Badger Meter, Inc. (BMI) , a leading provider of smart water solutions, has witnessed a stock price gain of 14.9% year to date (“YTD”), outpacing the S&P 500 composite decline of 1.1% and the Instruments-Control industry’s growth of 9.7%.Image Source: Zacks Investment ResearchBMI was down 1.4% in the last session and closed trading at $243.68. The stock is trading closer to its 52-week high of $249.65. Will the stock register further gains or will it start coming down?As investors contemplate how to strateg ...

Core Insights - Badger Meter, Inc. (BMI) reported Q1 2025 EPS of $1.30, exceeding Zacks Consensus Estimate by 20.4% and up from $0.99 in the same quarter last year [1] - Quarterly net sales reached $222.2 million, a 13% increase from $196.3 million year-over-year, driven by higher utility water sales and contributions from the SmartCover acquisition [1][4] Financial Performance - Gross profit for the quarter was $95.4 million, up from $77.2 million year-over-year, with a gross margin of 42.9%, an increase of 360 basis points [6] - Operating earnings surged 35% year-over-year to $49.5 million, with an operating margin of 22.2%, also expanding by 360 basis points [6] - The company generated $33 million in net cash from operating activities, compared to $21.5 million a year ago [9] Segment Performance - Utility water sales increased by 16%, supported by strong demand for mechanical and E-Series Ultrasonic meters, and a 12% organic growth excluding SmartCover contributions [4] - Flow instrumentation sales decreased by 5% year-over-year, but showed a 7% sequential increase from Q4 2024, indicating potential long-term growth [5] Strategic Developments - Badger Meter completed the acquisition of SmartCover on January 30, 2025, enhancing its smart water portfolio with advanced monitoring capabilities [2] - Customer feedback on SmartCover's integration has been positive, reinforcing the strategic value of the acquisition [2] Market Reaction - Following the strong performance, BMI's shares rose by 9.64%, closing at $201.63 on April 17, 2025, with a year-over-year gain of 11.3% compared to a 10.8% decline in the Zacks Instruments-Control industry [3] Outlook - The company anticipates a challenging year-over-year comparison in Q2 but remains optimistic about long-term growth, expecting continued high single-digit revenue growth [11]

Financial Performance - Net sales for Q1 2025 increased to $222,211,000, a 13.2% rise from $196,280,000 in Q1 2024[14] - Gross margin improved to $95,437,000, compared to $77,178,000 in the same period last year, reflecting a significant increase of 23.6%[14] - Net earnings for Q1 2025 were $38,398,000, up 31.8% from $29,131,000 in Q1 2024[14] - Earnings per share (EPS) for Q1 2025 were $1.31 (basic) and $1.30 (diluted), compared to $0.99 for both in Q1 2024[14] - Comprehensive income for Q1 2025 was $43,556,000, compared to $25,509,000 in Q1 2024, reflecting a growth of 70.8%[16] - Total operating earnings for Q1 2025 were $49.4 million, representing 22.2% of sales, compared to $36.6 million or 18.6% of sales in Q1 2024[85] - Gross margin for Q1 2025 was 42.9%, an increase from 39.3% in the prior year, benefiting from higher sales volumes and a favorable product mix[85] Assets and Liabilities - Total assets increased to $899,596,000 as of March 31, 2025, up from $816,413,000 at the end of 2024, marking a growth of 10.2%[12] - Cash and cash equivalents decreased to $131,358,000 from $295,305,000, a decline of 55.6%[12] - Total current liabilities rose to $141,017,000, an increase of 19.3% from $118,205,000 in the previous period[12] - The balance of contract liabilities increased to $90.6 million as of March 31, 2025, up from $78.3 million at the end of 2024[50] - Primary Working Capital (PWC) increased to $187.5 million (22.0% of sales) as of March 31, 2025, compared to $172.1 million (20.8% of sales) at the end of 2024[89] - Receivables rose by $27.5 million due to increased sales activity, while inventories increased by $6.0 million[89] Cash Flow - The company reported a net cash provided by operations of $33,027,000 for Q1 2025, compared to $21,460,000 in Q1 2024, an increase of 53.8%[19] - Cash provided by operations in Q1 2025 was $33.0 million, up from $21.5 million in Q1 2024, driven by higher net earnings[90] - Cash and cash equivalents decreased to $131.4 million from $295.3 million at the end of 2024, primarily due to $184.9 million used for the SmartCover acquisition[91] Dividends and Share Repurchase - The company declared dividends of $0.34 per share in Q1 2025, up from $0.27 per share in Q1 2024[14] - The company authorized the repurchase of up to 200,000 shares of common stock through February 2026, with no shares purchased in Q1 2025[102] Acquisitions and Investments - The total purchase consideration for SmartCover was $184.9 million, with $117.4 million allocated to goodwill that is not tax-deductible[34][35] - The company acquired SmartCover for $184.9 million, with revenue contribution of $6.2 million for the two months ended March 31, 2025[77][78] - The Company acquired select remote water monitoring hardware and software for $3.0 million effective January 1, 2024[36] - Property, plant, and equipment expenditures for Q1 2025 were $3.0 million, slightly higher than $2.7 million in Q1 2024[90] Market and Revenue Insights - Utility water market net sales reached $197.3 million, up 16.0% from $170.1 million in the prior year, driven by increased sales of mechanical and ultrasonic meters, ORION® Cellular endpoints, and BEACON® SaaS revenue[84] - The Company recognized $20.3 million in revenue over time, representing 9.1% of total revenue, compared to $12.7 million or 6.5% in the prior year[48] - The company continues to operate under a single segment, focusing on water and wastewater management solutions[45] - Approximately 40% of water meters installed in the U.S. have been converted to advanced metering infrastructure (AMI) systems[67][73] - The flow instrumentation product line accounted for approximately 12% of net sales in 2024, serving various industrial applications[70] - The company is expanding into international markets, including the Middle East and the UK, with its BlueEdge offerings[82] Taxation - The effective income tax rate for the Company was 24.4% for the three months ended March 31, 2025, compared to 23.5% in the prior year[42] - The provision for income taxes for Q1 2025 was 24.4%, compared to 23.5% in the prior year[86] Compliance and Internal Controls - The company remains compliant with all financial covenants as of March 31, 2025[92] - There were no material changes in the company's internal control over financial reporting during Q1 2025[98]

Badger Meter First Quarter 2025 Financial Results April 17, 2025 1 Forward Looking Statements Certain statements contained in this presentation 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 words "anticipate," "believe," "estimate," "expect," "think," "should," "could" and "objective" or s ...

Industry Overview - The Zacks Instruments – Control industry focuses on energy-efficient production processes and integrated software systems, with rising demand for advanced technology to replace legacy industrial controls expected to drive growth [1][4] - The industry includes manufacturers of precision and specialty motion-control components and systems, providing solutions for flow measurement, control, and communication across various sectors [3] Growth Drivers - Increased adoption of automation and higher investments in new technologies are anticipated to propel growth, particularly in North America, supported by rising infrastructural investments in energy and power sectors [4] - The pharmaceutical industry's process automation market is expanding due to cost factors and evolving regulations, indicating a shift towards high-quality equipment and partnerships with process control players [4][6] Challenges - Elevated customer inventory levels, high capital expenditures for infrastructure upgrades, and market volatility may negatively impact the process automation and instrumentation market [2] - Material cost inflation and rising transportation costs, exacerbated by geopolitical tensions, are affecting margins and production schedules, with companies struggling to pass on costs to customers due to competitive pressures [5] Technological Trends - The industry's growth is significantly driven by the emphasis on digitized technologies, including the Industrial Internet of Things, which enhances manufacturing processes and compliance with regulations [6] - Process instrumentation equipment is crucial for measuring key elements in industries such as chemicals, mining, and pharmaceuticals, contributing to improved product quality and emission reductions [6] Market Performance - The Zacks Instruments – Control industry has underperformed compared to the S&P 500 and the broader Zacks Computer and Technology sector, with a decline of 12.3% over the past year [9] - The industry currently holds a Zacks Industry Rank of 89, placing it in the top 36% of over 250 Zacks industries, indicating positive near-term prospects [7][8] Valuation Metrics - The industry has a trailing 12-month Enterprise Value-to-EBITDA (EV/EBITDA) ratio of 11.19X, lower than the S&P 500's 15.54X and the sector's 14.30X, suggesting potential undervaluation [11] Notable Companies - **Watts Water Technologies, Inc. (WTS)**: Focuses on water safety and flow control products, benefiting from cost-reduction actions and a strong balance sheet, with a long-term earnings growth expectation of 7.1% [14] - **Badger Meter, Inc. (BMI)**: Provides flow measurement and control solutions, known for accuracy and durability, with a long-term earnings growth expectation of 12.1% and a 20.2% gain over the past year [17][18] - **Thermon Group Holdings, Inc. (THR)**: Offers engineered industrial process heating solutions, expanding its market reach through acquisitions, with a consistent earnings surprise of 11.3% on average [21]

Financial Data and Key Metrics Changes - Total sales grew 13% year over year in Q1 2025, with a 10% increase excluding smart cover, following a 23% growth in Q1 2024 [9][10] - Operating profit margins reached a record 22.2%, expanding 360 basis points year over year, while gross profit margins improved to 42.9%, also a 360 basis point increase from the prior year [12][17] - Consolidated EPS increased by 31% to $1.30 from $0.99 in the prior year [17][18] - Free cash flow for the quarter was $30 million, up 60% from $18.8 million in the previous year [18] Business Line Data and Key Metrics Changes - Utility water product line sales increased by 16% year over year, or 12% when excluding smart cover revenue [10] - Sales for the flow instrumentation product line decreased nearly 5% year over year, although there was a sequential improvement of 7% from Q4 2024 [11] Market Data and Key Metrics Changes - Year over year growth in utility water was driven by cellular AMI adoption, including associated meters, Orion cellular endpoints, and beacon software [11] - The company noted strong positive feedback from customers regarding the integration of smart cover into their water management solutions [7] Company Strategy and Development Direction - The company aims to manage uncertainties related to tariffs and macroeconomic conditions while focusing on operational execution and supply chain management [19][27] - The acquisition of smart cover is expected to enhance the company's product offerings and drive sales and operating synergies [7][28] - The long-term average revenue growth outlook remains at high single digits with modest margin improvement over time [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of their business model, particularly in the context of replacement-driven demand [46][72] - The evolving tariff situation and macroeconomic challenges are acknowledged, but the company believes it can manage these effectively [19][27] - The company remains debt-free and has ample capacity to invest in growth despite economic volatility [29] Other Important Information - The company was recognized on the Barron's list of 100 most sustainable companies for the third consecutive year [29] - Karen Bauer, the retiring Investor Relations Executive, was acknowledged for her contributions over 72 quarters [30][105] Q&A Session Summary Question: Can you provide more color on the favorable product and customer mix benefits? - Management indicated that while the margins are impressive, they are influenced by various factors, and some elements driving Q1 results may not be sustainable [40][42] Question: Are core customers showing signs of pulling back on spending? - Management reported no indications of customers pulling back, emphasizing the durability of the replacement-driven market [46][72] Question: What is the aggregate impact of tariffs on COGS? - Management stated that the situation is complex and variable, but they believe they can manage the impact through pricing actions [56][60] Question: How are municipal budgets affecting AMI investments? - Management noted that utilities often reprioritize budgets to ensure meter replacements are funded, even during budget constraints [71][72] Question: Are price increases already communicated to customers? - Management confirmed that price increases are forthcoming but have not yet been communicated to customers [94] Question: What caused the increase in receivables? - The increase was attributed to timing differences in sales between Q4 and Q1, along with the addition of smart cover [102]

Core Insights - Badger Meter (BMI) reported quarterly earnings of $1.30 per share, exceeding the Zacks Consensus Estimate of $1.08 per share, and up from $0.99 per share a year ago [1] - The company achieved a revenue of $222.21 million for the quarter, surpassing the Zacks Consensus Estimate by 0.14% and increasing from $196.28 million year-over-year [3] Earnings Performance - The earnings surprise for the quarter was 20.37%, following a previous surprise of 2.97% when earnings were $1.04 per share against an expectation of $1.01 [2] - Badger Meter has consistently surpassed consensus EPS estimates over the last four quarters [2] Revenue Insights - The company has also exceeded consensus revenue estimates three times in the last four quarters [3] - Current consensus EPS estimate for the upcoming quarter is $1.16 on revenues of $236.44 million, and for the current fiscal year, it is $4.61 on revenues of $930.73 million [8] Market Performance - Badger Meter shares have declined approximately 13.3% since the beginning of the year, compared to a decline of 10.3% for the S&P 500 [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Industry Context - The Instruments - Control industry, to which Badger Meter belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9] - Another company in the same industry, Sensata (ST), is expected to report a year-over-year earnings decline of 19.1% in its upcoming results [10]

Financial Results Announcement - Badger Meter, Inc. announced its financial results for Q1 2025 on April 17, 2025[4] - The press release detailing the financial results is available as Exhibit 99.1[5] Company Information - The company is listed on the New York Stock Exchange under the ticker symbol BMI[2] - The report does not indicate whether Badger Meter is an emerging growth company[3] - No specific financial metrics or performance data were provided in the extracted content[4]

Market Overview - The smart water meters market is projected to grow from USD 4.61 billion in 2024 to USD 9.04 billion by 2030, at a CAGR of 11.9% [2][10] - The growth is driven by regulatory pressures, limited budgets in utilities, and the need to address Non-Revenue Water (NRW), which accounts for 30-35% of total available water annually [2][3] Technology and Components - The Advanced Metering Infrastructure (AMI) technology segment is expected to dominate the market from 2024 to 2030, enhancing utility operations through two-way communication and reducing dependency on manual labor [4] - IT solutions are the fastest-growing component, driven by IoT sensors and data management software, allowing for proactive management of water resources [5] Regional Insights - The Asia Pacific region is anticipated to experience the highest growth rate in the smart water meter market, with significant investments in infrastructure development from countries like China, Australia, Singapore, and India [6] Competitive Landscape - Key market participants include Badger Meter, Inc., Sensus (Xylem), Diehl Stiftung & Co. KG, Landis+Gyr, Itron, Inc., and ZENNER International GmbH & Co.KG, among others [7] - The report provides an in-depth competitive analysis, exploring company profiles, strategies, and recent developments [8] Research Coverage - The report examines the smart water meter market segmented by meter type, technology, component, application, and region, analyzing drivers, restraints, challenges, and opportunities shaping market growth [8][12]

Core Viewpoint - Northern Graphite Corporation and BMI Group are collaborating to evaluate the feasibility of establishing a Battery Anode Material facility at a former paper mill in Baie-Comeau, Quebec, which aims to support the growing demand for battery materials essential for electric vehicles and renewable energy [1][3]. Group 1: Partnership and Development Plans - The partnership will engage local authorities and utility providers to secure power supply for a Stage 1, 50,000 tonnes-per-year BAM hub in Baie-Comeau, focusing on maximizing economic benefits and minimizing environmental impacts [2]. - The proposed BAM hub could be located at BMI's Norderra multimodal industrial hub or an alternative greenfield site, with the Norderra location offering significant advantages due to existing infrastructure [3][4]. Group 2: Market Demand and Strategic Importance - Graphite demand is projected to surge in the coming years, positioning Canada as a leader in battery materials critical for electric vehicles and renewable energy [3]. - The Baie-Comeau initiative addresses a critical need in the energy transition supply chain, as Battery Anode Material is the largest component of lithium-ion batteries [5]. Group 3: Infrastructure and Supply Chain - The partnership would enhance BMI Group's critical minerals infrastructure and help Northern become one of the world's largest integrated graphite producers, with feedstock supplied from Northern's LDI mine in Quebec and development projects in Namibia and Ontario [6]. - BMI Group's Critical Mineral Corridor aims to connect Ontario and Quebec's mineral resources to global markets, establishing a stable supply chain for essential minerals like lithium, graphite, nickel, copper, and cobalt [9].