Financial Data and Key Metrics Changes - The company achieved record sales, operating margin, and earnings per share for both Q4 and the full year 2025, with organic sales rising 8% and reported sales up 16% in Q4 [3][10] - Adjusted operating margin climbed 220 basis points to 19% in Q4, while for the full year, adjusted operating margin improved by 190 basis points to 19.6% [3][12] - Free cash flow reached a record $356 million for 2025, up 7%, with a conversion rate of 105% [4][15] - Adjusted earnings per share for Q4 was $2.62, a 28% year-over-year increase, while full year adjusted EPS was $10.58, up 19% [12][14] Business Line Data and Key Metrics Changes - In the Americas, organic sales grew by 10% and reported growth was 17% in Q4, driven by favorable pricing and volume [10] - Europe saw organic sales rise by 1% and reported sales increase by 10%, benefiting from favorable pricing and foreign exchange effects [10] - APMEA experienced organic sales growth of 9%, with acquisitions contributing an additional 6% for a total reported sales growth of 15% [11] Market Data and Key Metrics Changes - The Americas region showed strong performance, while Europe faced challenges with a 5% decline in organic sales for the full year [12][16] - The company anticipates a mixed outlook for non-residential new construction in the Americas, with indicators suggesting subdued market conditions [6] - In Europe, new residential and non-residential construction is expected to remain sluggish due to uncertainties surrounding inflation and trade policies [6] Company Strategy and Development Direction - The company continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks [4] - The data center initiative is a key growth area, with an addressable market exceeding $1 billion and sales from this sector growing at a double-digit rate [8] - The company plans to phase out underperforming products, identifying $10-15 million of European sales and $25-30 million in the Americas to eliminate during 2026 [5] Management's Comments on Operating Environment and Future Outlook - Management expects pricing and continued repair and replacement activity to fuel growth in 2026, despite a soft construction market [6] - The company anticipates reported sales growth of 8%-12% and organic sales growth of 2%-6% for 2026, with specific guidance for different regions [16][17] - Management remains cautious about the European market, expecting volume to be muted and margins to be flat [62] Other Important Information - The company completed two acquisitions, Superior Boiler and Saudi Cast, which are expected to be accretive to adjusted EPS in 2026 [4][5] - The company returned $83 million to shareholders through dividends and share repurchases in 2025, increasing the annual dividend payout by approximately 20% [15] Q&A Session Summary Question: M&A Strategy and Revenue Contribution - Management emphasized that M&A is a key part of the strategy, aiming for acquisitions to be accretive to EPS in the first year and targeting a return on invested capital of 10% by year three or five [27][29] Question: Data Center Growth - Management indicated that data center sales are growing at the higher end of double digits, with a focus on both air-cooled and liquid-cooled solutions [31][32] Question: Organic Growth Guidance - Management confirmed that the 80/20 revenue is included in the organic growth guidance, with expectations for low single-digit price growth and some volume offset by the 80/20 efforts [39][41] Question: Competitive Landscape in Data Centers - Management stated that they are among the top three competitors in the cooling valve market, focusing on quality and reputation to maintain their position [60] Question: Margin Guidance for Europe - Management expects margins in Europe to be flat in 2026, with some restructuring benefits expected primarily in the first half of the year [62]

Financial Data and Key Metrics Changes - The company reported a 10% organic sales growth in Q4 2025 compared to Q4 2024, with EBITDA increasing by 14% to $104 million and margins expanding by 100 basis points to 25.6% [3][9] - Free cash flow for Q4 was $83 million, contributing to a full-year total of $317 million, which is a 17% increase over 2024 [3][10] - The company repurchased approximately 3% of its outstanding shares for $160 million and paid $64 million in dividends, while leverage declined to 0.4x, the lowest since going public [3][10] Business Line Data and Key Metrics Changes - Q4 sales totaled $407 million, reflecting a 10% core and reported growth year-over-year, with non-residential end markets showing stronger growth compared to residential and certain commercial segments [8] - The adjusted EBITDA margin for Q4 expanded to 25.6%, driven by productivity initiatives and continuous improvement activities [9] Market Data and Key Metrics Changes - The institutional and waterworks end markets are expected to grow at low single digits, while the commercial end markets are projected to be flat, and the residential market remains challenging [17] - The company anticipates core sales growth of 7%-8% in Q1 2026, with incremental adjusted EBITDA margins of approximately 35% [19] Company Strategy and Development Direction - The company is focused on leveraging the Zurn Elkay Business System to enhance competitive advantages and drive organic growth opportunities, particularly in adjacencies and underserved verticals [6][7] - A three-year strategic planning process was completed, with year one actively deployed, emphasizing continuous improvement and evaluation of market conditions [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing the strategic plan and achieving another record year in 2026, with a focus on mitigating risks and capitalizing on growth opportunities [4][7] - The evolving tariff environment is being monitored, with expectations that tariff rates will remain consistent throughout 2026 [17][18] Other Important Information - The company highlighted its sustainability efforts, including the launch of ProFiltration products and partnerships for recycling used water filters, contributing to significant environmental benefits [11][12][13] - The company reported philanthropic giving of $1.9 million in 2025, supporting access to clean water initiatives [13] Q&A Session Summary Question: Core sales outlook for 2026 - Management indicated a strong start to 2026 with projected core sales growth of 7%-8% in Q1, with expectations to exceed annual guidance [23][24] Question: Deal environment and M&A opportunities - Management noted a robust pipeline of M&A opportunities and a fresh perspective on adjacencies, expressing optimism about potential transactions [25][26] Question: Details on adjacencies and verticals identified - Management described new adjacencies as North American-based, focusing on water and plumbing, with plans to leverage existing products into new markets [32] Question: Impact of recent metal price increases on pricing strategy - Management acknowledged monitoring metal prices and indicated a cautious approach to any incremental price increases while maintaining a strong supply chain [33] Question: Update on the drinking water business and filter attachment rates - Management reported good early adoption of ProFiltration, with high attachment rates expected to increase as the product gains market share [48][51] Question: Pricing in Q4 and expectations for 2026 - Management indicated that Q4 experienced about five points of price increase, with expectations for higher pricing in the first half of 2026 [58]

Financial Data and Key Metrics Changes - The company reported a 10% organic sales growth in Q4 2025 compared to Q4 2024, with EBITDA increasing by 14% to $104 million, and margins expanding by 100 basis points to 25.6% [3][9] - Free cash flow for Q4 was $83 million, bringing the full-year total to $317 million, a 17% increase over 2024 [3][10] - The company repurchased about 3% of its outstanding shares for $160 million and paid $64 million in dividends, while leverage declined to 0.4 times, the lowest since going public [3][10] Business Line Data and Key Metrics Changes - Q4 sales totaled $407 million, reflecting a 10% core and reported growth year-over-year, with non-residential end markets showing stronger growth compared to residential and some commercial segments [8][9] - The adjusted EBITDA margin for Q4 expanded to 25.6%, driven by productivity initiatives and continuous improvement activities [9] Market Data and Key Metrics Changes - The institutional and waterworks end markets are expected to grow at low single digits, while the commercial end markets are projected to be flat, and the residential market remains challenging [16][17] - The company anticipates core sales growth of 7%-8% in Q1 2026, with incremental adjusted EBITDA margins of approximately 35% [18][19] Company Strategy and Development Direction - The company completed its annual three-year strategic planning process and is now deploying the first year of that plan, focusing on organic growth opportunities in adjacencies and underserved verticals [5][6] - The company aims to leverage its Zurn Elkay Business System to enhance operational efficiency and competitive advantages [4][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing its strategic plan and achieving another record year in 2026, with a focus on mitigating risks and capitalizing on growth opportunities [7][16] - The evolving tariff environment is being monitored closely, with expectations that tariff rates will remain consistent throughout the year [17] Other Important Information - The company highlighted its sustainability efforts, including the launch of new filtration products and partnerships aimed at reducing plastic waste [11][12] - The company reported significant philanthropic contributions, reaching $1.9 million in 2025 [13] Q&A Session Summary Question: Core sales outlook for 2026 - Management indicated a strong start to 2026 with projected core sales growth of 7%-8% in Q1, with expectations to exceed annual guidance [23][24] Question: Deal environment and M&A opportunities - Management noted a fresh perspective on adjacencies and ongoing cultivation of M&A opportunities, expressing optimism about potential transactions [25][26][27] Question: Details on adjacencies and verticals identified - Management described new adjacencies as North American-based and related to water and plumbing, with plans to leverage existing products into new markets [31][32] Question: Impact of recent metal price increases on pricing strategy - Management acknowledged monitoring metal prices and indicated that costs are decreasing due to supply chain improvements, while being judicious about price increases [33][34] Question: Update on the drinking water business and filter attachment rates - Management reported good early adoption of the ProFiltration product, with high attachment rates expected to increase as the product gains market share [48][49][51] Question: Pricing in Q4 and guidance for 2026 - Management indicated that Q4 experienced about 5 points of price increase, with expectations for 4-5 points of price increase in early 2026 [56][58] Question: Adjacent market strategy and product development spending - Management confirmed that product development spending will increase in 2026, embedded within the overall financial guidance [66][67] Question: Data center market focus - Management confirmed participation in the data center market, which is growing quickly, and highlighted the company's suite of products relevant to this sector [68][69]

Financial Data and Key Metrics Changes - The company reported first quarter sales of $558 million, down 2% on both a reported and organic basis, primarily due to fewer shipping days and ongoing weakness in Europe [13][14] - Adjusted operating income reached a record $106 million, increasing by 2%, with adjusted operating margins at 19%, up 80 basis points [16][18] - Adjusted earnings per share rose to $2.37, reflecting a 2% increase compared to the previous year [16][18] - Free cash flow for the quarter was $46 million, up from $37 million in the same quarter last year [17][18] Business Line Data and Key Metrics Changes - Americas organic sales decreased by 1%, while reported sales remained flat, benefiting from the Icon acquisition which added $5 million [13][14] - Europe experienced a 9% decline in organic sales and a 12% drop in reported sales, attributed to fewer shipping days and weakness in new construction markets [14][16] - APMEA sales increased by 9% on a reported basis and 13% on an organic basis, driven by growth in China, the Middle East, and Australia [14][16] Market Data and Key Metrics Changes - The company anticipates continued weakness in Europe due to a slowdown in new construction amid economic challenges [10][11] - The Americas market is expected to show slight improvement, while Europe is projected to decline compared to initial forecasts [19][20] Company Strategy and Development Direction - The company is focusing on vertical integration and manufacturing close to customers in the U.S. to mitigate tariff impacts [7][12] - A proactive approach to productivity savings through automation and lean initiatives is being implemented [8] - The company is maintaining its full-year organic sales and adjusted operating margin outlook despite macroeconomic uncertainties [9][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current trade environment and expects to manage costs effectively through their OneWatts performance system [24][25] - The outlook for the second half of 2025 remains cautious due to potential demand impacts from tariffs and economic conditions [10][11] Other Important Information - The company announced a 21% increase in dividends starting in June, reflecting strong cash flow and a healthy balance sheet [6][18] - The search for a new CFO is ongoing, with the current CFO remaining in position to ensure a smooth transition [13] Q&A Session Summary Question: Opportunities to gain market share and margin - Management highlighted their strategy of manufacturing products regionally, which positions them favorably in the current tariff environment [31][33] Question: Pacing of price increases and potential tariff reductions - The company implemented annual price increases in January and additional tariff-related increases in March and May [35][36] Question: Front half versus back half margin and revenue expectations - Management indicated that the cautious outlook for the second half is due to uncertainty surrounding tariffs and potential demand impacts [44][90] Question: Weaker guidance for Europe - The management noted that the guidance reflects destocking in the heat pump market and uncertainty in new construction [61] Question: Integration of recent acquisitions - Integration efforts with recent acquisitions are ahead of schedule, with positive synergy tracking [63] Question: Raw material supply issues - Management acknowledged some raw material supply constraints but emphasized that tariffs are the primary concern impacting pricing [67][68] Question: Capacity and utilization of U.S. manufacturing facilities - The company has not fully utilized its North American manufacturing footprint and plans to expand shifts as needed without significant capital expenditures [79] Question: Margin expectations for the Americas - Management aims for a year-over-year margin increase of 30 to 50 basis points while continuing to invest in the business [92]