Summary of Mueller Water Products Conference Call Company Overview - **Company**: Mueller Water Products (NYSE: MWA) - **Industry**: Water Infrastructure - **CEO Transition**: Marty Zakas will step down as CEO on February 9, 2026, with Paul McAndrew taking over [8][18] Key Financial Highlights - **Fiscal Year 2025 Performance**: - Record-breaking year with over 8% net sales growth, all organic [9][10] - EBITDA margin of 22.8% [10] - Free cash flow was approximately 84% of adjusted net income [15] Market Position and Products - **Core Products**: - Underground water infrastructure components including iron gate valves, fire hydrants, and specialty valves [9][12] - Focus on water and wastewater treatment facilities [9] - **Market Segments**: - Predominantly serves the U.S. market (92% of net sales), with a small portion from Canada [10] - Strong presence in municipal water utilities and residential construction markets [12][13] Strategic Initiatives - **Infrastructure Investment**: - $55 billion allocated for water infrastructure by the federal government [13] - Emphasis on the need for continued investment in aging water infrastructure [30][28] - **Product Innovations**: - Introduction of hydrant renewal technology to reduce replacement costs and time [30][31] - Development of EcoBrass, a more sustainable brass material [11][39] Operational Improvements - **Manufacturing Enhancements**: - Consolidation of five manufacturing sites into a new facility in Kimball, Tennessee [37] - New brass foundry opened, replacing an older facility [38] - **Capacity and Productivity**: - Plans to modernize aged equipment in iron foundries to increase capacity and productivity [40] Leadership Vision - **Future Growth**: - Focus on fewer, larger opportunities for growth rather than spreading resources too thin [22] - Commitment to enhancing customer experience through digital interfaces and operational improvements [16][23] - **Cultural Shift**: - Transition towards a performance-driven culture to support growth and margin expansion [23] Financial Strategy - **Capital Allocation**: - Balanced approach between returning capital to shareholders and investing in growth opportunities [52][54] - Ongoing share repurchase program with $65 million remaining [52] - **Margin Improvement**: - Expectation of 100 basis points year-over-year margin expansion [42] Conclusion - **Outlook**: - Positive outlook for continued growth driven by infrastructure investment and operational improvements [15][17] - Strong focus on innovation and customer relationships to enhance market position [16][30]

Financial Performance Highlights - FY2025 net sales reached $1,430 million, with a 5-year CAGR of 8.2%[12] - Adjusted EBITDA for FY2025 was $326.2 million, representing 22.8% of net sales and a 5-year CAGR of 11.3%[12] - Free cash flow for FY2025 amounted to $172 million[12] - Net debt stood at $20.1 million as of September 30, 2025, with a net debt to adjusted EBITDA ratio of 0.1x[12] - Q4 Fiscal 2025 net sales were $380.8 million, a 9.4% increase year-over-year[71] - Q4 Fiscal 2025 adjusted EBITDA was $91.8 million, a 26.6% increase year-over-year[71] - Q4 Fiscal 2025 adjusted net income per diluted share was $0.38, a 72.7% increase year-over-year[71] Strategic Priorities and Investments - The company aims to identify a total of 18 billion gallons of water loss by 2029 through EchoShore® leak detection[20] - Capital expenditures are expected to increase to 4% to 5% of net sales over the next 3 years[77] - The company has allocated $95 million to share repurchases since FY2019, including $15 million in FY2025, with $65 million remaining authorization on the share repurchase program as of September 30, 2025[93] FY2026 Outlook - Consolidated net sales are projected to be between $1,450 million and $1,470 million, representing a year-over-year growth of 1.4% to 2.8%[87] - Adjusted EBITDA is expected to range from $345 million to $350 million, indicating a year-over-year growth of 5.8% to 7.3%[87]

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Core Viewpoint - Mueller Water Products, Inc. will participate in the Baird 2025 Global Industrial Conference, highlighting its role in the water transmission and distribution industry [1]. Company Overview - Mueller Water Products, Inc. is a leading manufacturer and marketer of products and solutions for water transmission, distribution, and measurement in North America [3]. - The company's product portfolio includes engineered valves, fire hydrants, pipe connection and repair products, metering products, leak detection, pipe condition assessment, pressure management products, and software for critical water system data [3]. - The company aims to help municipalities enhance operational efficiencies, improve customer service, and prioritize capital spending, positioning itself as a key player in the water infrastructure sector [3]. Event Details - The management team will present at the Baird 2025 Global Industrial Conference on November 11, 2025, at 10:50 a.m. local time [1]. - The presentation will be available via webcast and archived for approximately 90 days on the company's Investor Relations webpage [2].

Financial Data and Key Metrics Changes - The company reported a net sales growth of 9.4% in Q4 2025, reaching $380.8 million, driven by strong volume gains and improved pricing [7][18] - For the full year, net sales increased by 8.7% to over $1.4 billion, with adjusted EBITDA growing 14.6% year-over-year to a record $326 million [9][10] - Adjusted net income per share rose 73% year-over-year to $0.38 in Q4 and increased approximately 37% year-over-year to $1.31 for the full year [8][10] Business Line Data and Key Metrics Changes - The Water Management Solutions (WMS) segment saw net sales increase by 10.4% year-over-year to $163.3 million, driven by volume growth in hydrants and repair products [21] - The Water Flow Solutions (WFS) segment reported net sales growth of 8.6% year-over-year to $217.5 million, supported by volume growth in iron gate and specialty valves [21] Market Data and Key Metrics Changes - The company anticipates a slowdown in residential construction, projecting a decline in the high single-digit range, while municipal repair and replacement growth is expected to be in the low to mid-single-digit range [34][35] - The municipal market remains resilient, with strong volume growth observed in 2025, particularly in iron gate valves and specialty products [35] Company Strategy and Development Direction - The company plans to continue investing in capital expenditures, targeting 4-5% of net sales over the next three years to enhance domestic capabilities and expand production [16][26] - Strategic investments will focus on operational efficiencies, digital customer experience, and new product offerings to drive future growth [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued net sales growth and margin expansion in 2026, despite external uncertainties [10][28] - The company expects consolidated net sales for 2026 to range between $1.45 billion and $1.47 billion, reflecting year-over-year growth of 1.4% to 2.8% [24][25] Other Important Information - The company achieved a record gross margin of 36.1% for the full year, an increase of 120 basis points compared to the prior year [19] - Free cash flow for the year exceeded expectations at $172 million, representing 84% of adjusted net income [23] Q&A Session Summary Question: How did Muni and residential market sales shake out in fiscal 2025? - Management indicated that residential construction is expected to decline in the high single-digit range, while municipal repair and replacement growth will be in the low to mid-single-digit range [34] Question: Can you provide more detail on the anticipated benefits of the initiatives and investments? - Management noted that capital investments in iron foundries will not yield immediate margin benefits but are expected to support future growth and capacity [36] Question: How should we think about inventory in the channel and backlog? - Management believes channel inventory is normalized for most product lines and is monitoring for any tariff-related buying ahead [56] Question: What impact has the government shutdown had on the business? - Management stated that most spending comes from the municipal level and they have not seen any noticeable impacts from the government shutdown [68] Question: Can you provide an update on the warranty charge? - The warranty charge is related to metering products within the WMS segment, with adjustments made based on historical failure rates [70]

Financial Performance Highlights - Q4 2025 net sales reached $380.8 million, a 9.4% increase year-over-year[13] - Adjusted EBITDA for Q4 2025 was $91.8 million, up 26.6% year-over-year[13] - Adjusted net income per diluted share for Q4 2025 increased by 72.7% to $0.38[13] - Fiscal Year 2025 net sales hit a record $1,429.7 million, an 8.7% increase year-over-year[13] - Adjusted EBITDA for FY2025 grew by 14.6% year-over-year to $326.2 million[13] - Free cash flow for FY2025 was $172 million[13] Segment Performance - Water Flow Solutions (WFS) net sales in Q4 2025 increased by 8.6% year-over-year to $217.5 million[28] - Water Management Solutions (WMS) net sales in Q4 2025 increased by 10.4% year-over-year to $163.3 million[32] FY2026 Outlook - The company projects net sales between $1,450 million and $1,470 million, representing a 1.4% to 2.8% year-over-year growth[38] - Adjusted EBITDA is expected to be between $345 million and $350 million, a 5.8% to 7.3% year-over-year increase[38]

Core Insights - Mueller Water Products (MWA) reported revenue of $380.8 million for the quarter ended September 2025, reflecting a year-over-year increase of 9.4% and a surprise of +5.18% over the Zacks Consensus Estimate of $362.05 million [1] - Earnings per share (EPS) for the quarter was $0.38, compared to $0.22 in the same quarter last year, resulting in an EPS surprise of +11.76% against the consensus estimate of $0.34 [1] Revenue Performance - Net Sales from Water Management Solutions reached $163.3 million, exceeding the average estimate of $157.5 million by two analysts, marking a year-over-year increase of +10.4% [4] - Net Sales from Water Flow Solutions amounted to $217.5 million, surpassing the average estimate of $204.5 million, with a year-over-year change of +8.6% [4] Operating Income - Adjusted operating loss for Corporate was reported at $-16 million, slightly worse than the estimated $-15 million by two analysts [4] - Adjusted operating income for Water Management Solutions was $39.8 million, exceeding the average estimate of $34 million [4] - Adjusted operating income for Water Flow Solutions was $55.1 million, compared to the average estimate of $53.5 million [4] Stock Performance - Shares of Mueller Water Products have returned +1.2% over the past month, in comparison to the Zacks S&P 500 composite's +1.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Mueller Water Products (MWA) reported quarterly earnings of $0.38 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and up from $0.22 per share a year ago [1][2] - The company achieved revenues of $380.8 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 5.18% and increasing from $348.2 million year-over-year [3] - The stock has gained approximately 15.8% since the beginning of the year, slightly outperforming the S&P 500's gain of 15.6% [4] Earnings Performance - The earnings surprise for the recent quarter was +11.76%, while the previous quarter saw a surprise of -2.86% [2] - Over the last four quarters, Mueller Water Products has exceeded consensus EPS estimates three times [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.29 on revenues of $317.3 million, and for the current fiscal year, it is $1.42 on revenues of $1.47 billion [8] - The estimate revisions trend for the company was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [7] Industry Context - Mueller Water Products operates within the Zacks Steel - Pipe and Tube industry, which is currently ranked in the bottom 17% of over 250 Zacks industries [9] - Historical data suggests that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than a factor of 2 to 1 [9]

Financial Performance - Net sales increased 9.4% in Q4 2025 to $380.8 million, compared to $348.2 million in Q4 2024[2] - Adjusted EBITDA for Q4 2025 was $91.8 million, a 26.6% increase from $72.5 million in Q4 2024, with an adjusted EBITDA margin of 24.1%[10] - Net income for Q4 2025 rose to $52.6 million, a 426.0% increase from $10.0 million in Q4 2024, resulting in a net income margin of 13.8%[9] - The company reported adjusted net income per diluted share of $0.38 in Q4 2025, a 72.7% increase from $0.22 in Q4 2024[2] - Gross profit for the year ended September 30, 2025, was $516.7 million, representing a 12.5% increase from $459.0 million in 2024[40] - Net income for the year ended September 30, 2025, was $191.7 million, compared to $115.9 million in 2024, reflecting a 65.3% increase[40] - The company reported a net income per diluted share of $1.22 for the year ended September 30, 2025, compared to $0.74 in 2024[40] - The gross profit for 2025 was $516.7 million, with a gross profit margin of 36.2%, compared to $459.0 million and a margin of 34.9% in 2024[47][49] - Operating income for 2025 was $260.6 million, reflecting an operating margin of 18.2%, up from an operating income of $181.7 million and a margin of 13.8% in 2024[47][49] - The company reported a net income of $191.7 million for 2025, resulting in a net income margin of 13.4%, compared to a net income of $115.9 million and a margin of 8.8% in 2024[47][49] - Adjusted EBITDA for 2025 was $326.2 million, with an adjusted EBITDA margin of 22.8%, compared to $284.7 million and a margin of 21.7% in 2024[47][49] Guidance and Projections - Fiscal 2026 net sales guidance is projected between $1,450 million and $1,470 million, reflecting a 1.4% to 2.8% increase compared to the prior year[23] - Fiscal 2026 adjusted EBITDA is expected to be between $345 million and $350 million, representing a 5.8% to 7.3% increase year-over-year[24] Cash Flow and Capital Expenditures - Free cash flow for the fiscal year was $172.0 million, a decrease of $19.4 million compared to $191.4 million in the prior year[21] - Free cash flow for the quarter ended September 30, 2025, was $69.0 million, compared to $69.9 million in the same quarter of 2024, a slight decrease of 1.3%[44][45] - Capital expenditures for the quarter ended September 30, 2025, totaled $14.5 million, compared to $19.4 million in the same quarter of 2024, a decrease of 25.2%[44][45] - Capital expenditures for 2025 totaled $47.3 million, reflecting ongoing investments in operational capabilities[47][49] - The company plans to invest between $60 million and $65 million in capital expenditures for fiscal 2026[27] Balance Sheet and Debt - Total debt outstanding as of September 30, 2025, was $451.6 million, with a net debt leverage ratio of 0.1x[22] - Total assets as of September 30, 2025, were $1,838.9 million, an increase from $1,635.9 million as of September 30, 2024[38] - Total liabilities increased to $857.2 million as of September 30, 2025, compared to $825.8 million in 2024[38] - Cash and cash equivalents rose to $431.5 million as of September 30, 2025, up from $309.9 million in 2024[38] - The debt leverage ratio for 2025 was 1.4x, while the net debt leverage ratio was 0.1x, indicating a strong balance sheet position[48] Tax and Other Charges - Cash paid for income taxes, net, for the year ended September 30, 2025, was $69.1 million, down from $74.4 million in 2024, a decrease of 7.0%[43] - Strategic reorganization and other charges for the year ended September 30, 2025, amounted to $8.8 million, down from $15.8 million in 2024[40] - The effective tax rate for adjusting items was 24.6% in 2025, which may be subject to rounding[48]

Core Points - Paul McAndrew has been appointed as the new CEO of Mueller Water Products, effective February 9, 2026, succeeding Martie Edmunds Zakas, who will retire after a 19-year tenure [1][2] - The transition is part of a thoughtful succession planning process by the Board of Directors, highlighting McAndrew's key role in improving the company's operations and financial success [2] - Zakas will continue to support the company as a Senior Advisor until December 31, 2026, ensuring a smooth transition [1][2] Company Overview - Mueller Water Products, Inc. is a leading manufacturer and marketer of products and solutions for the transmission, distribution, and measurement of water in North America [9] - The company's product portfolio includes engineered valves, fire hydrants, pipe connection and repair products, metering products, leak detection, and software for critical water system data [9] Leadership Background - Paul McAndrew has been with Mueller since 2022, serving as COO and President, and has extensive experience in operations, engineering, and sales [4][5] - Prior to joining Mueller, McAndrew held leadership roles at Emerson and Kautex Textron, demonstrating a strong background in managing operations and supply chains [4][5]