We began 2026 with better-than-expected results, including record sales, operating income, operating margin, and earnings per share. Organic sales rose 12% in the quarter as we benefited from price and incremental volume. Adjusted operating margin of 20.1% increased 110 basis points due to better than expected price, volume, and productivity, which more than offset tariff costs, inflation, and acquisition dilution of 80 basis points. Our balance sheet remains strong and provides ample capacity to support our disciplined capital allocation strategy.
As a result of our solid start to 2026 and expected cash flows for the remainder of the year, we announced a 21% increase to our dividend beginning in June. To support this growth and meet our customers' needs, we're investing in our team and accelerating innovation across our product portfolio. Together, these strategic initiatives are driving growth and helping to offset softer end markets. In 2025, we completed five acquisitions, enhancing our technology capabilities and expanding our product range, geographic reach, and exposure to high-growth non-residential end markets.
Our strong first quarter performance and outlook for the second quarter give us a solid start towards achieving our outlook for the full year. In light of these factors, we believe it's prudent to maintain our full year outlook, and we'll revisit in our next earnings call. With that, let me turn the call over to Diane, who will address our first quarter results and our second quarter and full year outlook. Sales reached $677 million, reflecting a 21% increase on a reported basis and a 12% increase organically.
| Metric | Period | Current guidance |
|---|---|---|
| Full-year consolidated organic sales growth | FY2026 | +2% to +6% (Reaffirmed) |
| Full-year reported sales growth | FY2026 | +8% to +12% (Reaffirmed) |
| Full-year free cash flow conversion | FY2026 | >= 90% of net income (Reaffirmed) |
| Q2 reported sales growth | Q2 2026 | +10% to +14% (New) |
| Q2 organic sales growth | Q2 2026 | +4% to +8% (New) |
| Q2 adjusted EBITDA margin | Q2 2026 | 22.3% to 22.9% (New) |
| Q2 adjusted operating margin | Q2 2026 | 20% to 20.6% (New) |
| Metric | YoY | Note |
|---|---|---|
| Total sales | +21% reported, +12% organic | Favorable price and volume, including growth in data center sales |
| Americas organic sales | +16% organic, +23% reported | Strong demand exceeding expectations; acquisitions added $31 million / 7 points to reported growth |
| Europe organic sales | +1% organic, +12% reported | Favorable pricing organically; reported also aided by positive foreign exchange |
| APMEA organic sales | +3% organic, +29% reported | Acquisitions added 19% and favorable foreign exchange added 7% |
| Adjusted EBITDA | +27% | Margin of 22.3%, up 90 bps, on pricing, volume leverage, and productivity |
| Adjusted operating income | +28% | Margin up 110 bps to 20.1% on price, volume leverage, and productivity, offsetting inflation, tariffs, and acquisition dilution |
| Adjusted EPS | +28% to $3.04 | Operational performance, acquisitions, tax, and FX gains outweighed higher net interest expense |
| Free cash flow | $7 million vs $46 million prior year | Higher receivables on volume, timing of customer rebate payments, and tariff-related and strategic inventory increases |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Data center cooling | Ramped up in 2025 with stronger second half | Sales more than doubled; targeting high double-digit growth for the year on a >$1B addressable market | Accelerating |
| Middle East conflict exposure | — | About 2% of global sales (mostly APMEA, including Saudi Cast); roughly $8M Q2 sales headwind; mitigating via pricing and sourcing | Emerging headwind |
| Tariffs / price-cost | — | IEEPA tariffs eliminated but offset by Section 122 and Section 232 changes; well positioned on price-cost; ~8% price in Q1 | Fluid but managed |
| 80/20 product rationalization | ~$15 million sales impact in first half | Expected to ramp significantly in second half and wrap into early 2027 | Ramping |
| Residential / new construction demand | Characterized as remaining soft in 2026 | A little softer than anticipated; new construction soft, big remodeling deferred, repair and replacement holding | Softening |
| Nexa digital water management | — | Continued slow but steady growth; being enabled across main products to protect core business and command higher pricing | Growing |