Zurn Elkay Water Solutions (ZWS 1.72%), a leading provider of engineered water management products for commercial and institutional buildings, reported its Q2 2025 results on July 29, 2025. The company reported non-GAAP earnings per share and GAAP revenue that exceeded analyst expectations, with earnings per share (non-GAAP) at $0.42 and revenue at $444.5 million. These results beat consensus estimates of $0.36 per share (non-GAAP) and $424.76 million in revenue (GAAP). The quarter was marked by record margins and a significant jump in free cash flow (non-GAAP). Management raised its outlook for full-year 2025, citing strong first-half performance and increased visibility for the remainder of the year. Overall, the quarter showed notable progress in profitability and cash generation amid ongoing tariff challenges.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.42 | $0.36 | $0.33 | 27.3% |
| Revenue | $444.5 million | $424.76 million | $412.0 million | 7.9% |
| Adjusted EBITDA | $117.9 million | $104.3 million | 13.1% | |
| Free Cash Flow | $101.6 million | $80.2 million | 26.7% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
Zurn Elkay Water Solutions specializes in water management systems, providing products such as commercial plumbing fixtures, water safety equipment, and water filtration solutions used in schools, hospitals, office buildings, and public facilities. Its offerings are specification-driven, meaning that products are designed to meet strict regulatory and building code standards. This focus on compliance helps secure recurring demand and end-user loyalty, as architects and engineers often specify these products early in a building’s design.
Recent business strategy has centered on managing supply chain risk, executing selective price increases, and investing in product innovation. The integration of Elkay Manufacturing, completed in 2022, expanded Zurn Elkay’s portfolio in drinking water solutions and commercial sinks. Key success factors include building out a resilient supply chain, maintaining strong relationships with customers, and navigating tariff impact through pricing and sourcing shifts.
Quarter Highlights: Strong Financials and Key Developments
The second quarter saw Zurn Elkay deliver results above analyst expectations, with adjusted earnings per share (non-GAAP) in Q2 2025 beat the estimate by $0.06. Revenue (GAAP) surpassed the consensus by $19.74 million. The company recorded its highest-ever adjusted EBITDA margin at 26.5%, up from 25.3% in the prior year period, Year-over-year sales growth (including price realization) and productivity savings contributed to the record adjusted EBITDA margin. Management attributed part of the strong quarter to “selective pricing actions” and noted that some customers advanced their orders ahead of planned price increases, providing a temporary lift to sales figures.
Record free cash flow (non-GAAP) of $101.6 million was generated, exceeding $100 million for the first time. This included $33 million deployed for share repurchases. Net debt leverage improved to 0.7x, reflecting both higher cash generation and responsible capital deployment. Management continues to emphasize balance sheet strength as a foundation for future investments and potential acquisitions.
No major acquisitions occurred in the quarter, but the integration of Elkay Manufacturing continued to support broader product offerings, especially in the drinking water and filtration segments. Core sales improved 8% compared to the prior-year quarter, with growth across all product categories. Although there was limited commentary on specific new product launches, management highlighted ongoing innovation around filtered drinking water and sustainability-focused solutions.
While the non-residential market remained stable and robust, the residential segment showed some weakness, though this represents a smaller portion of overall sales. The company’s business is anchored in commercial and institutional end-markets, which management described as “positive and stable” Zurn Elkay’s products benefit from being project-critical, helping it maintain pricing power and demand consistency even as broader market conditions evolve.
Looking Ahead: Guidance and What to Watch
Management lifted its outlook for fiscal 2025, based on outperformance in the second quarter and improved expectations for the rest of the year. The company now forecasts at least 5% core sales growth for full-year 2025, up from the previous outlook. Adjusted EBITDA is projected to be between $420 million and $430 million for full-year 2025, while free cash flow (non-GAAP) guidance increased to approximately $300 million for full-year 2025. For Q3 2025, leadership expects similar core sales growth and adjusted EBITDA margin as delivered in the previous quarter. These projections assume no material changes in the current global tariff structure, which remains a source of uncertainty.
Investors should monitor the impact of customer order pull-forwards and further developments in tariff policy. Results included “some customer buy ahead as well as some early benefit from our pricing actions implemented in the quarter.”. Ongoing supply chain repositioning, continued innovation in water management products, and the pace of market demand in non-residential construction will also be key themes to watch. $30.3 million was distributed in the first half of the year.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
