Executive Summary

Zurn Elkay delivered an 8% YoY revenue increase to $444.5M, record Adjusted EBITDA margin of 26.5% (+120 bps YoY), and Adjusted EPS of $0.42 (+27% YoY). Management raised FY25 guidance for Adjusted EBITDA to $420–$430M and free cash flow to ~$300M .
Results beat S&P Global consensus on revenue ($444.5M vs $424.6M*) and EPS ($0.42 vs $0.36*). Management guided Q3 core growth and margin to be similar to Q2 (≈8% core, ≈26.5% margin) and highlighted resilience in non-residential end markets . Values retrieved from S&P Global.
Execution on pricing and supply-chain migration offset tariff headwinds; CFO quantified ~$8–$10M customer order pull-forward and ~2 points of total price YoY in Q2, while remaining “price-cost positive” .
Free cash flow exceeded $100M for the first time in a quarter; net debt leverage fell to 0.7x despite $33M buybacks (1.0M shares), providing capacity for M&A as a medium-term catalyst .

What Went Well and What Went Wrong

What Went Well
- Record profitability: Adjusted EBITDA margin reached 26.5% (+120 bps YoY), above the high end of guidance; “record 26.5%” noted by the CEO .
- Strong cash generation and balance sheet: Free cash flow was $101.6M (vs $80.2M LY) and leverage declined to 0.7x; “exceeded $100 million…for the first time ever” and “lowest leverage we’ve had” .
- Raised outlook: “We’re raising our full year outlook for sales, adjusted EBITDA and free cash flow,” reflecting better-than-expected tariff impact and end-market resilience .
What Went Wrong
- Residential softness: Management continued to see “a modestly weaker residential market,” while institutional/commercial remained stable .
- Tariff volatility persists: Although the expected 2025 tariff cost before price was reduced to $35–$45M from 90 days ago, management emphasized ongoing monitoring of new Section 232 steel (50%) and proposed copper tariffs .
- Demand pull-forward: ~$8–$10M of orders pulled ahead due to price increases and tariff noise; management worked to pace shipments into Q3 to avoid operational inefficiencies .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025 (Actual)	Q2 2025 Consensus (S&P Global)	Beat / (Miss)
Revenue ($M)	$412.0	$388.8	$444.5	$424.6*	+$19.9
Adjusted EPS (Diluted)	$0.33	$0.31	$0.42	$0.36*	+$0.06
Adjusted EBITDA ($M)	$104.3	$98.0	$117.9	$110.1*	+$7.8
Adjusted EBITDA Margin (%)	25.3%	25.2%	26.5%	n/a	n/a

Values retrieved from S&P Global.
Notes: Adjusted EPS and Adjusted EBITDA are non-GAAP company metrics; see reconciliations in the release .

Additional GAAP/operating details (Q2 2025 vs. LY)
- GAAP Diluted EPS from continuing operations: $0.29 vs $0.26 LY .
- Income from operations: $77.6M vs $71.9M LY; gross profit $202.3M vs $186.3M LY .
- Non-GAAP drivers include LIFO adjustment ($7.3M), stock-based comp ($9.0M), amortization ($14.6M), restructuring ($1.9M) .

Segment breakdown: Company stated “growth in all product categories”; detailed segment revenue was not disclosed in the release .

KPIs and Cash Flow

KPI	Q2 2024	Q2 2025
Cash from Operations ($M)	$85.1	$110.6
Capex ($M)	$4.9	$9.0
Free Cash Flow ($M)	$80.2	$101.6
Net Debt Leverage (x)	n/a	0.7x
Share Repurchases	n/a	$33M; 1.0M shares

Operational color (Q2): ~$8–$10M order pull-forward; ~2 points of total price YoY; ~1 point of price yield from mid-quarter increases .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core Sales Growth	FY 2025	“Similar to 2024” (core +3% in 2024)	At least +5% YoY	Raised
Adjusted EBITDA ($M)	FY 2025	$405–$420	$420–$430	Raised
Free Cash Flow ($M)	FY 2025	~$290	~$300	Raised
Core Sales Growth	Q3 2025	n/a	Similar to Q2 (≈8% YoY)	New
Adjusted EBITDA Margin	Q3 2025	n/a	Similar to Q2 (≈26.5%)	New
Dividend per Share	Next payable	Prior $0.09 (May)	$0.09 declared; payable Sep 5, 2025	Maintained

Management will update more granular assumptions (interest, SBC, D&A, tax rate, diluted shares) each quarter; Q2 call indicated those assumptions were included in slides but not quantified in the transcript .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
Tariffs & Price-Cost	Q4’24: Provided FY25 guide with confidence; outlined 2024 EBITDA margin expansion and FCF record . Q1’25: Expected 2025 tariff cost before price $45–$55M; high confidence to be price-cost positive; supply chain shift away from China underway .	2025 tariff cost before price now $35–$45M (down $10M); remain price-cost positive; no hedging .	Improving clarity; cost lower than feared.
Supply Chain China Exposure	Q1’25: Plan <2–3% of COGS from China by end 2026; accelerating moves, dual sourcing .	“Firmly on track… by end of 2026 less than 2%–3% of COGS from China” .	On track / ahead of schedule.
End Markets	Q1’25: Non-residential mid-single digit growth; residential soft .	Non-residential positive/stable; residential modestly weaker .	Stable with known pockets of softness.
Drinking Water/Filtration	Q1’25: 600M gallons filtered, rising attachment; more to come .	Launch of Elkay Pro Filtration; total PFAS filter; connectivity; potential +10% ASP; target >$100M over time .	Product refresh accelerating opportunity.
Continuous Improvement	Q1’25: #CI submissions up 60% YoY .	2,575 CI activities in Q2, up 210% YoY; structural driver of margins .	Stronger CI cadence.
M&A	Q1’25: Balance sheet capacity, evaluating funnel .	Active pipeline; capacity and optionality remain .	Optionality intact.
Legislative Tailwinds	Q1’25: Early “filter-first” momentum .	Continued state actions (MI law; NJ funding; activity in WI/PA/NJ/MA/NY) .	Building support.

Management Commentary

“Adjusted EBITDA margins were above the high end of our guidance range at a record 26.5%… Free cash flow…exceeded $100 million… while our leverage declined to 0.7x.” — Todd Adams, CEO .
“There’s approximately $8–$10 million coming from customers ordering ahead of price increases and a point coming from realization on our tariff-related price increase.” — David Pauli, CFO .
“We are raising our outlook for the year as it relates to top line growth, EBITDA, and free cash flow.” — Todd Adams .
“We expect our tariff cost impact before any price for 2025 to be between $35 million and $45 million… a reduction of $10 million from what we thought 90 days ago.” — CFO .
“We shipped our very first units of Elkay Pro Filtration… filters can now be changed in less than 30 seconds… total PFAS filter… connected units.” — CEO .

Q&A Highlights

Growth and categories: All categories grew; innovation in drinking water, flow systems, water safety/control driving unit volume and share gains .
Pricing and pre-buy: Total price ~2 pts YoY; ~$8–$10M pull-forward; managed shipments to avoid inefficiencies; still guiding Q3 ~8% core YoY without adjusting Q2 .
Tariffs and hedging: 2025 tariff before price now $35–$45M; no hedging; confident to remain price-cost positive near/long term .
End markets: Institutional/Commercial/Waterworks outlook unchanged; Residential softer; education/healthcare budgets not pressuring orders to date .
Product and pricing: Elkay Pro Filtration carries ~10% higher ASP; filtration growth expected to be double-digit, target >$100M over time .

Estimates Context

EPS and revenue beat S&P Global consensus: Adjusted EPS $0.42 vs $0.36*, revenue $444.5M vs $424.6M* . Values retrieved from S&P Global.
For EBITDA, S&P Global’s “EBITDA Consensus Mean” for Q2’25 is $110.1M*; company-reported Adjusted EBITDA was $117.9M. Definition differences (Adjusted vs. unadjusted) can drive divergence; we present the company’s Adjusted EBITDA for comparability to history/guidance . Values retrieved from S&P Global.
Q3’25 consensus (for context): EPS ~$0.40*, revenue ~$442.6M*; management guided “similar” core growth/margins to Q2 . Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat and raise: Strong beat on revenue/EPS and higher FY25 EBITDA/FCF guidance should support estimate revisions upward and a constructive narrative into Q3 . Values retrieved from S&P Global.
Margin durability: Record 26.5% Adjusted EBITDA margin reflects structural productivity/CI and selective pricing; management expects Q3 margins similar to Q2 .
Tariff risk managed: Expected 2025 tariff cost reduced by ~$10M vs prior view, with price-cost positive stance and accelerated supply-chain diversification (China COGS heading to 2–3% by 2026) .
Free cash flow flywheel: >$100M quarterly FCF and 0.7x leverage create capacity for consistent buybacks and M&A, reinforcing medium-term EPS compounding .
Growth vectors: Filtration refresh (PFAS-certified, connected, faster filter changes) and state “filter-first” momentum can support multi-year growth and higher attachment/ASP .
Near-term setup: Q3 guide effectively calls for repeat of Q2’s growth/margins; watch for normalization of pulled-forward orders and tariff developments as incremental stock drivers .

Financial tables and figures are sourced from the company’s Q2 2025 earnings materials and filings.

Q2 2025 press release and 8-K 2.02 (financials, reconciliations, guidance): .
Q2 2025 earnings call transcript (management commentary, Q&A, guidance color): .
Q1 2025 results for sequential/trend context: .
Q4 2024 for prior guidance baseline: .
Estimates marked with an asterisk are from S&P Global. Values retrieved from S&P Global.

Zurn Elkay Water Solutions Corp (ZWS)·Q2 2025 Earnings Summary