🧾 What This Document Is 📊

This document is an 8-K filing, which is a mandatory report used by public companies to announce major events that investors should know about immediately. Specifically, this is a press release detailing Zurn Elkay Water Solutions’ financial results for the first quarter of 2026. 👉 It gives readers a clear snapshot of how the company performed in the last three months and what management expects for the rest of the year.

🏢 What The Company Does 🤔

In simple terms, Zurn Elkay is a "pure-play water management business." They are a growth-oriented company that designs, produces, and sells products focused on solving water safety and environmental challenges. 🤔 Their products span professional-grade water safety controls, flow systems, hygienic products, and filtered drinking water, serving both public and private spaces. 👉 The company operates out of Milwaukee, WI, and aims to provide a broad portfolio of sustainable solutions to improve health, hydration, and environmental quality.

💰 First Quarter 2026 Financial Highlights ✨

The financial highlights show strong growth across core metrics compared to the year-ago period (March 31, 2025). Generally, sales increased, and profitability improved, suggesting solid operational performance.

• Net Sales: For the quarter, net sales reached $433 million. This represents an increase of 11% compared to the $389 million reported in the March 2025 quarter.
  • Why it matters: This 11% year-over-year sales growth suggests that demand for Zurn Elkay's water solutions remains robust despite potential economic pressures.
• Income from Operations: Income from operations stood at $82.1 million, up significantly from $63.4 million the previous year.
• Core Sales: The key metric, "core sales," also improved by 11% year-over-year. This number is often preferred by management because it removes the distorting effects of large, non-recurring transactions like mergers or divestitures.
• Adjusted EBITDA: This key profitability metric reached $116 million. This is an improvement from $98 million in the prior year, and it accounts for 26.8% of net sales.
  • Why it matters: EBITDA is crucial because it measures cash flow from operations before accounting for non-cash items like depreciation, which gives a clearer view of the operational profitability.
• Profitability Growth: Net income from continuing operations was $59 million, an increase from $41 million in the year-ago quarter, leading to a diluted EPS from continuing operations of $0.35 (up from $0.24).

📈 Key Performance Drivers and Operational Strategy 🚀

The management commentary details why the numbers were strong, pointing to product strength, operational efficiency, and strategic focus.

• Margin Expansion: The company achieved strong margin expansion. Adjusted EBITDA margins increased by 160 basis points to 26.8%.
  • Why it matters: Margin expansion means that the company is able to increase its profitability faster than its revenue, indicating either cost-cutting efficiencies or the successful implementation of premium-priced products.
• Product Growth: Core sales growth included increases in nearly all product categories, signaling that the demand for Zurn Elkay’s comprehensive product range is wide-ranging and healthy.
• Strategic Initiatives: CEO Todd A. Adams highlighted that the positive results are driven by "targeted growth initiatives" and progress on "new growth adjacencies" planned for launch in late 2026 and 2027.
  • Why it matters: This shifts the focus from just the past quarter to future expansion, telling investors that the company has a clear plan for continued growth areas.
• Sustainability Focus: Adams also referenced the company’s February 2025 Sustainability report, noting that Zurn Elkay’s role in water management is critical due to global issues like water conservation and contamination.
  • Why it matters: This signals that environmental stewardship and sustainable solutions are central to the company's long-term value proposition and marketing strategy.

💰 Capital Structure and Investments 💵

The company also provided updates on its financial backbone and how it is using cash to return value to shareholders.

• Debt Management: As of March 31, 2026, the net debt leverage was 0.5x.
  • Why it matters: This low leverage ratio suggests that the company's debt load is manageable relative to its operational income, which signals financial stability and capacity for future investments.
• Credit Capacity: The company increased its revolving credit facility capacity from $200 million to $550 million.
  • Why it matters: Increasing credit capacity provides a significant financial buffer, giving the company flexibility to fund unexpected needs or capitalize on sudden growth opportunities without having to secure new loans.
• Share Repurchases: Zurn Elkay deployed $50 million during the quarter to buy back 1.0 million shares of common stock.
  • Why it matters: Buying back stock reduces the total number of outstanding shares, which often boosts earnings per share (EPS) for shareholders.

🔮 Financial Outlook and Guidance 🔮

Management provided specific quantitative guidance for the next quarter and the full year, grounding it in current economic conditions.

• Core Assumption: The outlook is predicated on the assumption that the "current tariff structure in place as of today (April 21, 2026) remains in place throughout 2026."
  • Why it matters: This makes the guidance conditional. If the tariff structure changes, the entire forecast could become inaccurate.
• Second Quarter (Q2) Guidance:
  • They expect Q2 core sales to grow by 8% to 9% compared to Q2 of last year.
  • They project adjusted EBITDA margins will be between 27.0% to 27.5%.
• Full Year 2026: Management noted that they see potential for "upside beyond our Q1 actuals and Q2 guidance" compared to the full-year outlook provided previously.
  • Why it matters: This is a strong signal, implying that the company believes its current momentum may allow for better-than-expected full-year results.

🔍 Understanding the Financial Metrics (Non-GAAP Definitions) 📚

Because the company uses several specialized financial terms, it spent time defining them. Understanding these differences is crucial for accurate analysis.

• Core Sales: This metric specifically excludes the impact of mergers, acquisitions, divestitures, and foreign currency translation.
  • Why it matters: By removing these external variables, core sales allow for a "more and meaningful comparison" of the underlying operating performance over time and against competitors.
• Adjusted EBITDA: This is defined as net income adjusted for many non-operational, non-cash, or non-recurring charges (like restructuring charges, actuarial gains/losses, etc.).
  • Why it matters: It is intended to show the "unleveraged, pre-tax operating results," meaning it helps analysts assess the pure ability of the core business to generate cash from operations, independent of financing decisions.

💬 Executive Leadership Commentary 👑

Management provided robust statements that set the tone for the company’s confidence, strategic direction, and industry importance.

• CEO Todd Adams: Adams emphasized "the relentless deployment of our strategic initiatives paired with world-class operational execution." He stressed that the company's resilience is built on "unique, sustainable competitive advantages" across its products, supply chain, and market focus.
  • Why it matters: This is management's key message: the company's success isn't just about quarterly sales; it's about deeply embedded operational advantages and strategic planning.
• Focus on Water Leadership: Adams reiterated that Zurn Elkay's role "as a leader in water management is to meet those challenges [water conservation and contamination] with practical, innovative solutions that set new standards for water efficiency, safety and quality."
  • Why it matters: This frames the company as an essential utility provider, not just a manufacturer, elevating its importance in a world focused on climate and water issues.

📅 Next Steps & Investor Resources 🗓️

If you want the deepest dive into these results, Zurn Elkay is scheduling an investor call and has provided specific access information.

• Investor Call Date: A conference call is scheduled for Wednesday, April 22, 2026, at 8:30 a.m. Eastern Time.
  • Why it matters: This is the prime opportunity for investors to hear management answer questions directly and get qualitative color on the numbers.
• Contact Details: For immediate questions, investors can contact Dave Pauli, Chief Financial Officer, at 414.223.7770.
• Webcast Access: A live webcast will be available on the company’s investor relations website (investors.zurnelkay.com), and a replay will also be provided.

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🧠 The Analogy

Think of Zurn Elkay's water solutions business like a highly specialized, local plumbing service that has done a fantastic job of making itself indispensable. While every plumbing company can sell pipes and fixtures, Zurn Elkay is like the one that also offers advanced water testing, sustainable rainwater harvesting systems, and professional filtration installations. The company isn't just selling products; it's selling water security and reliability. Their ability to increase their credit capacity and focus on core sales metrics shows they are not only doing a good job today but are also building the structural, financial foundation to keep up with increasingly complex global water needs.

🧩 Final Takeaway

Zurn Elkay reports strong Q1 2026 results, driven by an 11% increase in core sales and expanding margins, reinforcing their status as a stable, essential provider of water management solutions. The company signals confidence with strong Q2 guidance and a clear focus on capital deployment and future growth adjacencies.