Q2 2025 Zurn Elkay Water Solutions Corp Earnings Call Transcript
Key Points
- Zurn Elkay Water Solutions Corp (ZWS) reported 8% organic growth in the second quarter, with EBITDA growing 13% year over year and margins expanding by 120 basis points.
- The company raised its full-year outlook for top-line growth, EBITDA, and free cash flow due to improved tariff situations and strong core business trajectory.
- ZWS achieved its highest quarterly margins since the Zurn Elkay merger, driven by volume leverage, productivity initiatives, and continuous improvement activities.
- Free cash flow exceeded $100 million for the first time, ending at $102 million, with net debt leverage at 0.7 times, the lowest as a public company.
- The company made significant progress on sustainability initiatives, delivering 1.2 billion gallons of safer, cleaner filtered drinking water and preventing 9.6 billion single-use plastic water bottles from entering water streams.
- The residential market is experiencing some softness, which could impact future growth.
- There is a potential risk of tariff-related costs, with an expected impact of $35 million to $45 million for 2025, despite a reduction from previous estimates.
- The company is taking a cautious approach by evaluating its outlook on a quarter-by-quarter basis due to uncertainties in the global tariff environment.
- Some customers ordered ahead of price increases, which could lead to fluctuations in demand and potential inefficiencies in operations and supply chain.
- The company's guidance implies a potential step down in fourth-quarter margins, although this is not driven by any specific event.
Good morning and welcome to the Zurn Elkay Water Solutions Corp Second Quarter 2025 earnings results conference call with Todd Adams, the Chairman and Chief Executive Officer, Dave Pauli, Chief Financial Officer, and Bryan Wendlandt, Director of Zurn Elkay Water Solutions. A replay of the conference call will be available as a webcast on the company's investor relations website. At this time for opening remarks and introduction, I'll turn the call over to Brian Whitlam.
Good morning everyone, and thanks for joining the call today. Before we begin, I'd like to remind everyone that this call contains certain forward-looking statements that are subject to the safe harbor language contained in the press release that we issued yesterday afternoon, as well as in our filings with the SEC.
In addition, some comparisons will refer to non-gap measures. Our earnings relief and SEC filings contain additional information about these non-gap measures, why we use them, and why we believe they are helpful to
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