Zurn Elkay Water Solutions (ZWS) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2025 reached $389 million, up 4% year-over-year, with 5% core sales growth; foreign exchange reduced net sales by 1%.

• Adjusted EBITDA margin improved by 110 basis points to 25.2% year-over-year, with adjusted EBITDA at $98 million.

• Net income from continuing operations rose to $43.6 million, with diluted EPS at $0.26, and adjusted EPS at $0.31.

• $77 million was returned to shareholders via repurchases of 2.3 million shares, and $15 million paid in dividends.

• Recognized for sustainability and ESG leadership, including a 33% year-over-year increase in filtered water delivered and the release of the 2024 Sustainability Report.

Financial highlights

• Adjusted EBITDA was $98 million, with margin up 110 basis points year-over-year to 25.2%.

• Income from operations increased to $63.4 million (16.3% of net sales), up from $53.2 million (14.2%) year-over-year.

• Free cash flow for Q1 was $39 million, with cash and cash equivalents at $144.7 million as of March 31, 2025.

• Net debt leverage stood at 0.9x at quarter end, with total indebtedness at $495.8 million.

• Gross margin improved to 46.6% from 45.5% year-over-year.

Outlook and guidance

• Q2 2025 core sales growth projected in low to mid-single digits year-over-year, with adjusted EBITDA margin expected between 25.5%–26.0%.

• Full-year guidance affirmed, with Q1 and Q2 performance tracking to plan.

• Interest expense projected at ~$8 million, stock compensation ~$10 million, D&A ~$23 million, adjusted tax rate 26.5%–27.5%, and diluted shares outstanding ~172 million.

• 100% of the $72.3 million backlog as of March 31, 2025, is expected to be recognized in the remaining nine months of 2025.

• Management anticipates continued restructuring expenses as further initiatives are executed to optimize margins and manufacturing footprint.