49% increase in employee-driven CI initiatives.
- **2026 Guidance**: Mid-single-digit sales growth, 35% incremental margins, $335M free cash flow.
- **Sustainability Leadership**: Pro Filtration innovation, 1.9M gallons of filtered water, and top-tier ESG ratings.
- **Strategic Expansion**: Focus on adjacencies and M&A, with cautious optimism on construction market recovery.
- **Tariff Resilience**: Positive price/cost impact expected, with 5pts of price in Q1 tapering in H2.


**【CEO Summary Section】**
- **Q4 2025 Results**: Organic sales grew 10%, EBITDA rose 14% to $104 million, and free cash flow reached $317 million annually. Full-year share buybacks totaled $160 million, with leverage at 0.4x, the lowest as a public company.
- **Strategic Focus**: 2026 planning emphasizes adjacencies and underserved verticals, leveraging ZEBS for continuous improvement. Employee-driven CI submissions increased 49% in 2025.
- **2026 Outlook**: Core sales expected to grow mid-single digits, with 35% incremental EBITDA margins and $335 million free cash flow.

**【CFO Financial Commentary】**
- **Q4 2025 Financials**: Sales of $407 million (+10% YoY), adjusted EBITDA margin expanded 100bps to 25.6%. Full-year EBITDA rose $52 million, with 40% drop-through on volume growth.
- **Balance Sheet Strength**: $317 million free cash flow, $160 million share buybacks, and $64 million dividends. M&A funnel active, with focus on organic adjacency development.

**【Sustainability Highlights】**
- **Product Innovations**: Pro Filtration features 10,000-gallon capacity and PFAS reduction; Liv EZ brings commercial-grade filtration to residences. Filter recycling partnership with TerraCycle.
- **Recognition**: Top-tier sustainability ratings from Sustainalytics, MSCI, and S&P Global. Philanthropic giving reached $1.9 million in 2025.

**【2026 Guidance】**
- **Sales Growth**: Mid-single digits, driven by price/cost benefits (5pts in Q1, tapering in H2). Tariff environment assumed stable at current levels.
- **Margins**: 35% incremental EBITDA on growth, with Q1 margin ~25.5%-26%.

**【Q&A Highlights】**
- **M&A Activity**: Active funnel with focus on North American, water-related adjacencies. Potential for M&A alongside organic growth.
- **Filter Attachment Rate**: Pro Filtration units have high filter attachment rates, expected to boost overall filtration sales over time.
- **Construction Trends**: Institutional markets stable, commercial flat, residential soft. Dodge data aligns with cautious outlook.
- **Data Center Growth**: Increasing participation in water management for cooling systems, though not a major revenue driver.


Zurn Elkay Water Solutions Corporation (ZWS) Q4 2025 Earnings Call Transcript

- **Record Financials**: Q3 2025 sales up 11%, EBITDA $122M (+16%), with 26.8% margin (highest since Elkay merger). Free cash flow $94M, driving $135M share buybacks and 22% dividend hike.
- **Tariff Resilience**: $50M tariff costs offset by price/cost neutrality; 50%+ COGS domestic, China exposure <3% by 2026. ZEB system ensures operational efficiency.
- **Growth Drivers**: Stable 2026 market outlook (low single-digit growth), outperformance in drinking water (+55% Q3), and new products like Elkay Liv EZ targeting residential filtration.
- **Balance Sheet Strength**: 0.6x leverage, $500M buyback program, and $300M+ free cash flow for 2025.

**【CEO Summary Section】**
- **Revenue Growth**: Q3 2025 sales of $455 million reflect 11% organic growth year-over-year, driven by tariff-related price increases and incremental demand. EBITDA rose 16% to $122 million, with margins expanding 120 basis points to 26.8%.
- **Share Buybacks and Dividends**: Repurchased 600,000 shares ($25M in Q3, $135M YTD) and raised the dividend 22%, with a refreshed $500M buyback program. U.S. pension plan termination eliminated $200M liability.
- **Market Outlook**: 2026 nonresidential construction market growth expected to mirror 2025, with stable demand across education, healthcare, and warehouses. Zurn Elkay's Zurn Elkay Business System (ZEB) drives continuous improvement and operational efficiency.

**【CFO Financial Commentary】**
- **Financial Highlights**: Q3 free cash flow of $94M, net debt leverage at 0.6x (lowest as a public company). Year-to-date EBITDA up $39M, with 42% drop-through on volume growth. Tariff costs for 2025 revised to $50M, offset by price/cost neutrality.
- **M&A and Growth**: Evaluating M&A opportunities with a focus on adjacencies and internal innovation. Drinking water initiatives, like Elkay Liv EZ, target residential filtration with minimal market penetration but potential for incremental growth.

**【Q&A Highlights】**
- **Tariff Management**: 50%+ of COGS sourced domestically, reducing China exposure to 2-3% by end-2026. Price increases offset $50M tariff impact in 2025.
- **Product Performance**: Flow systems lead-cycle indicator shows stable demand; Pro Filtration units see strong uptake. Elkay Liv EZ launch focuses on DIY convenience, targeting 1.8B gallons of filtered water annually.
- **Margin Expansion**: 26.8% EBITDA margin is a new baseline, with long-term 30-35% incremental margin potential. Free cash flow >$300M for 2025, supporting dividend and buyback flexibility.

Zurn Elkay Water Solutions Corporation (ZWS) Q3 2025 Earnings Call Transcript

- **Revenue Beat**: 8% organic growth in Q2, exceeding expectations with strong nonresidential demand.
- **Margin Expansion**: 120 bps EBITDA margin improvement to 26.5%, driven by volume leverage and continuous improvement.
- **Tariff Mitigation**: Reduced 2025 tariff impact to $35-45 million, with 2%+ COGS exiting China by 2026.
- **Free Cash Flow Record**: $102 million in Q2, enabling $300 million+ annual target.
- **Innovation Success**: Elkay Pro Filtration ASP +10%, with filters lasting 20,000 gallons.

**【CEO Opening Remarks】**
- **Revenue Growth**: 8% organic growth in Q2, driven by strong demand in nonresidential markets and targeted growth initiatives.
- **Profitability**: Adjusted EBITDA of $118 million, up 13% YoY, with margin expansion of 120 basis points to 26.5%.
- **Tariff Management**: Reduced 2025 tariff impact estimate to $35-45 million (down $10 million from prior guidance), reflecting China's tariff rollback and supply chain diversification progress.
- **Guidance Update**: Raised full-year outlook to 5%+ core sales growth, $420-430 million EBITDA, and $300 million free cash flow.

**【CFO Financial Commentary】**
- **Sales Performance**: Q2 sales of $445 million (+8% YoY), with $8-10 million from pre-buy orders and 1 point from tariff-related price increases.
- **Cash Flow**: Record $102 million free cash flow in Q2, bringing total to $204 million year-to-date. Share buybacks of $33 million reduced net debt leverage to 0.7x.
- **Tariff Impact**: 2025 tariff cost estimate reduced to $35-45 million, with 2%+ of COGS expected to shift out of China by end-2026.

**【Q&A Highlights】**
- **Product Category Growth**: All categories grew in Q2, driven by innovation in drinking water, flow systems, and filtration. Elkay Pro Filtration ASP increased 10%, with filters lasting up to 20,000 gallons.
- **M&A Pipeline**: Active pipeline with focus on complementary technologies; no deals yet, but balance sheet flexibility and Zurn Elkay Business System provide execution confidence.
- **End Market Outlook**: Nonresidential markets remain strong, while residential softness offset by institutional and waterworks growth. No impact seen from federal budget cuts to healthcare/education.
- **Tariff Strategy**: Price increases and supply chain diversification offset 50% of tariff impact; continuous improvement initiatives (2,575+ projects in Q2) drive long-term margin resilience.


Zurn Elkay Water Solutions Corporation (ZWS) Q2 2025 Earnings Call Transcript

- **Q1 Growth & Margin**: 5% revenue growth, 25.2% EBITDA margin (up 110 bps YoY).
- **Tariff Mitigation**: $45-55M 2025 tariff costs offset by price hikes, China sourcing <3% of COGS by 2026.
- **Supply Chain Shift**: 44% of materials sourced in North America, accelerating U.S. & Southeast Asia production.
- **Q2 Outlook**: Core sales growth low-mid single digits, EBITDA margin 25.5-26%.
- **Risk Management**: Dual-sourcing strategy, 60%+ CI projects reducing costs.

**【CEO Opening Remarks】**
- Q1 2025 organic revenue growth of 5%, driven by nonresidential end markets.
- EBITDA margin expanded 110 bps to 25.2%, outperforming expectations.
- Tariff impact: $45-55M incremental costs in 2025, offset by price increases and supply chain restructuring.
- China sourcing to drop to <3% of COGS by end-2026, with dual-sourcing strategy.

**【CFO Financial Details】**
- Q1 sales: $389M (5% core growth), beating high end of guidance.
- Adjusted EBITDA: $98M, margin 25.2% vs. 24.1% YoY.
- 2024 direct material spend: 44% North America, 25% China, 31% rest of world.
- 2025 tariff cost: $45-55M, with 145% China tariffs and 10% non-China tariffs.
- 2026 China spend: <$30M, <3% of COGS.
- Q2 2025 outlook: core sales growth low-mid single digits, EBITDA margin 25.5-26%.

**【Key Q&A Takeaways】**
- Tariff mitigation: 60%+ CI projects reduce costs, 8 months to adapt to new tariffs.
- Pricing: industry-wide 10-15% increases, no demand destruction seen yet.
- Supply chain: Southeast Asia, Mexico, and U.S. reshoring underway.
- Cash flow: $290M+ annual target, $77M Q1 buybacks.
- Risk: 10% non-China tariffs could rise, but 2026 China exposure minimal.

Zurn Elkay Water Solutions (ZWS)-23 Apr 25-2025 Q1 Earnings call transcript

- **Strong 2024 Performance**: 4% organic growth, 15% EBITDA expansion to $390M, and $272M free cash flow. Share buybacks totaled $150M at $32 average price.
- **2025 Outlook**: Core sales growth similar to 2024, $405-420M EBITDA, and $290M free cash flow. Targeting 1% price realization and <10% China supply chain exposure by 2026.
- **Tariff Resilience**: Reduced China exposure to <25%, with flexible supply chain capabilities. No tariff impacts in guidance but ready to act.
- **M&A Potential**: Disciplined approach with multiple pipeline opportunities, supported by 0.8x leverage ratio.
- **Operational Excellence**: 3,749 continuous improvement initiatives in 2024 ($5.9M savings), targeting 5,000 in 2025.


**【CEO Summary Section】**
- Fourth quarter revenue grew 4% year-over-year, driving 8% adjusted EBITDA growth to $91 million with a 24.6% margin (100bps YoY expansion). Full year organic growth of 4% in a flattish market resulted in $390 million EBITDA (15% YoY growth) and 24.9% margin (270bps YoY expansion). Free cash flow was $272 million for the year, with $150 million in share repurchases at $32 average price.
- 2025 outlook includes core sales growth similar to 2024, $405-420 million EBITDA, and $290 million free cash flow. Key initiatives: 1% price realization, strategic growth programs, and reducing China supply chain exposure to <10% by 2026.

**【CFO Financial Commentary】**
- Q4 2024 sales $371 million (+4% YoY), with mid-single-digit growth in nonresidential offset by softness in residential. Adjusted EBITDA margin expanded 100bps YoY to 24.6% due to productivity initiatives and Elkay synergies. Full year leverage 0.8x, lowest in company history, enabling $150 million share buybacks and $57 million dividends.
- 2025 Q1 guidance: low single-digit core sales growth, 24.5-25% EBITDA margin (40-90bps expansion). Full year free cash flow target $290 million.

**【Q&A Key Themes】**
- **Tariff Strategy**: Reduced China exposure to <25% (from peak 70%), with <10% target by 2026. Flexible supply chain allows migration to Southeast Asia/North America. No tariff impacts in 2025 guidance, but ready to implement price increases or supplier shifts as needed.
- **M&A Activity**: Actively pursuing 3-5 strategic deals with balance sheet flexibility. Management focused on disciplined execution, with multiple opportunities in pipeline.
- **Interest Rate Impact**: 45% of business in non-interest rate sensitive institutional/retrofit markets. Management focused on driving above-market growth through 4 strategic initiatives.
- **Supply Chain Resilience**: 3,749 continuous improvement initiatives in 2024 ($5.9 million savings), targeting 5,000 in 2025. Variable cost structure enables 30-35% incremental margins.


Actual								0.2649	0.1734	0.2264	0.2264	0.2794	0.2264	0.55	0.22	0.24	0.32	0.26	0.16	0.18	0.24	0.29	0.26	0.29	0.33	0.34	0.32	0.31	0.42	0.43	0.36
Forecast								0.2437	0.1457	0.1766	0.2263	0.2387	0.2188	0.555	0.112	0.22	0.29	0.2417	0.165	0.1533	0.2229	0.2729	0.23	0.2588	0.3138	0.3213	0.2788	0.29	0.3588	0.3958	0.3395
Surprise	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	+8.70%	+19.01%	+28.20%	+0.04%	+17.05%	+3.47%	-0.90%	+96.43%	+9.09%	+10.34%	+7.57%	-3.03%	+17.42%	+7.67%	+6.27%	+13.04%	+12.06%	+5.16%	+5.82%	+14.78%	+6.90%	+17.06%	+8.64%	+6.04%

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