Zurn Elkay Water Solutions — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the quarter ended September 30, 2026, were $495.1 million, an increase of 9% year-over-year compared to $455.4 million in the prior year period; core sales grew 7% year-over-year, with an additional 2% attributed to the Intellihot acquisition.
• Net income from continuing operations was $76.1 million ($0.45 diluted EPS) compared to $59.6 million ($0.35 diluted EPS) in the prior year quarter.
• Adjusted EBITDA was $140.1 million (28.3% of net sales) compared to $122.2 million (26.8% of net sales) in the prior year quarter.
• Adjusted EPS was $0.52 compared to $0.43 in the prior year quarter.
• Free cash flow was $110 million, excluding IEEPA reciprocal tariff refunds received and net of related taxes paid.
• Net debt leverage was 0.4x as of September 30, 2026.
• Income from operations was $108.2 million compared to $77.5 million in the prior year quarter; income from operations as a percentage of net sales increased by 490 basis points year-over-year.
• For the nine months ended September 30, 2026, net sales were $1,419.1 million compared to $1,288.7 million in the prior year period.
• For the nine months ended September 30, 2026, net income from continuing operations was $247.5 million compared to $150.7 million in the prior year period.
• For the nine months ended September 30, 2026, Adjusted EBITDA was $392.1 million compared to $338.1 million in the prior year period.
• Cash provided by operating activities was $112.2 million for the quarter and $320.6 million for the nine months ended September 30, 2026.
• Capital expenditures were $9.8 million for the quarter and $16.1 million for the nine months ended September 30, 2026.

Guidance and Future Outlook:

• For the fourth quarter, the company expects net sales to be between $430 million and $437 million.
• For the fourth quarter, the company expects Adjusted EBITDA to be between $120 million and $123 million.
• For the full year, the company expects free cash flow to be greater than $350 million, excluding the net impact of tariff-related refunds received.
• Management stated they are taking a conservative approach to assumptions while remaining aggressive with actions due to global uncertainty.

Business Segments and Product Lines:

• Completed the acquisition of Intellihot, Inc. during the third quarter.
• Entered the digital master mixing valve market with internally developed new products to expand presence in the hot water loop.
• Expanded served markets by roughly $400 million in 2026.
• Growth was observed in nearly all product categories.
• Product mix, Zurn Elkay Business System-led productivity initiatives, and supply chain repositioning contributed to margin expansion.

Market and Competitive Landscape:

• Management noted the need to remain nimble to find pockets of growth to offset general uncertainty within served markets and the broader economy.
• The company aims to take meaningful, profitable share in the digital master mixing valve category over the next several years.

Risks and Challenges:

• General uncertainty within served markets and the broader economy.
• Forward-looking statements involve risks and uncertainties, including factors that could cause actual results to differ materially from expectations, as detailed in the company's Form 10-K and subsequent reports.

Management Commentary and Tone:

• Todd A. Adams, Chairman and CEO, expressed confidence in the long-term fundamentals of the business and the Zurn Elkay Business System.
• Management highlighted the ability to leverage exceptional free cash flow to fund share repurchases, acquisitions, and dividend increases.
• The tone reflected confidence in progress while acknowledging the need for agility in a uncertain economic environment.

Other Key Points:

• Deployed $35 million to repurchase 0.7 million shares of common stock in the quarter.
• Increased the annual dividend by 18% to $0.52 per share.
• Total cash used for repurchase of common stock was $134.7 million for the nine months ended September 30, 2026.
• Total cash used for payment of common stock dividends was $55.0 million for the nine months ended September 30, 2026.
• Acquisitions, net of cash acquired, totaled $107.3 million for the nine months ended September 30, 2026.
• Tariff refunds received were $7.2 million for the quarter and $40.4 million for the nine months ended September 30, 2026 (net of related taxes paid of $8.7 million for the nine months).
• Goodwill increased to $848.6 million as of September 30, 2026, from $795.0 million as of December 31, 2025.
• Cash and cash equivalents were $307.1 million as of September 30, 2026.