Zurn Elkay's Q3 Sales Surge 11% Amid Strong Water Solutions Demand

Ticker: ZWS · Form: 10-Q · Filed: Oct 28, 2025 · CIK: 1439288

Sentiment: bullish

Topics: Water Management, Industrial Products, Q3 Earnings, Revenue Growth, Net Income Increase, Share Repurchase, Restructuring

Related Tickers: ZWS, RNR, WTS

TL;DR

**ZWS is flowing strong with double-digit sales growth and fatter profits, making it a solid buy in the essential water infrastructure space.**

AI Summary

Zurn Elkay Water Solutions Corp (ZWS) reported a strong financial performance for the three and nine months ended September 30, 2025. Net sales increased by 11.1% to $455.4 million for the three months ended September 30, 2025, up from $410.0 million in the prior year period. For the nine months, net sales grew by 7.8% to $1,288.7 million, compared to $1,195.8 million in the same period of 2024. Net income saw a significant jump, rising 42.1% to $61.8 million for the three-month period, from $43.5 million, and increasing 25.9% to $155.9 million for the nine-month period, up from $123.8 million. The company continued its restructuring efforts, incurring $1.8 million in charges for the quarter and $5.4 million for the nine months, primarily for workforce reductions and facility rationalization. Cash and cash equivalents rose to $260.1 million as of September 30, 2025, from $198.0 million at December 31, 2024. The company also repurchased $134.9 million of common stock during the nine months ended September 30, 2025, demonstrating a commitment to shareholder returns.

Why It Matters

ZWS's robust sales and net income growth signal strong demand for its water management solutions, which is positive for investors looking for stable, infrastructure-related plays. The continued restructuring efforts, while incurring short-term costs, aim to optimize operating margins and manufacturing footprint, potentially leading to greater long-term profitability and competitive advantage against rivals like Watts Water Technologies. For employees, these restructuring charges, particularly workforce reductions, could indicate ongoing operational shifts. Customers benefit from Zurn Elkay's focus on sustainable, specification-driven products, which are critical for health, safety, and environmental standards in public and private spaces, reinforcing the company's market position.

Risk Assessment

Risk Level: medium — The company's restructuring plans are preliminary and the full extent of related expenses are not yet estimable, as stated in Note 2, indicating potential for unforeseen costs. Additionally, the company's accumulated other comprehensive loss increased from $(74.4) million at December 31, 2024, to $(78.4) million at September 30, 2025, primarily due to changes in pension and other postretirement benefit obligations, which could signal future financial volatility.

Analyst Insight

Investors should consider ZWS as a potential long-term hold given its consistent revenue and net income growth in a critical sector. Monitor future restructuring charges and their impact on operating margins, as management expects further expenses. The company's share repurchase program of $134.9 million in nine months suggests confidence and a commitment to shareholder value.

Financial Highlights

debt To Equity
0.69
revenue
$455.4M
operating Margin
16.9%
total Assets
$2,684.0M
total Debt
$496.4M
net Income
$61.8M
eps
$0.36
gross Margin
44.1%
cash Position
$260.1M
revenue Growth
+11.1%

Key Numbers

Key Players & Entities

FAQ

What were Zurn Elkay Water Solutions Corp's net sales for the third quarter of 2025?

Zurn Elkay Water Solutions Corp reported net sales of $455.4 million for the three months ended September 30, 2025. This represents an 11.1% increase compared to $410.0 million in the same period of the prior year.

How did Zurn Elkay's net income change in the nine months ended September 30, 2025?

For the nine months ended September 30, 2025, Zurn Elkay's net income increased to $155.9 million, up from $123.8 million in the corresponding period of 2024. This marks a significant 25.9% rise.

What were the primary drivers of Zurn Elkay's restructuring charges in 2025?

Zurn Elkay's restructuring charges for the nine months ended September 30, 2025, totaling $5.4 million, primarily resulted from workforce reductions, lease termination costs, and other facility rationalization costs aimed at driving efficiencies and optimizing its operating footprint.

What is Zurn Elkay's strategic outlook regarding its operating margin and manufacturing footprint?

Management expects to continue executing initiatives to optimize Zurn Elkay's operating margin and manufacturing footprint. This includes further expenses related to workforce reductions, potential asset impairment, accelerated depreciation, and lease termination costs, as detailed in Note 2.

What is the risk associated with Zurn Elkay's restructuring plans?

The primary risk is that Zurn Elkay's restructuring plans are preliminary and the full extent of related expenses are not yet estimable. This could lead to higher-than-anticipated costs for workforce reductions, asset impairments, or facility rationalization.

How much common stock did Zurn Elkay repurchase in the first nine months of 2025?

Zurn Elkay repurchased $134.9 million of common stock during the nine months ended September 30, 2025. This demonstrates the company's commitment to returning value to shareholders.

What was Zurn Elkay's cash and cash equivalents balance as of September 30, 2025?

As of September 30, 2025, Zurn Elkay's cash and cash equivalents stood at $260.1 million. This is an increase from $198.0 million reported at December 31, 2024.

What accounting pronouncements is Zurn Elkay evaluating for future impact?

Zurn Elkay is evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, and ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for fiscal years beginning after December 15, 2026.

What is Zurn Elkay's business focus?

Zurn Elkay is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets a broad portfolio of specification-driven water management solutions. These products aim to improve health, hydration, human safety, and the environment in public and private spaces.

How does Zurn Elkay recognize revenue from product sales?

For the majority of Zurn Elkay's product sales, revenue is recognized at a point-in-time when control of the product is transferred to the customer, typically upon shipment from the company's manufacturing facility. The company also accounts for variable consideration like volume-based rebates and product returns.

Risk Factors

Industry Context

Zurn Elkay Water Solutions operates in the water infrastructure and solutions market, which is influenced by factors such as construction spending, renovation trends, and increasing demand for sustainable and efficient water management products. The industry is competitive, with companies focusing on product innovation, distribution networks, and acquisitions to gain market share. Regulatory requirements related to water quality and conservation also play a significant role.

Regulatory Implications

The company must comply with various environmental and safety regulations related to water products. Changes in building codes, water efficiency standards, or material safety regulations could necessitate product redesigns or impact sales. The provision for income taxes also highlights the impact of tax regulations on financial performance.

What Investors Should Do

  1. Monitor Restructuring Progress
  2. Analyze Goodwill and Intangible Assets
  3. Evaluate Share Repurchase Program
  4. Assess Debt Management

Key Dates

Glossary

Restructuring and other similar charges
Costs incurred by a company related to significant organizational changes, such as workforce reductions, facility closures, or business divestitures, aimed at improving efficiency and profitability. (These charges ($1.8M in Q3 2025, $5.4M YTD) indicate ongoing efforts by ZWS to streamline operations, which can impact short-term profitability but are intended to drive long-term gains.)
Accumulated other comprehensive loss
A component of stockholders' equity that includes unrealized gains and losses on certain investments, foreign currency translation adjustments, and pension plan adjustments that have not yet been realized in net income. (The balance of ($78.4M) as of September 30, 2025, reflects items not yet impacting net income but affecting the overall equity position of the company.)
Retained deficit
A negative balance in retained earnings, indicating that a company has accumulated more losses than profits over its history. (ZWS has a retained deficit of ($1,148.7M) as of September 30, 2025. Despite current profitability, this reflects historical losses or significant distributions.)
Goodwill
An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (ZWS holds $794.4M in goodwill, primarily from past acquisitions, which is a significant portion of its assets and subject to impairment risk.)

Year-Over-Year Comparison

Compared to the prior year period, Zurn Elkay Water Solutions Corp. has demonstrated robust growth, with net sales increasing by 11.1% in Q3 2025 and 7.8% for the nine months. Net income has seen even more substantial improvements, rising 42.1% in Q3 and 25.9% year-to-date, indicating improved profitability and operational leverage. While restructuring charges have decreased year-over-year, they remain a factor. The company's cash position has strengthened significantly, and active share repurchases underscore a commitment to shareholder returns.

Filing Stats: 4,546 words · 18 min read · ~15 pages · Grade level 9.5 · Accepted 2025-10-28 16:18:33

Key Financial Figures

Filing Documents

FINANCIAL INFORMATION

Part I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements 4

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 30

Controls and Procedures

Item 4. Controls and Procedures 31

OTHER INFORMATION

Part II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 32

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32

Other Information

Item 5. Other Information 32

Exhibits

Item 6. Exhibits 33 Signature s 34 2 Table of Contents Private Securities Litigation Reform Act Safe Harbor Statement Our disclosure and analysis in this report concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business and the realization of sales from our backlog, include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. Although these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flows, research and development costs, working capital and capital expenditures, they are subject to risks and uncertainties that are described more fully herein and in our Annual Report on Form 10-K for the year ended December 31, 2024, in Part I, Item 1A, "Risk Factors" and in Part I under the heading "Cautionary Notice Regarding Forward-Looking Statements", as well as in our other filings with the Securities and Exchange Commission. Accordingly, we can give no assurance that we will achieve the results anticipated or implied by our forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. 3 Table of Contents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS Zurn Elkay Water Solutions Corporation and Subsidiaries Condensed Consolidated Balance Sheets (in Millions, except share amounts) (Unaudited) September 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 260.1 $ 198.0 Receivables, net 232.3 202.2 Inventories, net 273.2 272.6 Income taxes receivable 5.8 19.6 Other current assets 29.3 29.7 Total current assets 800.7 722.1 Property, plant and equipment, net 162.7 164.0 Intangible assets, net 849.1 891.6 Goodwill 794.4 794.2 Other assets 77.1 76.6 Total assets $ 2,684.0 $ 2,648.5 Liabilities and stockholders' equity Current liabilities: Current maturities of debt $ 0.9 $ 0.8 Trade payables 82.2 71.7 Compensation and benefits 41.2 37.9 Current portion of pension and other postretirement benefit obligations 1.2 1.2 Other current liabilities 162.7 136.2 Total current liabilities 288.2 247.8 Long-term debt 495.5 494.8 Pension and other postretirement benefit obligations 8.8 14.1 Deferred income taxes 182.8 196.5 Operating lease liability 43.7 43.3 Other liabilities 73.5 65.2 Total liabilities 1,092.5 1,061.7 Stockholders' equity: Common stock, $ 0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 167,469,305 at September 30, 2025 and 170,308,023 at December 31, 2024 1.7 1.7 Additional paid-in capital 2,816.9 2,828.2 Retained deficit ( 1,148.7 ) ( 1,168.7 ) Accumulated other comprehensive loss ( 78.4 ) ( 74.4 ) Total stockholders' equity 1,591.5 1,586.8 Total liabilities and stockholders' equity $ 2,684.0 $ 2,648.5 See notes to the condensed consolidated financial statements. 4 Table of Contents Zurn Elkay Water Solutions Corporation and Subsidiaries Condensed Consolidated Statements of Operations (in Millions, except share and per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net sales $ 455.

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