Yahoo Finance Zurn Elkay Water Solutions Corp (ZWS) (Q1 2024) Earnings Call Transcript Highlights: Robust ...
Q1 Sales: $374 million, up 400 basis points year-over-year.
Q1 Adjusted EBITDA: $90 million, increased 24% from previous year.
Q1 Adjusted EBITDA Margin: Expanded 460 basis points to 24.1%.
Q1 Free Cash Flow: $50 million, with $19 million used for share repurchases.
Net Debt Leverage: Reduced from 1.1 to 0.9 times.
Q2 Margin Outlook: Expected to be between 24.5% to 25%.
Annual Free Cash Flow Forecast: Approximately $250 million.
Full Year Margin Expansion: Raised outlook from 150 basis points to 150-200 basis points.
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide insights into the double-digit growth in drinking water and the rollout of filtration systems? A: Todd Adams, CEO, mentioned that the growth in filtered units is expected to continue in the double-digit range throughout the year. He emphasized that the growth in filtration is significantly faster, aligning with the company's core strategy. Despite new legislation, the current growth is primarily driven by existing strategies, with expected amplification as legislative measures are implemented.
Q: What are your expectations for margin progression in the latter half of the year, considering the robust guide for Q2? A: Todd Adams, CEO, explained that the guidance for Q2 is based on current visibility and maintained a conservative outlook for the second half of the year. He reassured that the margin improvements are sustainable and driven by gross margin enhancements, with no significant inflation concerns anticipated.
Q: How does the changing interest rate environment impact your outlook for residential and non-residential construction sectors? A: Mark Peterson, CFO, noted that while lower interest rates would benefit the commercial sector, the current rate changes do not significantly alter their outlook. He highlighted the company's resilience, with half of its business in institutional sectors and significant retrofit activities, which are less sensitive to interest rate fluctuations.
Q: With leverage below one and strong cash flow, what are your plans for M&A and capital allocation? A: Mark Peterson, CFO, indicated ongoing efforts to cultivate proprietary M&A opportunities, with all forms of capital allocation, including investments in core business and share buybacks, under consideration. The company aims to maintain a balanced approach moving forward.
Q: Can you discuss the performance and outlook for the residential segment of your portfolio? A: Todd Adams, CEO, stated that the residential segment, particularly multifamily, is stable but not a significant growth driver currently. The focus remains on parts of the residential market where Zurn Elkay can build competitive advantages.
Q: What impact do you foresee from potential new tariffs, and how flexible is your supply chain in this regard? A: Todd Adams, CEO, reassured that the company's proactive supply chain management strategies are designed to minimize tariff impacts. He highlighted past successes in adapting to tariff changes and ongoing efforts to optimize the supply chain to mitigate potential future tariffs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
