8-K: Zurn Elkay Water Solutions Reports Solid First Quarter 2025 Results, Affirms Full Year Guidance

Zurn Elkay Water Solutions announces a strong start to 2025 with increased net sales, net income, and adjusted EBITDA, while reaffirming its full-year guidance.

Summary

• Zurn Elkay Water Solutions reported its first quarter 2025 financial results on April 22, 2025.
• Net sales increased to $389 million, up from $374 million in the same quarter last year, representing a 5% increase in core sales.
• Net income from continuing operations rose to $41 million (diluted EPS of $0.24), compared to $34 million (diluted EPS of $0.19) in the prior year.
• Adjusted EPS increased to $0.31 from $0.29 in the year-ago quarter.
• Adjusted EBITDA was $98 million, or 25.2% of net sales, compared to $90 million, or 24.1% of net sales, in the first quarter of the previous year.
• The company's net debt leverage stood at 0.9x as of March 31, 2025.
• Zurn Elkay deployed $77 million to repurchase 2.3 million shares of its common stock during the quarter.
• For the second quarter, the company expects core sales growth in the low to mid-single digit range and adjusted EBITDA margin between 25.5% and 26.0%.
• The company reaffirmed its full-year guidance, citing a strong start to 2025.
• The company issued its 2024 Sustainability Report in February.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, reaffirmation of guidance, and a focus on sustainability. The management's comments are optimistic, and the company appears to be managing challenges effectively.

Positives

• Core sales experienced a 5% increase, indicating strong underlying business performance.
• Adjusted EBITDA margins improved by 110 basis points year-over-year, reflecting enhanced profitability.
• The company actively returned capital to shareholders through share repurchases and dividends.
• Net income from continuing operations increased to $41.0 million, or $0.24 per diluted share.
• The company's net debt leverage stood at 0.9x as of March 31, 2025.
• The company reaffirmed its full-year guidance, citing a strong start to 2025.

Negatives

• Foreign currency exchange rates reduced net sales by 1% in the quarter compared to the prior year quarter.

Risks

• The company acknowledges the unprecedented and volatile nature of the current trade environment.
• The second quarter outlook is based on the assumption that the current tariff structure remains in place.

Future Outlook

For the second quarter, the company expects core sales growth to be in the low to mid-single digit range and adjusted EBITDA margin in the range of 25.5% to 26.0%. The company is affirming its full year guidance.

Management Comments

• Todd A. Adams, Chairman and Chief Executive Officer, commented, 'We had a solid start to 2025, delivering first quarter core sales growth of 5% along with 25.2% adjusted EBITDA margins, an increase of 110 basis points year over year.'
• Adams also stated that the company is well equipped to manage through the uncertainty of the current trade environment by leveraging the Zurn Elkay Business System.
• Adams concluded, 'In February we issued our 2024 Sustainability Report...We remain committed as ever not only to our sustainability efforts but also supporting the sustainability efforts of our customers.'

Industry Context

The company operates in the water management industry, which is increasingly focused on sustainability and efficient water use. Zurn Elkay's emphasis on sustainable product portfolios and solutions aligns with these industry trends.

Comparison to Industry Standards

• It is difficult to compare Zurn Elkay directly to other companies without knowing their specific financial details for the same period.
• However, companies like Pentair, Xylem, and Watts Water Technologies also operate in the water technology and management space.
• Comparing Zurn Elkay's growth rates, EBITDA margins, and debt leverage to these peers would provide a more comprehensive assessment of its performance relative to industry standards.
• For example, if Pentair reported a similar core sales growth rate of 5% and an EBITDA margin around 25%, it would suggest that Zurn Elkay is performing in line with industry expectations.
• Similarly, a net debt leverage of 0.9x is generally considered healthy, but comparing it to the leverage ratios of its peers would offer a more nuanced perspective.

Stakeholder Impact

• Shareholders benefit from share repurchases and dividends.
• Employees are recognized for their dedication as the company celebrates its 125th anniversary.
• Customers benefit from sustainable water management solutions.
• The company's sustainability efforts positively impact the environment.

Next Steps

• Zurn Elkay will hold a conference call and webcast on April 23, 2025, to discuss the first quarter results and provide a business update.
• The company will continue to focus on optimizing its supply chain and capturing price increases to remain price-cost positive.
• Zurn Elkay will continue to advance its sustainability strategy and work towards its timebound goals.

Key Dates

Keywords

financial results, earnings release, Zurn Elkay Water Solutions, net sales, EBITDA, EPS, share repurchase, sustainability, water management