Zurn Elkay Water Solutions Corporation: A Leader in Innovative Water Management

Published on March 12, 2025 | Ticker: ZWS

Zurn Elkay Water Solutions Corporation (ZWS) is a growth-oriented, pure-play water management business that has been at the forefront of delivering innovative and sustainable water solutions for over 125 years. The company designs, procures, manufactures, and markets what it believes to be the broadest portfolio of specification-driven water management products, catering to the needs of institutional, commercial, waterworks, and residential end markets.

Company History and Challenges

Established in 1900 as Zurn Industries, the company initially focused on manufacturing plumbing products and systems. Over the decades, Zurn expanded its product portfolio, establishing itself as a leading provider of water management solutions. Throughout its history, Zurn Elkay has faced various challenges, including navigating changing industry regulations, adapting to evolving customer demands, and managing supply chain disruptions. However, the company's commitment to continuous improvement, embodied in its Zurn Elkay Business System, has allowed it to overcome these obstacles and maintain its position as a market leader.

Innovation and Market Position

Zurn Elkay's focus on innovation has been a key driver of its success. The company has a long track record of developing cutting-edge products that meet stringent performance and regulatory requirements. This dedication to innovation has earned Zurn Elkay a reputation for delivering highly-engineered, mission-critical solutions that improve water safety, hygiene, and sustainability. The company's extensive patent portfolio and strong brand recognition have further strengthened its competitive position.

Strategic Acquisitions

In 2022, the company strengthened its market position through the strategic acquisition of Elkay Manufacturing Company, a leader in filtered drinking water solutions and commercial sinks. This transformative merger expanded Zurn Elkay's product portfolio and end-market exposure, solidifying its standing as a premier provider of comprehensive water management solutions. The combined company leveraged Zurn's heritage of engineering expertise and Elkay's design acumen to deliver unparalleled value to customers.

Product Portfolio

Zurn Elkay's product portfolio is designed to deliver superior value to building owners, positively impact the environment and human hygiene, and reduce product installation time. The company's offerings are divided into four main categories:

1. Water Safety and Control Products: Sold under the Zurn and Wilkins brand names, these products include backflow preventers, fire system valves, pressure reducing valves, and thermostatic mixing valves. They are designed to protect and control potable and emergency water supplies in various applications.

2. Flow Systems Products: These products manage storm water and wastewater within buildings or on-site. They include point drains, linear drainage systems, and wastewater pre-treatment products such as oil and grease interceptors and separators.

3. Hygienic and Environmental Products: This category includes sensor-operated flush valves, heavy-duty commercial faucets, water-conserving fixtures, sinks made from various materials, and restroom partition systems and lockers.

4. Drinking Water Products: Sold under the Elkay and Halsey Taylor brand names, these products include water filters, bottle filling stations, water fountains, water dispensers, and filtered faucets, all designed to provide clean, superior-tasting water while improving overall water hygiene, accessibility, and sustainability.

Financials

Zurn Elkay's financial performance has been consistently robust, with the company delivering strong organic growth and margin expansion in recent years. In fiscal year 2024, the company reported net sales of $1.57 billion, a 2.4% increase year-over-year, driven by 3% core sales growth across its non-residential end markets. Adjusted EBITDA for the year reached $390 million, up 15% compared to the prior year, with margins expanding by 270 basis points to 24.9%.

The company's disciplined approach to capital allocation has also been a key driver of shareholder value creation. Zurn Elkay has a track record of effectively deploying its strong free cash flow, which totaled $272 million in 2024, towards strategic acquisitions, organic investments, and returning capital to shareholders. During the year, the company repurchased $150 million of its common stock at an average price of $31.81 per share and declared $57 million in dividends.

Net income for fiscal year 2024 was $160.2 million, with operating cash flow of $293.5 million. The company's largest customer accounted for 19% of consolidated net sales, with no other customers accounting for more than 10% of consolidated net sales.

In the most recent quarter (Q4 2024), Zurn Elkay reported revenue of $371 million and net income of $36.4 million. Core sales grew 4% compared to Q4 2023, driven by solid execution on growth initiatives despite softness in residential and pockets of commercial end markets.

Geographically, the majority of Zurn Elkay's sales are in the United States, with 90.1% of 2024 revenue coming from the US market. Canada accounted for 5.7% of 2024 revenue, and the rest of the world was 3.0%.

Liquidity

Zurn Elkay's financial flexibility is underpinned by a solid balance sheet, with net debt to adjusted EBITDA ratio of 0.8x as of December 31, 2024. This low leverage position provides the company with ample capacity to pursue accretive acquisition opportunities and continue investing in its growth initiatives.

As of December 31, 2024, the company reported:

Debt/Equity Ratio: 0.348
Cash and Cash Equivalents: $198 million
Available Credit Line: $188.7 million under a $200 million revolving credit facility
Current Ratio: 2.91
Quick Ratio: 1.81

Future Outlook

Looking ahead, Zurn Elkay is well-positioned to capitalize on favorable trends in its end markets. For full year 2025, the company expects core sales growth to be similar to the 4% delivered in 2024, driven by continued strength in its institutional and waterworks segments, which are expected to offset modest softness in the commercial and residential markets. Management anticipates generating adjusted EBITDA in the range of $405 million to $420 million for the full year, representing year-over-year growth of 3-8%. The company also projects free cash flow of approximately $290 million for 2025.

For Q1 2025, Zurn Elkay is projecting core sales growth in the low single-digits and an adjusted EBITDA margin of 24.5% to 25%, representing 40-90 basis point expansion.

Sustainability Focus

Zurn Elkay's strategic focus on sustainability has also been a key differentiator. In 2024, the company's products saved 32.5 billion gallons of water and prevented the need for 19 billion single-use plastic water bottles. Additionally, Zurn Elkay has achieved a 23% reduction in energy intensity and a 38% reduction in greenhouse gas intensity compared to its 2021 baseline, demonstrating its commitment to environmental stewardship.

Supply Chain Management

The company has been actively working to reduce its exposure to materials from China. By the end of 2026, Zurn Elkay expects to have less than 10% exposure to materials from China, down from a higher level previously. This strategic move aims to mitigate supply chain risks and enhance operational resilience.

Recognition and Awards

The company's strong track record, diversified product portfolio, financial flexibility, and focus on sustainability have earned it recognition as one of America's Most Responsible Companies by Newsweek for the fifth consecutive year in 2025 and one of the World's Best Companies for Sustainable Growth by TIME in 2025.

Operational Excellence

Zurn Elkay operates in a disciplined way using the Zurn Elkay Business System (ZEBS), a process-based framework that focuses on driving superior customer satisfaction and financial results. This operational philosophy has been instrumental in the company's ability to navigate through various market cycles and deliver consistent growth.

Industry Trends

Zurn Elkay has demonstrated strong performance relative to industry trends, with a core sales CAGR of 6% over the past 10 years. This growth rate outpaces many competitors and reflects the company's ability to capitalize on emerging opportunities in the water management sector.

Conclusion

Despite the challenges posed by macroeconomic uncertainties, Zurn Elkay has proven its ability to navigate through various market cycles by leveraging its Zurn Elkay Business System, a disciplined operating philosophy rooted in continuous improvement. This operational excellence, coupled with the company's strategic initiatives, robust financial position, and comprehensive product portfolio, positions Zurn Elkay well to deliver sustainable growth and create long-term value for its shareholders. With its focus on innovation, sustainability, and operational efficiency, Zurn Elkay Water Solutions Corporation remains a leader in the water management industry, poised for continued success in the years to come.