Zurn Elkay Water Solutions (ZWS) Q3 2024 earnings summary

Executive summary

• Net sales reached $410 million in Q3 2024, growing 3–4% year-over-year, with core sales growth across all product categories, partially offset by the planned exit of certain residential sink products.

• Adjusted EBITDA for Q3 was $105 million, up 9% year-over-year, with margin expanding to a record 25.6%, a 150 basis point increase.

• Free cash flow for the quarter was $87 million, with $50 million used for share repurchases and year-to-date free cash flow at $217 million.

• Quarterly dividend per share increased by 12.5–13% to $0.09, with $130 million deployed to share repurchases year-to-date.

• Net income from continuing operations was $44 million (diluted EPS $0.25), up from $35 million in the prior year quarter.

Financial highlights

• Gross profit for Q3 2024 was $220.6 million, with gross margin and operating margin both improving year-over-year due to cost synergies and lower input costs.

• Adjusted EBITDA margin for Q3 was 25.6%, the highest since the Elkay merger.

• Net debt leverage ended at 0.8x as of September 2024, an all-time low.

• Cash and cash equivalents stood at $187.9 million as of September 30, 2024.

• Interest expense, net, decreased to $8.3 million in Q3 2024.

Outlook and guidance

• Full-year adjusted EBITDA expected at $387–$389 million, with margin expansion of 250–270 basis points year-over-year.

• Full-year free cash flow guidance raised to approximately $260 million.

• Q4 2024 core sales growth projected in the low single digits; adjusted EBITDA expected between $88–$90 million.

• Price increases of 1–2% are anticipated in 2025 as demand returns.

• Management expects to continue restructuring initiatives to optimize margin and manufacturing footprint.