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 Data and Key Metrics Changes - Consolidated net sales increased by 6.6% to $380.3 million, setting a new quarterly record [17] - Gross margin improved to 38.3%, reflecting a 150 basis point increase year over year [18] - Adjusted EBITDA reached a record $86.4 million, up 1.4% compared to the prior year [21] - Free cash flow for the quarter was $56 million after $12 million in capital expenditures [9] - Adjusted net income per diluted share increased by 6.3% year over year to $0.34 [22] 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 [22] - Water Management Solutions (WMS) net sales rose by 10.2% to $163.7 million, led by strong volume growth in repair products and hydrants [24] - Adjusted operating income for WSS increased by 4.7% to $60.5 million, while WMS saw a 12.6% increase to $30.3 million [23][25] Market Data and Key Metrics Changes - The residential construction market is experiencing a slowdown, particularly in single-family housing starts, which may impact future sales [35] - The municipal repair and replacement market remains strong, driven by the need to repair aging infrastructure [37] Company Strategy and Development Direction - The company aims to enhance operational efficiencies and customer service while navigating external challenges such as tariffs [9][16] - Focus on sustainability and innovative solutions is emphasized, with ongoing investments in facilities and employees [10][30] - The closure of the legacy brass foundry is expected to yield benefits in the upcoming quarters [14][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledges heightened macroeconomic and geopolitical uncertainty but remains optimistic about achieving record results for the second consecutive year [7][9] - The anticipated impact of tariffs has been lower than initially expected, with ongoing efforts to mitigate costs through pricing actions and supply chain initiatives [14][15] - The company is excited about the long-term growth potential in water infrastructure solutions, despite current challenges [30][72] Other Important Information - The company has updated its annual guidance for 2025, increasing net sales expectations by $15 million and adjusted EBITDA by $7.5 million [27][28] - Total debt stands at $451 million, with a strong balance sheet and no debt maturities until June 2029 [26][27] 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 [35][37] Question: Margin outlook and FX impact - Management indicated that the FX headwind was a one-time event and that margins are expected to improve moving forward [38][46] Question: Legacy brass foundry impact on margins - The legacy brass foundry closure is expected to improve margins, with the tariff impact being significant in the specialty valve business [44][45] Question: Infrastructure funding and market conditions - Management expressed that infrastructure funding has been slow, but the need for investment in water infrastructure remains critical [70][72] Question: Pricing actions and demand pull forward - No significant pre-buy demand was observed, and pricing adjustments have been made in response to tariffs [62][64]

Financial Data and Key Metrics Changes - Consolidated net sales increased by 3.1% to $364.3 million, surpassing the previous year's strong results [20] - Gross profit decreased by 1.8% to $128 million, with a gross margin of 35.1%, down 180 basis points year over year [20] - Adjusted EBITDA reached a record $84.5 million, an increase of 2.8% compared to the prior year, with an adjusted EBITDA margin of 23.2% [23] - Adjusted net income per diluted share increased by 13.3% to $0.34, setting a new second quarter record [24] Business Line Data and Key Metrics Changes - Water Flow Solutions (WFS) net sales increased by 5.1% to $216.2 million, driven by higher volumes of iron gate and specialty valves [24] - Water Management Solutions (WMS) net sales increased by 0.3% to $148.1 million, primarily due to increased volumes of repair products [26] - Adjusted operating income for WFS increased by 6.3% to $55.9 million, while adjusted EBITDA decreased by 0.3% to $62.2 million [25] Market Data and Key Metrics Changes - Approximately 92% of net sales are in the U.S., with 60% to 65% of net sales used for the repair and replacement of municipal water infrastructure [11] - The company is experiencing resilient end market demand, particularly in the municipal market, while facing challenges in the residential construction market [52] Company Strategy and Development Direction - The company is focused on enhancing operational excellence, improving supply chain efficiencies, and developing advanced manufacturing capabilities [14] - Recent investments and experience with inflationary cycles position the company to strengthen its market presence [18] - The company aims to capture benefits from investments needed to address aging North American water infrastructure [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to adapt to external challenges, including recently enacted tariffs [9] - The company is increasing its annual guidance for 2025 net sales while maintaining adjusted EBITDA guidance due to higher costs from tariffs [29] - Management anticipates continued resilience in the municipal market, with some uncertainty in the residential construction market [52] Other Important Information - The company has a strong balance sheet with a net debt leverage ratio below one and no debt maturities until June 2029 [28] - Free cash flow for the first half of the year was $47.3 million, representing 51% of adjusted net income [28] Q&A Session Summary Question: Was there any pre-buy observed due to tariffs? - Management indicated that there was no significant pre-buy observed, but it is being analyzed closely [39][40] Question: Is the new foundry fully operational? - The new foundry is fully operational, and the impairment charge of $800,000 was related to the legacy foundry [42][43] Question: What is the outlook for capital expenditures now that the new foundry is operational? - Most capital for the new foundry has already been spent, and anticipated CapEx will remain at 3% to 4% of sales [48][49] Question: How is end market demand being affected by tariffs? - Management expects continued resiliency in the municipal market, but some uncertainty in the residential construction market [52] Question: How are pricing strategies being adjusted in light of tariffs? - Targeted price increases have been implemented for specialty valve and repair products, but they may not fully cover the expected tariff impacts [60][62] Question: What is the expected gross margin for the next quarter? - Management anticipates improvements in gross margin, expecting an implied range of about 37% for the back half of the year [74]