Zurn Elkay Water Solutions Corporation

What they do

Zurn Elkay designs, procures, manufactures and markets water management solutions including professional grade water safety and control products, flow systems, hygienic and environmental products, and filtered drinking water products. It sells mainly into new institutional and commercial building construction, retrofit of existing structures, and to a lesser extent waterworks and residential construction. Its physical footprint comprises 21 principal manufacturing and warehouse facilities, located primarily in North America. The company operates under the Zurn Elkay Business System (ZEBS), a continuous-improvement framework built on strategy deployment, Voice of the Customer, associate involvement and Kaizen/80-20 simplification.

Revenue drivers

• Professional grade water safety and control products — Part of the specification-driven portfolio sold into institutional and commercial building construction and retrofit; demand is tied to building activity, plumbing codes and retrofit for water and energy efficiency. The filing does not break out separate revenue by product line, so relative size is not disclosed.
• Filtered drinking water products — Filtered drinking water products for public and private spaces, marketed on health, hydration and reduced installation time; served end markets are institutional and commercial buildings. No discrete revenue figure is given in the excerpts.
• Flow systems, hygienic and environmental products — Flow systems and hygienic/environmental products sold into the same institutional, commercial, waterworks and residential channels; demand partly driven by retrofit of existing structures to be more water and energy efficient. Segment-level revenue is not disclosed in the provided material.
• Intellihot tankless water heating (acquired July 21, 2026) — Acquired for approximately $108.5 million preliminary cash consideration; Intellihot makes tankless gas and electric water heaters for healthcare, education, hospitality and commercial end markets. Management expects Intellihot sales of approximately $16 million for the remainder of 2026.

Recent performance

Second quarter 2026 net sales were $491.0 million versus $444.5 million in the year-ago quarter, with core sales up 10% and growth in all product categories. Net income from continuing operations was $113 million, or $0.67 diluted EPS, compared with $50 million and $0.29 a year earlier. Adjusted EBITDA was $136.0 million (27.7% of net sales) versus $118 million (26.5%). Income from operations was $152.3 million versus $77.6 million, a comparison that includes a $47.6 million IEEPA reciprocal tariff refund received in the quarter; excluding that item, income from operations rose $27.1 million, or 380 basis points year over year. The company repurchased $50 million of stock in the quarter (about 1.0 million shares) and net debt leverage was 0.3x at June 30, 2026.

Strategy

Management describes Zurn Elkay as a growth-oriented, pure-play water management platform that pursues strategic acquisitions to broaden product lines, enter adjacent markets and expand geographically. The company applies ZEBS, including 80/20 simplification, supply chain initiatives and continuous improvement, to drive above-market growth and incremental margins. Capital allocation in the first half of 2026 included $100 million of share repurchases and $37 million of dividends while maintaining low leverage. The Intellihot acquisition is intended to enter high-efficiency tankless water heating within existing core markets and verticals, with a multi-year integration plan. Management also says several new products will launch into adjacent categories in the second half of 2026 and into 2027 to expand the served available market.

Risks

• Construction cycle exposure — Financial performance depends largely on U.S. institutional, commercial and, to a lesser extent, residential construction, and a sustained downturn or weak consumer confidence, employment, interest rates or credit availability could materially reduce net sales and profitability.
• Tariffs and trade policy — The company is importer of record for certain raw materials and products and remains exposed to tariff and trade-protection measures, including uncertainty over the process, timing and total amount of further IEEPA reciprocal tariff recoveries beyond the approximately $47.6 million of refunds already received and not recorded as additional benefit.
• Input cost inflation and pricing — Increases in raw material costs, including from tariffs and trade wars, could pressure margins if the company is unable to raise product prices to offset them.
• Acquisition and integration risk — The company has a track record of acquiring and integrating businesses, including the 2022 Elkay merger and the July 2026 Intellihot acquisition, and the costs and uncertainties of integrating recent and future acquisitions could affect results.

Outlook

For the third quarter of 2026, management expects core sales growth of approximately 6% to 7% and adjusted EBITDA margins of around 28%. It currently expects mid-single digit core growth in the fourth quarter and full-year 2026 adjusted EBITDA of $503 million to $513 million, which management says would be roughly 140 basis points of year-over-year margin expansion versus 2025 excluding all tariff-related refunds. Full-year free cash flow is expected to be at least $350 million, also excluding the net impact of tariff refunds already received, and Intellihot sales are expected to approximate $16 million for the remainder of 2026.