Badger Meter Reports Record Third Quarter 2023 Financial Results

MILWAUKEE–(BUSINESS WIRE)–Badger Meter, Inc. (NYSE: BMI) today reported record results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights

  • Total sales of $186.2 million, 26% higher than the prior year’s $148.0 million.
  • Operating profit increased 31% year-over-year, with operating profit margins expanding 80 basis points to 16.9% from 16.1%.
  • Diluted earnings per share (EPS) increased 44% to $0.88, up from $0.61 in the comparable prior year quarter.
  • Announced the 31st consecutive increase in the annual dividend rate of 20%.
  • Strong cash flow with $31 million in net cash provided by operations, increasing 32% over the prior year.

“Our third quarter results once again demonstrated the value of our differentiated smart water solution offerings and strength of our execution, yielding 26% sales growth and record EPS in the quarter. We delivered 80 basis points of operating margin improvement as well as robust cash flow which continues to fuel our capital allocation priorities including the recent 20% annual dividend increase,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “Our ongoing success is built on our culture of continuous improvement, enabling our world-class team to execute for customers and drive outperformance for Badger Meter.”

Third Quarter Operating Results

Utility water sales increased 31% year-over-year with strong growth across the broad suite of digital smart water solutions. This includes robust adoption of cellular AMI solutions, including higher ORION® Cellular endpoint and BEACON® Software as a Service (SaaS) revenues as well as increased meter volumes, notably E-Series® Ultrasonic meters. The continued normalization of supply chain conditions and the addition of Syrinix also contributed to the year-over-year sales increase.

Sales of flow instrumentation products increased 2% year-over-year, the result of steady order demand across the water-focused end markets including wastewater and HVAC, which more than offset anticipated modest sales declines in the de-emphasized general industrial markets.

Operating earnings increased 31% year-over-year, with operating profit margins expanding 80 basis points to 16.9% in the third quarter of 2023, up from the prior year’s 16.1%. Gross margin dollars increased $15.2 million year-over-year, and gross margin as a percent of sales was 39.1%, an increase of 20 basis points over the comparable prior year quarter. Gross margins continue to benefit from higher volumes and structural positive sales mix trends.

Selling, engineering and administrative (SEA) expenses in the third quarter of 2023 were $41.3 million, with SEA as a percent of sales improving 50 basis points to 22.2% versus 22.7% in the comparable prior year quarter. The $7.6 million year-over-year increase in SEA spend included higher personnel-related costs such as headcount, salaries, sales and management incentives and R&D expenses as well as the addition of Syrinix, including the associated intangible asset amortization.

The tax rate for the third quarter of 2023 was 20.3% inclusive of a discrete favorable income tax benefit related to equity compensation transactions, compared to 25.1% in the prior year quarter. As such, EPS was a record $0.88, up 44% compared to $0.61 in the comparable prior year period.

Outlook

Bockhorst continued, “With healthy market conditions and another quarter of business momentum, we continue to strengthen our foundation for sustainable, profitable, long-term growth. The resilient order pace and robust bid funnel are reflective of strong customer support for our differentiated portfolio of digital smart water solutions. These comprehensive yet flexible hardware-enabled software offerings deliver efficiency, resiliency, and sustainability for customers to address the variety of challenges facing the water industry.

As we prepare to close out the year, we remain focused on execution and capitalizing on the strength of our end markets with anticipated strong sales and operating performance, yet with sequentially fewer total operating days as a result of holidays in the fourth quarter.

Robust cash flow and ample cash and credit availability provide us with the financial flexibility to execute our capital allocation priorities and continued investments in growth.”

Bockhorst concluded, “We believe we are well positioned, given our order momentum, elevated backlog, leading technologies, execution track record, positive market dynamics and the strength of our people. I remain excited about the tremendous value creation opportunities ahead of us as we further our vision to preserve and protect the world’s most precious resource.”

Conference Call and Webcast Information

Badger Meter management will hold a conference call to discuss the Company’s third quarter 2023 results today, Thursday October 19, 2023 at 10:00 AM Central/11:00 AM Eastern time. The webcast and related presentation can be accessed via the Investor section of the Company’s website. Individuals wishing to participate in the call should use this online registration link: https://www.netroadshow.com/events/login?show=6a889942&confId=56083

Safe Harbor Statement

Certain statements contained in this news release, as well as other information provided from time to time by Badger Meter, Inc. (the “Company”) or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those statements. The Company’s results are subject to general economic conditions, variation in demand from customers, continued market acceptance of new products, the successful integration of acquisitions, competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, tax reform and foreign currency risk. See the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for further information regarding risk factors, which are incorporated herein by reference. Badger Meter disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

About Badger Meter

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters. These offerings provide our customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious resource. For more information, visit www.badgermeter.com.

BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and earnings per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales

$

186,193

$

148,009

$

521,152

$

418,244

Cost of sales

113,470

90,487

316,179

255,239

Gross margin

72,723

57,522

204,973

163,005

Selling, engineering and administration

41,301

33,651

119,003

98,184

Operating earnings

31,422

23,871

85,970

64,821

Interest income, net

(1,200

)

(108

)

(2,649

)

(86

)

Other pension and postretirement costs

32

32

97

97

Earnings before income taxes

32,590

23,947

88,522

64,810

Provision for income taxes

6,621

6,014

20,645

15,853

Net earnings

$

25,969

$

17,933

$

67,877

$

48,957

Earnings per share:
Basic

$

0.89

$

0.61

$

2.32

$

1.68

Diluted

$

0.88

$

0.61

$

2.30

$

1.67

Shares used in computation of earnings per share:
Basic

29,294,886

29,215,982

29,275,445

29,211,488

Diluted

29,473,374

29,372,464

29,448,475

29,363,097

BADGER METER, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)

Assets

September 30,

December 31,

2023

2022

(Unaudited)
Cash and cash equivalents

$

162,910

$

138,052

Receivables

89,063

76,651

Inventories

147,788

119,856

Other current assets

23,191

13,273

Total current assets

422,952

347,832

Net property, plant and equipment

74,439

73,542

Intangible assets, at cost less accumulated amortization

54,634

53,607

Other long-term assets

25,034

26,805

Goodwill

112,698

101,261

Total assets

$

689,757

$

603,047

Liabilities and Shareholders’ Equity

Payables

$

84,997

$

71,440

Accrued compensation and employee benefits

25,502

20,513

Other current liabilities

18,283

18,359

Total current liabilities

128,782

110,312

Deferred income taxes

6,441

4,648

Long-term employee benefits and other

61,828

45,665

Shareholders’ equity

492,706

442,422

Total liabilities and shareholders’ equity

$

689,757

$

603,047

BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating activities:
Net earnings

$

25,969

$

17,933

$

67,877

$

48,957

Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation

2,662

2,791

8,100

8,413

Amortization

4,404

3,915

12,820

11,748

Deferred income taxes

(25

)

8

(401

)

24

Noncurrent employee benefits

(52

)

(74

)

(274

)

(138

)

Stock-based compensation expense

1,356

704

3,963

2,170

Changes in:
Receivables

(5,352

)

(6,832

)

(11,855

)

(18,860

)

Inventories

(3,875

)

(3,184

)

(27,628

)

(16,207

)

Payables

4,178

3,742

12,282

23,870

Prepaid expenses and other assets

(2,299

)

(1,252

)

(7,279

)

(9,405

)

Other liabilities

4,467

6,040

14,567

2,171

Total adjustments

5,464

5,858

4,295

3,786

Net cash provided by operations

31,433

23,791

72,172

52,743

Investing activities:
Property, plant and equipment expenditures

(3,014

)

(1,918

)

(9,949

)

(4,690

)

Acquisitions, net of cash acquired

(17,127

)

Net cash used for investing activities

(3,014

)

(1,918

)

(27,076

)

(4,690

)

Financing activities:
Dividends paid

(7,917

)

(6,580

)

(21,134

)

(18,292

)

Proceeds from exercise of stock options

909

61

967

61

Repurchase of treasury stock

(427

)

Net cash used for financing activities

(7,008

)

(6,519

)

(20,167

)

(18,658

)

Effect of foreign exchange rates on cash

(306

)

(777

)

(71

)

(1,782

)

Increase in cash and cash equivalents

21,105

14,577

24,858

27,613

Cash and cash equivalents – beginning of period

141,805

100,210

138,052

87,174

Cash and cash equivalents – end of period

$

162,910

$

114,787

$

162,910

$

114,787

Contacts

Karen Bauer

(414) 371-7276

kbauer@badgermeter.com

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