Financial Data and Key Metrics Changes - Revenue grew by 7% in Q3 2025, driven by strong performance in Measurement & Control Solutions and Water Solutions & Services [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments [10] Business Line Data and Key Metrics Changes - Measurement & Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [13] - Applied Water reported a 1% revenue increase, with EBITDA margin expanding by 310 basis points to 21.7% [14] - Water Solutions & Services experienced a 10% revenue growth, despite an 11% decline in orders [15] Market Data and Key Metrics Changes - Orders were down 2% in Q3, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains strong at approximately $5 billion, indicating healthy demand across the business [10] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][11] - The ongoing simplification efforts and 80/20 implementations are driving margin improvement and resource allocation towards high-value opportunities [7][8] - The company is optimistic about long-term growth, particularly in digital water solutions and partnerships with major clients like Amazon [18][20] Management's Comments on Operating Environment and Future Outlook - Management raised full-year guidance for revenue, margin, and EPS, reflecting confidence in the team's ability to deliver commitments amid macro uncertainty [8][16] - The company anticipates continued momentum through the end of the year, supported by strong demand and backlog execution [17][20] - Management remains cautious about the impact of tariffs and FX movements but believes they can offset these through pricing actions [15][17] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations of a slight margin dilutive effect [15] - The company is committed to maintaining a strong balance sheet, with net debt to adjusted EBITDA at 0.4 times [10] Q&A Session Summary Question: Can you continue to get margin improvement into 2026 and beyond? - Management indicated that there is likely some upside to long-term targets, with a focus on delivering 2025 commitments first [26][28] Question: How is the demand in Measurement & Control Solutions shaping up for 2026? - Demand remains healthy, with a strong backlog and expectations for continued growth in both water and energy meters [29][30] Question: What are the impacts of the government shutdown on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [36] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing divestitures expected [39][40] Question: How does the company plan to manage the challenges in China? - The company is restructuring in China, reducing the workforce by around 40% to align with market demand [79]

Financial Data and Key Metrics Changes - Revenue grew by 7% in Q3 2025, driven by strong performance in Measurement & Control Solutions and Water Solutions & Services [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments [10] Business Line Data and Key Metrics Changes - Measurement & Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [12] - Applied Water experienced a 1% revenue increase, with EBITDA margin expanding by 310 basis points to 21.7% [13] - Water Solutions & Services revenue grew by 10%, with an EBITDA margin of 26.3% [14] Market Data and Key Metrics Changes - Orders were down 2% in Q3, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains strong at approximately $5 billion, indicating healthy demand across the business [10] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][11] - The ongoing simplification efforts and 80/20 implementations are aimed at driving margin improvement and resource allocation [6][7][20] - The company raised its full-year guidance for revenue, margin, and EPS, reflecting confidence in its ability to deliver commitments despite macro uncertainties [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, particularly in digital water solutions and partnerships with major clients like Amazon [18][19] - The company is navigating macro uncertainties, including tariffs and FX movements, but remains confident in its operational execution and demand [17][20] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations to offset this through pricing actions and supply chain management [15] - The company is committed to maintaining a strong balance sheet, with net debt to adjusted EBITDA at 0.4 times [10] Q&A Session Summary Question: What is the potential for EBITDA margin improvement in 2026 and beyond? - Management indicated that there is likely upside to long-term targets, with a focus on delivering 2025 commitments and ongoing transformation efforts [24][25][26] Question: How is the demand landscape shaping up for Measurement & Control Solutions? - Demand remains healthy, with a strong backlog and expectations for continued growth in both water and energy meters [27][28] Question: What impact is the government shutdown having on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [32] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing efforts to simplify operations and improve resource allocation [34][35] Question: How does the company plan to address the challenges in the Chinese market? - The company is restructuring its operations in China, reducing workforce size to align with current demand levels while maintaining a long-term positive outlook for the market [70][71]

Financial Data and Key Metrics Changes - Consolidated net sales increased by 6.6% to $380.3 million, setting a new quarterly record [18][6] - Gross margin exceeded 38%, reflecting a sequential improvement of 320 basis points [7][19] - Adjusted EBITDA reached a record $86.4 million, an increase of 1.4% year over year [22] - Adjusted net income per diluted share increased by 6.3% year over year to $0.334, setting a new third-quarter record [23] Business Line Data and Key Metrics Changes - Water Supply Solutions (WSS) net sales increased by 4.1% to $216.6 million, driven by volume growth in iron gate and specialty valves [23] - Water Management Solutions (WMS) net sales increased by 10.2% to $163.7 million, led by strong volume growth of repair products and hydrants [26] - Adjusted operating income for WSS increased by 4.7% to $60.5 million, while WMS adjusted operating income increased by 12.6% to $30.3 million [24][26] Market Data and Key Metrics Changes - The residential construction market is experiencing a slowdown, particularly in single-family housing starts, influenced by high interest rates and macroeconomic uncertainty [38] - The municipal repair and replacement market remains strong, driven by the need to repair aging infrastructure [40] Company Strategy and Development Direction - The company aims to enhance manufacturing efficiencies and operational excellence while navigating external challenges such as tariffs [17][12] - The closure of the legacy brass foundry is expected to yield benefits in the fourth quarter and into the next year [13][19] - The company is focused on sustainability and innovation, as highlighted in their annual ESG report [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record results for the second consecutive year, despite external uncertainties [9][17] - The anticipated impact of tariffs has been lower than initially expected, with updated estimates for annualized tariff impact decreasing to approximately 3% to 4% of cost of sales [14] - The company is prepared to implement additional pricing actions to offset higher input costs as needed [16] Other Important Information - Free cash flow for the first nine months of the year was $103 million, representing 71% of adjusted net income [28] - The company ended the quarter with $451 million in total debt and $372 million in cash and cash equivalents, maintaining a strong balance sheet [29] Q&A Session Summary Question: Insights on end markets and stability - Management noted a slowdown in the residential construction market, particularly in single-family housing starts, while the municipal market remains strong [38][40] Question: Margin outlook and FX impact - Management indicated that the FX headwind was a one-time event and discussed expectations for margins moving forward [41][42] Question: Legacy brass foundry impact on margins - The legacy brass foundry closure is expected to improve margins, with management anticipating an 8-10 basis point improvement [47] Question: Infrastructure funding and market conditions - Management highlighted that infrastructure funding has been slow, with no immediate benefits expected from the infrastructure bill [74][75] Question: Pricing actions and demand pull forward - Management confirmed no significant pre-buy demand was observed, and pricing adjustments were made in response to tariffs [66][72]