Zurn Elkay Water Solutions (ZWS) Q3 2024 earnings summary

Executive summary

• Net sales grew to $410 million in Q3 2024, up 2.9–4% year-over-year, with core growth across all product categories, partially offset by the planned exit from certain residential sink products.

• Adjusted EBITDA reached $105 million (25.6% margin), up 9% year-over-year, with margin expansion of 150 bps, the highest since the Elkay merger.

• Free cash flow for Q3 was $87 million, with $50 million deployed for share repurchases and a quarterly dividend raised to $0.09 per share, a 13% increase.

• Net income from continuing operations was $43.5–$44 million, with diluted EPS of $0.25 and adjusted EPS of $0.34.

• Leverage reached an all-time low of 0.8x net debt, with strong balance sheet flexibility.

Financial highlights

• Q3 net sales totaled $410 million, up 2.9–4% year-over-year, with gross profit at $220.6 million and gross margin improvement from cost synergies.

• Adjusted EBITDA was $105 million (25.6% margin), with operating income margin up 200 bps year-over-year.

• Free cash flow for Q3 was $87 million; year-to-date free cash flow reached $217 million.

• Net debt leverage ended at 0.8x, the lowest as a public company.

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

Outlook and guidance

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

• Full-year free cash flow outlook 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% anticipated in 2025 as demand recovers.

• Management expects continued restructuring to optimize margin and footprint, with further expenses for workforce reductions and facility rationalization.