Executive Summary

Q1 2025 delivered strong YoY growth and record first-quarter profitability: net sales rose 18.7% to $304.3M, GAAP diluted EPS was $0.22, and adjusted EPS was $0.25; adjusted EBITDA increased 41.7% to $63.5M with a 20.9% margin .
Management raised FY2025 guidance: net sales to $1.37–$1.39B (from $1.34–$1.36B) and adjusted EBITDA to $310–$315M (from $300–$305M), with FCF >80% of adjusted net income; the guidance explicitly excludes potential tariff impacts .
Operational drivers included healthy short-cycle demand, normalized lead times, and efficiency gains; closure of the legacy brass foundry is expected to add 80–100 bps to annualized gross margin in 2H25 .
Balance sheet remained strong with $338.2M cash, $449.5M total debt, debt leverage 1.5x and net debt leverage 0.4x; Q1 FCF was $42.2M despite higher capex .

What Went Well and What Went Wrong

What Went Well
- Record first-quarter adjusted EBITDA and margin on higher volumes, favorable price/cost, and improved manufacturing performance; adjusted EBITDA margin rose 340 bps YoY to 20.9% .
- Segment execution: Water Flow Solutions adjusted operating margin rose to 22.1% (from 19.4%); Water Management Solutions adjusted operating margin improved to 21.3% (from 13.1%) .
- CEO tone constructive on pricing and operations: “Our disciplined execution on higher volumes led to a record first quarter adjusted EBITDA and more than a 300 basis point year-over-year improvement in our adjusted EBITDA margin” .
What Went Wrong
- Free cash flow declined YoY ($42.2M vs. $62.2M) due to lower operating cash flow and higher capex; capex increased to $11.9M from $5.7M .
- Legacy brass foundry closure drove $3.3M in inventory/asset write-downs; strategic reorg and other charges were $1.7M (leadership transition/severance) .
- Krausz repair products continued to face headwinds from the Israel-Hamas war, pressuring margins even as lead times improved .

Financial Results

Results vs prior year and prior quarter

Metric	Q1 2024	Q4 2024	Q1 2025
Net Sales ($M)	$256.4	$348.2	$304.3
GAAP Diluted EPS ($)	$0.09	$0.06	$0.22
Adjusted EPS ($)	$0.13	$0.22	$0.25
Operating Margin (%)	8.9%	8.2%	15.6%
Adjusted EBITDA ($M)	$44.8	$72.5	$63.5
Adjusted EBITDA Margin (%)	17.5%	20.8%	20.9%
Gross Margin (%)	—	—	33.8%; 34.9% ex-write-downs

Segment breakdown (Q1 YoY)

Segment	Q1 2024	Q1 2025
Water Flow Solutions Net Sales ($M)	$141.3	$174.6
Water Flow Solutions Adjusted Op Income ($M)	$27.4	$38.6
Water Flow Solutions Adjusted Op Margin (%)	19.4%	22.1%
Water Flow Solutions Adjusted EBITDA ($M)	$36.7	$44.7
Water Flow Solutions Adjusted EBITDA Margin (%)	26.0%	25.6%
Water Management Solutions Net Sales ($M)	$115.1	$129.7
Water Management Solutions Adjusted Op Income ($M)	$15.1	$27.6
Water Management Solutions Adjusted Op Margin (%)	13.1%	21.3%
Water Management Solutions Adjusted EBITDA ($M)	$22.1	$32.6
Water Management Solutions Adjusted EBITDA Margin (%)	19.2%	25.1%

KPIs and Balance Sheet

KPI	Q1 2024	Q1 2025
Cash from Operations ($M)	$67.9	$54.1
Capital Expenditures ($M)	$5.7	$11.9
Free Cash Flow ($M)	$62.2	$42.2
Total Debt ($M)	$447.4	$449.5
Cash & Equivalents ($M)	$216.7	$338.2
Debt Leverage (TTM Adj. EBITDA)	2.2x	1.5x
Net Debt Leverage (TTM Adj. EBITDA)	1.1x	0.4x
Dividend Declared per Share ($)	$0.064	$0.067

Non-GAAP adjustments in Q1 2025: $1.7M strategic reorganization & other charges (leadership transition/severance) and $3.3M inventory/asset write-down tied to the brass foundry closure were excluded from adjusted metrics .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($B)	FY2025	$1.34–$1.36	$1.37–$1.39	Raised
Adjusted EBITDA ($M)	FY2025	$300–$305	$310–$315	Raised
SG&A ($M)	FY2025	$236–$240	$240–$244	Raised
Net Interest Expense ($M)	FY2025	$11–$12	$10.5–$11.5	Lowered midpoint
Effective Tax Rate (%)	FY2025	25–27	25–27	Maintained
D&A ($M)	FY2025	$43–$45; amort. down ~$18M YoY	$43–$45; amort. down ~$18M YoY	Maintained
Capital Expenditures ($M)	FY2025	$45–$50	$45–$50	Maintained
FCF as % of Adj. Net Income	FY2025	>80%	>80%	Maintained
Tariff Assumption	FY2025	Not applicable	Excludes potential tariff impacts	New disclosure

Note: After Q1, on May 5, 2025, management further raised FY2025 net sales to $1.39–$1.40B while reaffirming adjusted EBITDA at $310–$315M to reflect enacted tariffs; other targets updated modestly (ETR 24–26%, interest $9–$10M) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2024)	Current Period (Q1 FY2025)	Trend
Pricing	Higher pricing supported 4Q performance	Low-to-mid-single-digit price realization embedded in FY25 outlook	Stable, supportive
Lead times/backlog	Normalized lead times in core products by Q4	Short-cycle iron gate valves/hydrants at normalized 2–4 week lead times; $60M service brass backlog worked down in FY24 implying near-term volume headwinds	Normalized; short-term headwind from backlog normalization
Foundry transformation	Anticipated benefits from closure of legacy brass foundry in FY25	Closure completed; 80–100 bps annualized gross margin uplift expected starting 2H25	Positive inflection in 2H25
Tariffs/macro	Not a factor in Q4 guide	Guidance excludes new tariffs; company largely U.S.-integrated; tariff headwinds manageable via price/efficiency/sourcing	New headwind, manageable
Krausz (Israel-Hamas)	Headwinds noted in Q4	Headwinds continue; working to reduce lead times/backlog; some margin pressure persists	Gradual improvement expected
Residential/land development	Resilient demand noted	Expect modest growth; homebuilders disciplined; lots/land assumed to grow modestly	Steady/modest growth
Infrastructure funding	Positioned to benefit; not embedded materially	Monitoring; increasing activity but not meaningful in guidance	Optionality, not in base case

Management Commentary

“We are increasing our fiscal 2025 guidance to primarily reflect our first quarter results and the expected benefits from recent price actions. We expect to deliver gross and adjusted EBITDA margin gains this year supported by our operational and commercial initiatives, including the anticipated benefits from the recent closure of our legacy brass foundry.”
“We ceased melting and casting operations at our legacy brass foundry and transitioned production to our state-of-the-art foundry… we continue to expect the closure… to generate an 80- to 100-basis-point annualized improvement in our gross margin starting in the second half of 2025.”
“Our adjusted EBITDA margin of 20.9%… are first quarter record levels… For the last 12 months, adjusted EBITDA was $303.4 million or 22.3% of net sales.”

Q&A Highlights

Pricing & volume outlook: FY25 assumes low-to-mid-single-digit price realization; volumes supported by normalized lead times in iron gate valves/hydrants; some near-term headwinds from lapping record Q2 and service brass backlog normalization .
Tariffs exposure/mitigation: 92% of 2024 sales were in the U.S.; vertically integrated in core categories; exposure manageable through price actions, strategic sourcing, and U.S. specialty valve capacity at Kimball .
Foundry closure & outsourcing: Outsourcing largely eradicated over last 2–3 quarters; $3.3M write-downs in Q1; decommissioning costs to be expensed as incurred .
Margin cadence: Back-half margins expected to exceed first half on seasonality, foundry benefits, and repair-products improvement .
Residential demand: Despite elevated mortgage rates, demand remains resilient; guidance assumes modest growth in lots/land development .

Estimates Context

Wall Street consensus EPS and revenue (S&P Global) were unavailable at time of analysis due to access limits; therefore, we do not present beat/miss vs consensus for Q1 2025. Management’s decision to raise FY2025 guidance following Q1 suggests results exceeded internal expectations, but we cannot quantify variance vs Street without S&P data .

Key Takeaways for Investors

Mix of resilient end-market demand, normalized lead times, and improved manufacturing drove record Q1 adjusted margins; structural tailwinds (foundry closure) support 2H25 margin expansion .
Guidance raised on both revenue and adjusted EBITDA (ex-tariffs), indicating confidence in price realization and execution; tariff risk acknowledged but deemed manageable .
Water Management Solutions’ profitability inflected sharply YoY (adj. op margin 21.3% vs 13.1%), reflecting manufacturing improvements and price/cost, partially offset by Israel-Hamas headwinds—continued tailwinds as repair normalizes .
Strong liquidity and deleveraging (net leverage 0.4x) provide flexibility for capex and shareholder returns (dividend raised to $0.067/quarter) .
Near-term watch items: short-cycle demand durability through construction season, timing and magnitude of tariff pass-throughs, and progress decommissioning the legacy foundry without incremental disruption .
Medium-term thesis: secular infrastructure needs (including lead service line replacement) and vertical integration support growth and margins; optionality from infrastructure bill not in base guidance .

Additional Q1 2025 Items

Dividend: Board declared $0.067 per share quarterly dividend (payable Feb 21, 2025; record Feb 10, 2025) .
8-K furnished results and attached press release (Ex. 99.1) .

Mueller Water Products, Inc. (MWA)·Q1 2025 Earnings Summary