Zurn Elkay Water Solutions Corporation Q1 FY2026 earnings call

Market conditions and pricing environment similar to February outlook. Tariff dynamics with Supreme Court ruling on IEPA tariffs, 122 tariffs implementation, 232 tariff changes, and 301 tariff studies. Advancing supply chain footprint initiatives. Zurn LK business system focus, including continuous improvement, unit volume growth in profitable areas, supply chain as competitive advantage. Trailing 12-month adjusted EBITDA margins improved 630 basis points from Q1 2023 to Q1 2026.

First quarter sales totaled $433 million, representing 11% core and reported growth year over year. Adjusted EBITDA was $116 million, up 18% year over year, with margin expanding 160 basis points to 26.8%. Generated $43 million of free cash flow and purchased $50 million of Zurn LK at roughly $47 a share.

Second quarter core sales growth projected to increase 8% to 9% year over year. Adjusted EBITDA margin expected in range of 27 to 27.5, 50 to 100 basis point expansion year over year. Full-year free cash flow outlook approximately $335 million, with plan to revisit下半年 outlook after Q2. Full-year outlook not accounting for potential tariff refund benefits and assumes current tariff structure remains in place.

Uncertainty from tariff changes such as 122 likely expiring, 301 studies potentially implementing, which could impact the business's financial outlook.

Q: Brian Blair asked about drinking water trends and Q2 performance.

A: Dave responded drinking water performed well, profiltration adoption high.

Q: Andrew Creel asked about OE vs retrofit split and weather impact.

A: Todd and Dave discussed retrofit replace moving to 50-50, weather impact on first half about a point.

Q: Nathan Jones asked about tariff gross impact.

A: Todd said not counting on future price increases, insulated by US sourcing.

Q: Michael Lauren asked about pricing fatigue and growth adjacencies.

A: Todd said no egregious price increases, growth adjacencies on track.

Q: James Cole asked about growth adjacency rationale.

A: Todd said dual-pronged approach.

Q: Jeff Hammond asked about end markets and waterworks.

A: Todd discussed end market outlook and waterworks.

Q: Brett Lindsay asked about end market outlook.

A: Todd said end market framework unchanged.

Q: Jeff Reeves asked about full-year outlook pause.

A: Todd said deliberate, waiting for Q2 clarity