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- **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

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

ZWS

ZWS fundamentals

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