Executive Summary

Solid beat and raise: ZWS delivered Q3 revenue of $455.4M (+11% YoY) and adjusted EPS of $0.43, both above S&P Global consensus; adjusted EBITDA was $122.2M (26.8% margin), the highest quarterly margin since the Elkay merger . Q3 revenue and EPS beat consensus of $442.6M and $0.396, respectively (S&P Global)*.
Guide raised again: FY25 adjusted EBITDA raised to $437–$440M (from $420–$430M) and FCF now “> $300M”; Q4 adjusted EBITDA guided to $99–$102M with high-single-digit core sales growth . Q4 EBITDA guide brackets consensus ($101.3M)* .
Pricing, tariffs, and mix: Results benefited from tariff-related price realization and an incremental $8M order pull-forward ahead of a mid-September price action; residential remained soft but non-residential was stable, with broad-based category growth .
Capital returns and balance sheet: Annual dividend lifted 22% to $0.44; repurchase authorization raised to $500M; leverage fell to 0.6x on strong FCF ($93.9M in Q3) and $25M buybacks in the quarter .
2026 setup steady: Macro indicators imply 2026 resembles 2025 (low-growth) amid tariff/interest-rate uncertainty; ZWS expects to outgrow via specification, pricing discipline, and product initiatives (e.g., Elkay LIV EZ home hydration) .

What Went Well and What Went Wrong

What Went Well

Broad-based growth and margin expansion: Core sales +11% YoY with growth “in all product categories”; adjusted EBITDA margin expanded 120 bps YoY to 26.8% .
Strong cash generation and deleveraging: Free cash flow of $93.9M in Q3; net debt leverage at 0.6x, lowest as a public company; enabled higher dividend and expanded buyback authorization .
Management confidence and guidance raise: “Sales and adjusted EBITDA both exceeded guidance… and we will again raise our expectations for the full year” — CEO Todd Adams .

What Went Wrong

Tariff headwind rising: 2025 tariff cost now expected to be ~ $50M (was $35–$45M last quarter); management still expects to remain price-cost positive .
LIFO headwind to GAAP: Q3 included an $11.2M LIFO adjustment, offset at the adjusted level, contributing to the gap between GAAP and adjusted results .
Residential softness: Non-residential remained positive; residential markets “continue to experience softness,” limiting upside to total demand .

Financial Results

Revenue, Profitability, EPS (older → newer)

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	$410.0	$388.8	$444.5	$455.4
Adjusted EBITDA ($M)	$105.0	$98.0	$117.9	$122.2
Adjusted EBITDA Margin (%)	25.6%	25.2%	26.5%	26.8%
GAAP Diluted EPS – Cont. Ops ($)	$0.25	$0.24	$0.29	$0.35
Adjusted EPS – Diluted ($)	$0.34	$0.31	$0.42	$0.43

Q3 vs consensus (S&P Global)*

Metric	Q3 2025 Actual	Q3 2025 Consensus*	Surprise
Revenue ($M)	$455.4	$442.6*	+$12.8M
Adjusted EPS ($)	$0.43	$0.396*	+$0.034

Key drivers: Price realization (tariff-related) and ~$8M order pull-forward ahead of a discrete mid-September price action in Water Safety & Control; volume growth and productivity initiatives expanded margins .

KPIs and Cash

KPI	Q1 2025	Q2 2025	Q3 2025
Free Cash Flow ($M)	$38.6	$101.6	$93.9
Net Debt Leverage (x)	0.9x	0.7x	0.6x
Share Repurchases	$77M / 2.3M shrs	$33M / 1.0M shrs	$25M / 0.6M shrs
Cash & Equivalents ($M)	$144.7	$201.9	$260.1
Dividend/Authorization	—	—	Annual dividend up 22% to $0.44; buyback auth. to $500M

Segment/Product Commentary (qualitative)

Water Safety & Control: Discrete Sep price action; ~$8M demand advanced from Q4 to Q3 .
Flow Systems: Grew at/above “fleet average” in last 24 months; supportive leading indicator .
Drinking Water: Strong uptake for Elkay Pro Filtration; launched LIV EZ built-in home dispenser in Oct .
Company did not disclose revenue by segment in Q3 materials .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core Sales Growth (YoY)	FY 2025	≥ 5%	~8%	Raised
Adjusted EBITDA ($M)	FY 2025	$420–$430	$437–$440	Raised
Free Cash Flow ($M)	FY 2025	~ $300	> $300	Raised
Adjusted EBITDA ($M)	Q4 2025	—	$99–$102	New
Core Sales Growth	Q4 2025	—	High-single-digit growth	New
Tariff Cost ($M)	FY 2025	$35–$45 (prior expectation)	~ $50	Higher
Dividend	Ongoing	—	Annual dividend +22% to $0.44/sh	Increased
Share Repurchase Authorization	Ongoing	—	Increased to $500M	Increased

Consensus cross-check: Q4 EBITDA guide $99–$102M vs consensus $101.3M* (in line); FY25 EBITDA guide $437–$440M vs consensus $439.5M* (in line) .

Earnings Call Themes & Trends

Topic	Q1 2025 (Apr)	Q2 2025 (Jul)	Q3 2025 (Oct)	Trend
Tariffs / Price-Cost	“Unprecedented and volatile trade environment”; focus on staying price-cost positive	Navigated tariffs via selective pricing and supply-chain flexibility	2025 tariff cost now ~ $50M (vs $35–$45 prior); still price-cost positive	Managing higher tariff costs with pricing discipline
Pricing / Demand Timing	No tariff-related price in Q1; growth volume-led	Pricing actions implemented in Q2	~$8M order pull-forward ahead of mid-Sep price action	Pricing tailwind; modest timing shift
Supply Chain Footprint	Optimizing supply chain	Supply chain diversity and flexibility drove results	>50% COGS now U.S.; China to 2–3% by end of next year	Structural de-risking continuing
End-Markets	—	Non-resi positive; residential modestly weaker	2026 looks like 2025; acceleration pushed to 2027	Stable near-term market
Product Initiatives	—	Targeted initiatives supporting organic growth	Elkay Pro Filtration uptake; LIV EZ home launch	Expanding adjacencies
Regulatory/Schools	—	—	Michigan “Filter First” roll-out tracking; NJ funding for schools	School hydration tailwind emerging

Management Commentary

“We delivered a solid quarter as our sales and adjusted EBITDA both exceeded the guidance we provided 90 days ago and will again raise our expectations for the full year.” — Todd Adams, CEO .
“26.8% consolidated EBITDA margins are the highest quarterly margins we've had since the Elkay merger.” — CFO commentary .
“With only one quarter to go… we are again raising our full year estimates for growth, profitability, and cash flow.” — CEO .
“About $8 million was pulled from Q4 into Q3” due to the mid-September pricing action .
“By the end of next year, only about 2–3% [of COGS] will come from China.” — CEO on supply-chain repositioning .

Q&A Highlights

Volume vs price and timing: ~$8M demand advanced into Q3; excluding pull-forward, Q3 and Q4 momentum are similar; about five points of price in Q3 .
Margin durability: Management views current margin level as a new baseline; targets 30–35% incrementals on volume longer-term .
M&A funnel and capital allocation: Funnel broad across flow systems, valving, and drinking water; steady repurchase cadence with flexibility for dislocations; returns and synergies drive valuation framework .
Tariff mitigation: Multi-year shift of sourcing out of China and strong U.S. footprint underpin resilience; confident in staying price-cost positive .
Regulatory tailwinds: Michigan “Filter First” program and New Jersey funding expanding school hydration opportunities in 2025–2026 .

Estimates Context

Q3 2025: Revenue $455.4M vs $442.6M consensus*; Adjusted EPS $0.43 vs $0.396 consensus* — both beats .
Q4 2025: Company guides adjusted EBITDA $99–$102M vs consensus $101.3M* (in line) .
FY 2025: Guide $437–$440M adjusted EBITDA vs consensus $439.5M* (in line); consensus revenue ~$1.689B*; EPS consensus ~$1.504* .
FY 2026: Consensus revenue ~$1.778B*; EPS consensus ~$1.648* (implies modest growth consistent with “2026 ≈ 2025” market view) .

Values with asterisk (*) are retrieved from S&P Global.

Consensus snapshot (S&P Global)*

Metric	Q3 2025	Q4 2025	FY 2025	FY 2026
Revenue Consensus Mean ($M)	442.6*	402.9*	1,689.0*	1,775.8*
Primary EPS Consensus Mean ($)	0.396*	0.339*	1.504*	1.648*
EBITDA Consensus Mean ($M)	117.0*	101.3*	439.5*	472.9*
Target Price Consensus Mean ($)	50.29*	50.29*	50.29*	50.29*

Key Takeaways for Investors

Beat-and-raise quarter anchored by pricing discipline and productivity drove record quarterly margin and FCF; near-term narrative is constructive despite tariff headwinds .
Q4 and FY25 guides are in line-to-better vs consensus, supporting estimate stability or modest upward EPS revisions given Q3 beat (and price-cost confidence) .
Tariff cost inflation (now ~$50M for 2025) is the principal headwind; ZWS’s multi-year supply-chain pivot and pricing agility mitigate risk .
Capital returns accelerating (22% dividend hike; $500M buyback authorization) with net leverage at 0.6x provide downside support and optionality for M&A .
2026 macro looks like 2025 (low growth), but ZWS targets structural outgrowth via spec-driven portfolio breadth, school hydration tailwinds, and new products (e.g., LIV EZ) .
Watch for: Q4 execution (no further demand pull-forward), tariff/policy developments on copper and country-specific rates, and sustained 30–35% incrementals commentary translating into FY26 margin trajectory .
Tactical setup: Positive beat-and-raise with balanced guide and robust cash returns; stock sensitivity likely tied to tariff headlines and evidence of continued price-cost positivity into early 2026 .

Sources: Company press releases, 8-K, and earnings call transcript.

Q3 2025 8-K/press release and financial tables ; Business Wire press release .
Q3 2025 earnings call transcript (pricing pull-forward, guidance, tariffs, margin, supply chain, schools) .
Q2 2025 press release (trend and prior guidance) .
Q1 2025 press release (trend and context) .
Product launch press release (Elkay LIV EZ) .