• Net Sales Growth: 18.7% increase to $304.3 million.
• Adjusted EBITDA: $63.5 million, a 41.7% increase.
• Adjusted EBITDA Margin: 20.9%, a 340 basis point improvement.
• Adjusted Net Income per Diluted Share: $0.25, a 92% increase.
• Free Cash Flow: $42 million after $12 million in capital expenditures.
• Gross Margin: 33.8%, a 10 basis point increase; 34.9% excluding write-downs.
• Operating Income: $47.4 million, a 107.9% increase.
• Adjusted Operating Margin: 17.2%, a 570 basis point improvement.
• Water Flow Solutions Net Sales: 23.6% increase to $174.6 million.
• Water Management Solutions Net Sales: 12.7% increase to $129.7 million.
• Capital Expenditures: $11.9 million, up from $5.7 million in the prior year.
• Total Debt Outstanding: $449.5 million.
• Cash and Cash Equivalents: $338.2 million.
• Net Debt Leverage Ratio: Below one.
• 2025 Net Sales Guidance: $1.37 billion to $1.39 billion, a 4.2% to 5.7% increase.
• 2025 Adjusted EBITDA Guidance: $310 million to $315 million, an 8.9% to 10.6% increase.

• Warning! GuruFocus has detected 3 Warning Signs with BOM:538666.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Mueller Water Products Inc (NYSE:MWA) achieved record first quarter results for adjusted EBITDA and adjusted net income per diluted share.
• Net sales growth of 18.7% exceeded expectations, driven by healthy order levels and strong customer service.
• The company increased its guidance for 2025 net sales and adjusted EBITDA, reflecting strong first quarter results and recent price actions.
• Closure of the legacy Brass Foundry is expected to generate an 80 to 100 basis point improvement in gross margin starting in the second half of 2025.
• Mueller Water Products Inc (NYSE:MWA) has a strong and flexible balance sheet with a net debt leverage ratio below one and no debt maturities until June 2029.

Negative Points

• The company anticipates year-over-year volume headwinds over the next few quarters as channel and customer inventory levels normalize.
• Mueller Water Products Inc (NYSE:MWA) continues to experience margin headwinds due to the Israel Hamas war impacting Krausz repair products.
• The updated guidance does not include potential cost increases or impacts associated with recently announced tariffs.
• Free cash flow for the first quarter decreased by $20 million compared to the prior year due to higher capital expenditures.
• There is uncertainty in the external environment, including potential policy changes, which could impact future performance.

Q & A Highlights

Q: How are you thinking about pricing and volumes in your guidance, given the normalization of lead times? A: Martie Edmunds Zakas, CEO: Our sales guidance for 2025 assumes benefits from both volume and price. We expect normal seasonality with the lowest sales in Q1, increasing in Q2, and higher in Q3. We anticipate price realization in the low to mid-single-digit range. Volume growth is expected from iron gate valves and hydrants, but we foresee headwinds as we lap record sales from the previous year. The guidance does not assume any meaningful impact from infrastructure bill funding.

Q: Can you elaborate on the impact of the infrastructure bill on your business? A: Paul McAndrew, COO: We are monitoring the infrastructure bill and see a trend of increasing activity, but it's not a material change from prior quarters. We are well-positioned to supply due to our US vertical integration and do not anticipate changes from the administration regarding the bill.

Q: What are the commercial benefits of the new foundry, and how does it impact your market position? A: Paul McAndrew, COO: The new foundry offers operational improvements quantified at 80 to 100 basis points. Commercially, it enhances our ability to service customers efficiently, positioning us well for lead service line replacements. This strengthens our market position and pricing power.

Q: How are you addressing potential impacts from the recently announced tariffs? A: Martie Edmunds Zakas, CEO: We are largely vertically integrated, with 92% of sales in the US. We have some exposure to China and Mexico, but our teams are working on mitigation strategies. Our guidance does not include potential cost increases from tariffs. We have previously managed tariff impacts through price increases and strategic sourcing.

Q: What is the outlook for land development and residential construction given current economic conditions? A: Paul McAndrew, COO: Demand for new homes remains resilient despite elevated mortgage rates. Homebuilders have strong balance sheets and manage investments at a disciplined pace. Our sales guidance assumes modest growth in land development.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.