Core Viewpoint - Badger Meter Inc (NYSE:BMI) is highlighted as a promising small-cap stock, benefiting from the growth in water utility infrastructure and technological advancements in flow measurement solutions [1][2] Company Overview - Badger Meter Inc specializes in flow measurement, quality, and control solutions, primarily for water utilities [1] - The company has a strong balance sheet with $295 million in cash and no debt, indicating financial stability [2] Growth Metrics - Badger Meter has achieved a compound annual growth rate (CAGR) of 14% in revenue over the last five years, significantly outpacing the industry average growth of single digits [2] - The company generated $827 million in revenue in 2024 and operates in a total addressable market estimated to be around $20 billion [2] Technological Advancements - The company enhances traditional monitoring systems by integrating advanced technology, improving the accuracy and capabilities of its meters [2] - Badger Meter's technology includes optimized data transmission from meters, sensors for monitoring water pressure, leak detection, and in-line water quality testing [2] Market Position - Badger Meter is well-positioned in the market due to the ongoing replacement of aging conventional meters in water system infrastructure [2]

Core Viewpoint - Badger Meter (NYSE: BMI) is recommended as a buy due to its transformation from a traditional metering company with cyclical earnings to one with a predictable recurring revenue stream [1] Group 1: Business Evolution - The company has evolved to focus on long-term investments while also incorporating short-term strategies to identify alpha opportunities [1] - The investment approach emphasizes bottom-up analysis, assessing the fundamental strengths and weaknesses of individual companies [1] Group 2: Investment Strategy - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Core Viewpoint - Badger Meter (NYSE: BMI) is recommended as a buy due to its transformation from a traditional metering company with cyclical earnings to one with a predictable recurring revenue stream [1] Group 1: Business Evolution - The company has evolved to focus on long-term investments while also incorporating short-term strategies to uncover alpha opportunities [1] - The investment approach emphasizes bottom-up analysis, assessing the fundamental strengths and weaknesses of individual companies [1] Group 2: Investment Strategy - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Core Thesis - Badger Meter, Inc. (BMI) is positioned as a stable, growth-oriented investment with a strong dividend history and operational efficiency, making it attractive for long-term investors [2][5]. Financial Performance - BMI's revenue for 2024 is projected to be flat at $826.6 million, while net income is expected to rise by 31%, driven by operational efficiency and margin expansion [3]. - The company has a trailing P/E of 39.16 and a forward P/E of 34.13, indicating a premium valuation relative to earnings [1]. Dividend Growth - BMI has increased its dividend for 33 consecutive years, with recent hikes of 18% in August 2025, 26% in 2024, and 18% in 2023, reflecting a commitment to returning value to shareholders [2]. - The current dividend yield is approximately 0.9%, supported by a conservative payout ratio of 31% [2]. Business Model and Market Position - BMI's business model is characterized by essential, recurring revenue, with 85% of sales derived from mandatory replacements in water measurement [4]. - The company has a growing SaaS segment that has expanded by 28% annually since 2019, contributing about 7% of total sales [4]. Market Opportunities - The U.S. smart water market, along with regulatory mandates and strategic acquisitions like SmartCover, is expected to support high single-digit sales growth and margin expansion [5]. - The global water technology market exceeds $100 billion, providing significant growth potential for BMI [5]. Investor Confidence - Institutional ownership stands at approximately 89%, indicating strong confidence from major investors such as BlackRock, Vanguard, and State Street [3]. - Analysts generally rate BMI as a Buy to Strong Buy, with a 12-month price target of $237, suggesting an upside of around 33% from current levels [5].

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) Unaudited consolidated financial statements and management's discussion and analysis for the period ended September 30, 2025 [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated condensed financial statements of Badger Meter, Inc. for the period ended September 30, 2025, including balance sheets, statements of operations, comprehensive income, cash flows, and shareholders' equity, along with accompanying notes detailing accounting policies, acquisitions, contingencies, and revenue recognition [Consolidated Condensed Balance Sheets](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Presents the company's financial position, highlighting assets, liabilities, and equity as of September 30, 2025 | Metric (In thousands of USD) | Sep 30, 2025 | Dec 31, 2024 | Change | % Change | | :--------------------------- | :----------- | :----------- | :----- | :------- | | Total Assets | $978,270 | $816,413 | $161,857 | 19.8% | | Total Current Assets | $494,586 | $540,116 | $(45,530) | -8.4% | | Goodwill | $236,654 | $111,770 | $124,884 | 111.7% | | Total Liabilities | $276,270 | $210,179 | $66,091 | 31.4% | | Total Shareholders' Equity | $702,510 | $606,232 | $96,278 | 15.9% | - Goodwill significantly increased by **$124.9 million**, primarily due to the acquisition of SmartCover® Systems[12](index=12&type=chunk)[34](index=34&type=chunk)[77](index=77&type=chunk) [Consolidated Condensed Statements of Operations](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Operations) Details the company's revenues, expenses, and net earnings for the three and nine months ended September 30, 2025 | Metric (In thousands of USD, except per share) | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | YoY Change | % YoY Change | | :------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :----------- | | Net sales | $235,651 | $208,438 | $27,213 | 13.1% | | Gross margin | $95,836 | $83,878 | $11,958 | 14.3% | | Operating earnings | $46,084 | $40,623 | $5,461 | 13.4% | | Net earnings | $35,077 | $32,038 | $3,039 | 9.5% | | Diluted EPS | $1.19 | $1.08 | $0.11 | 10.2% | | Dividends declared per common share | $0.40 | $0.34 | $0.06 | 17.6% | | Metric (In thousands of USD, except per share) | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | YoY Change | % YoY Change | | :------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :----------- | | Net sales | $695,957 | $621,376 | $74,581 | 12.0% | | Gross margin | $289,083 | $246,424 | $42,659 | 17.3% | | Operating earnings | $140,372 | $118,713 | $21,659 | 18.2% | | Net earnings | $108,059 | $94,225 | $13,834 | 14.7% | | Diluted EPS | $3.65 | $3.19 | $0.46 | 14.4% | | Dividends declared per common share | $1.08 | $0.88 | $0.20 | 22.7% | [Consolidated Condensed Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income) Presents net earnings and other comprehensive income components for the three and nine months ended September 30, 2025 | Metric (In thousands of USD) | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | YoY Change | % YoY Change | | :--------------------------- | :-------------------------- | :-------------------------- | :--------- | :----------- | | Net earnings | $35,077 | $32,038 | $3,039 | 9.5% | | Foreign currency translation adjustments | $(366) | $4,726 | $(5,092) | -107.7% | | Comprehensive income | $34,663 | $36,731 | $(2,068) | -5.6% | | Metric (In thousands of USD) | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | YoY Change | % YoY Change | | :--------------------------- | :-------------------------- | :-------------------------- | :--------- | :----------- | | Net earnings | $108,059 | $94,225 | $13,834 | 14.7% | | Foreign currency translation adjustments | $13,166 | $1,092 | $12,074 | 1105.7% | | Comprehensive income | $121,080 | $95,221 | $25,859 | 27.2% | [Consolidated Condensed Statements of Cash Flows](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Outlines cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2025 | Metric (In thousands of USD) | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | YoY Change | % YoY Change | | :--------------------------- | :-------------------------- | :-------------------------- | :--------- | :----------- | | Net cash provided by operations | $128,897 | $102,967 | $25,930 | 25.2% | | Net cash used for investing activities | $(194,017) | $(11,149) | $(182,868) | 1640.3% | | Net cash used for financing activities | $(31,237) | $(25,111) | $(6,126) | 24.4% | | (Decrease) increase in cash and cash equivalents | $(93,612) | $67,173 | $(160,785) | -239.3% | | Cash and cash equivalents – end of period | $201,693 | $258,955 | $(57,262) | -22.1% | - The significant increase in cash used for investing activities is primarily due to the **$184.0 million** acquisition of SmartCover® Systems in 2025[19](index=19&type=chunk)[34](index=34&type=chunk)[77](index=77&type=chunk) [Consolidated Condensed Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Condensed%20Statements%20of%20Shareholders'%20Equity) Details changes in shareholders' equity, including reinvested earnings and comprehensive income, as of September 30, 2025 | Metric (In thousands of USD) | Sep 30, 2025 | Dec 31, 2024 | Change | % Change | | :--------------------------- | :----------- | :----------- | :----- | :------- | | Total Shareholders' Equity | $702,510 | $606,232 | $96,278 | 15.9% | | Reinvested earnings | $624,054 | $547,796 | $76,258 | 13.9% | | Accumulated other comprehensive income (loss) | $5,115 | $(7,906) | $13,021 | 164.7% | - Accumulated other comprehensive income shifted from a loss of **$7.9 million** at December 31, 2024, to an income of **$5.1 million** at September 30, 2025, largely driven by foreign currency translation adjustments[12](index=12&type=chunk)[22](index=22&type=chunk)[31](index=31&type=chunk) [Notes to Unaudited Consolidated Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Condensed%20Financial%20Statements) Provides detailed explanations and disclosures supporting the unaudited consolidated condensed financial statements [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) Describes the accounting principles and assumptions used in preparing the interim financial statements - The unaudited consolidated condensed financial statements include all necessary adjustments for fair presentation, with interim results not necessarily indicative of full-year performance[26](index=26&type=chunk) [Note 2. Additional Financial Information Disclosures](index=9&type=section&id=Note%202.%20Additional%20Financial%20Information%20Disclosures) Provides further details on cash equivalents and warranty and after-sale costs - Cash equivalents are highly liquid investments with original maturities of ninety days or less[29](index=29&type=chunk) | Warranty and After-Sale Costs (In thousands of USD) | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | YoY Change | % YoY Change | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :----------- | | Balance at beginning of period | $16,693 | $11,102 | $5,591 | 50.4% | | Net additions charged to earnings | $10,898 | $9,908 | $990 | 10.0% | | Costs incurred | $(5,832) | $(5,350) | $(482) | 9.0% | | Balance at end of period | $21,759 | $15,660 | $6,099 | 38.9% | [Note 3. Accumulated Other Comprehensive Income (Loss)](index=9&type=section&id=Note%203.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Details the components of accumulated other comprehensive income and their changes | Component (In thousands of USD) | Balance at Dec 31, 2024 | Net Current Period OCI (Loss) | Balance at Sep 30, 2025 | | :------------------------------ | :---------------------- | :---------------------------- | :---------------------- | | Unrecognized pension and postretirement benefits | $1,146 | $(145) | $1,001 | | Foreign currency translation | $(9,052) | $13,166 | $4,114 | | Total | $(7,906) | $13,021 | $5,115 | - Foreign currency translation adjustments significantly contributed to the positive shift in accumulated other comprehensive income in 2025[31](index=31&type=chunk) [Note 4. Acquisitions](index=10&type=section&id=Note%204.%20Acquisitions) Outlines the details of significant business acquisitions made by the company - On January 30, 2025, Badger Meter acquired SmartCover® Systems for **$184.0 million**, a provider of sewer line and lift station monitoring solutions. This acquisition added **$27.8 million** in revenue for the eight months ended September 30, 2025, and resulted in **$85.6 million** in intangible assets and **$119.8 million** in goodwill[33](index=33&type=chunk)[34](index=34&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - On January 1, 2024, the Company acquired Telog® product line and Unity Remote Monitoring software for **$3.0 million** in cash[35](index=35&type=chunk)[78](index=78&type=chunk) [Note 5. Contingencies, Litigation and Commitments](index=10&type=section&id=Note%205.%20Contingencies,%20Litigation%20and%20Commitments) Addresses potential legal, environmental, and supply chain risks and commitments - The Company is not currently involved in any material legal proceedings[36](index=36&type=chunk) - Environmental compliance expenditures were not material in 2024 and the first nine months of 2025[37](index=37&type=chunk)[96](index=96&type=chunk) - The Company relies on single suppliers for certain brass castings, resin, and electronic subassemblies, mitigating risks through close supplier relationships, alternative suppliers, and business interruption insurance[38](index=38&type=chunk) [Note 6. Income Taxes](index=12&type=section&id=Note%206.%20Income%20Taxes) Provides information on the company's income tax provision and effective tax rates | Metric (In thousands of USD) | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Earnings before income taxes | $47,442 | $42,911 | $144,015 | $124,365 | | Provision for income taxes | $12,365 | $10,873 | $35,956 | $30,140 | | Effective income tax rate | 26.1% | 25.3% | 25.0% | 24.2% | [Note 7. Fair Value Measurements of Financial Instruments](index=12&type=section&id=Note%207.%20Fair%20Value%20Measurements%20of%20Financial%20Instruments) Discusses the fair value of financial instruments and their measurement - The carrying amounts of cash and cash equivalents, receivables, and payables approximate their fair values due to their short-term nature[42](index=42&type=chunk) [Note 8. Subsequent Events](index=12&type=section&id=Note%208.%20Subsequent%20Events) Discloses any significant events occurring after the reporting period - No material subsequent events were identified through the date of filing[43](index=43&type=chunk) [Note 9. Industry Segment and Geographic Areas](index=12&type=section&id=Note%209.%20Industry%20Segment%20and%20Geographic%20Areas) Describes the company's operating segments and geographical revenue distribution - Badger Meter operates as a single reportable segment, focusing on water and wastewater management solutions, due to similarities in products, processes, customers, and distribution methods[44](index=44&type=chunk) [Note 10. Revenue Recognition](index=13&type=section&id=Note%2010.%20Revenue%20Recognition) Details the company's revenue recognition policies, including geographic and timing breakdowns | Revenue by Geographic Area (In thousands of USD) | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | | :----------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $210,714 | $188,130 | $627,039 | $559,283 | | Foreign | $24,387 | $20,331 | $66,318 | $53,693 | | Total | $235,651 | $208,438 | $695,957 | $621,376 | | Revenue by Timing (In thousands of USD) | 3 Months Ended Sep 30, 2025 | % | 3 Months Ended Sep 30, 2024 | % | 9 Months Ended Sep 30, 2025 | % | 9 Months Ended Sep 30, 2024 | % | | :-------------------------------------- | :-------------------------- | :- | :-------------------------- | :- | :-------------------------- | :- | :-------------------------- | :- | | Recognized over time | $24,187 | 10.3% | $15,846 | 7.6% | $67,559 | 9.7% | $42,924 | 6.9% | | Recognized at a point in time | $211,464 | 89.7% | $192,592 | 92.4% | $628,398 | 90.3% | $578,452 | 93.1% | | Total | $235,651 | 100.0% | $208,438 | 100.0% | $695,957 | 100.0% | $621,376 | 100.0% | - Revenue recognized over time, primarily from BEACON® SaaS and SmartCover® revenue, increased significantly, reflecting a shift towards subscription-based services[47](index=47&type=chunk)[52](index=52&type=chunk) | Contract Balances (In thousands of USD) | Sep 30, 2025 | Dec 31, 2024 | | :-------------------------------------- | :----------- | :----------- | | Receivables | $115,056 | $84,325 | | Contract liabilities | $94,710 | $78,274 | - As of September 30, 2025, **$94.7 million** of transaction price was allocated to unsatisfied performance obligations, with estimated revenue recognition extending through 2030 and beyond[53](index=53&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Badger Meter's business, financial performance for the three and nine months ended September 30, 2025, and an analysis of its financial condition, liquidity, and capital resources. It highlights growth drivers, strategic acquisitions, and market trends [Business Description and Overview](index=15&type=section&id=BUSINESS%20DESCRIPTION%20AND%20OVERVIEW) Provides an overview of Badger Meter's core business, product lines, and market focus - Badger Meter is a global provider of water management solutions, with approximately **95%** of net sales from water-related applications, offering hardware, communication, software, and support services under its BlueEdge™ brand[55](index=55&type=chunk) - The Company's solutions are categorized into two product lines: Utility Water (**88%** of 2024 Net Sales) and Flow Instrumentation (**12%** of 2024 Net Sales)[59](index=59&type=chunk)[60](index=60&type=chunk)[69](index=69&type=chunk) - Utility Water solutions include smart metering (AMR/AMI), water quality monitoring, leak detection, and remote sewer monitoring, with a focus on North America[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - Flow Instrumentation serves industrial markets, including water/wastewater, HVAC, and corporate sustainability, with products measuring and controlling various fluids[69](index=69&type=chunk)[70](index=70&type=chunk) [Long-Term Business Trends](index=19&type=section&id=Long-Term%20Business%20Trends) Discusses key market drivers and evolving trends impacting the company's long-term growth strategy - Key drivers for the business include significant infrastructure investment needs, an aging workforce, increasing regulations, and a focus on climate change and sustainability, all driving demand for better water management[71](index=71&type=chunk) - The utility water market is seeing a continuing conversion to Advanced Metering Infrastructure (AMI) systems, with an estimated **40%** of US water meters already converted, and a shift from mechanical to static (ultrasonic) meters for improved accuracy[66](index=66&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - Customers increasingly seek frequent and diverse data for holistic water network management, which Badger Meter addresses with its smart water solutions, including water quality, pressure management, and sewer line monitoring[74](index=74&type=chunk)[75](index=75&type=chunk) [Acquisitions](index=19&type=section&id=Acquisitions) Details recent strategic acquisitions and their impact on the company's product offerings - On January 30, 2025, Badger Meter acquired SmartCover® Systems for **$184.0 million**, enhancing its sewer line and lift station monitoring solutions within the utility water product line[76](index=76&type=chunk)[77](index=77&type=chunk) - On January 1, 2024, the Company acquired the Telog® product line and Unity Remote Monitoring software for **$3.0 million**, expanding its remote water monitoring capabilities[78](index=78&type=chunk) [Revenue and Product Mix](index=19&type=section&id=Revenue%20and%20Product%20Mix) Analyzes revenue composition, including growth in SaaS and international market expansion efforts - Revenue from Software as a Service (SaaS), including ORION Cellular and BEACON digital solutions, has significantly increased and is margin accretive[80](index=80&type=chunk) - The Company is pursuing additional revenue enhancement through expansion into select international markets (e.g., Middle East, UK) and strategic mergers and acquisitions[81](index=81&type=chunk) [Current Business Trends – Tariffs](index=21&type=section&id=Current%20Business%20Trends%20%E2%80%93%20Tariffs) Addresses the impact of import tariffs on input costs and the company's mitigation strategies - Increased import tariffs in 2025 have the potential to raise input costs, which the Company is managing through selective supply chain and pricing actions[82](index=82&type=chunk) [Results of Operations - Three Months Ended September 30, 2025](index=21&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030,%202025) Analyzes the financial performance for the third quarter, including sales, margins, and earnings | Metric (In millions of USD) | Q3 2025 | Q3 2024 | YoY Change | % YoY Change | | :-------------------------- | :------ | :------ | :--------- | :----------- | | Net Sales | $235.7 | $208.4 | $27.3 | 13.1% | | Utility Water Sales | $209.2 | $183.0 | $26.2 | 14.3% | | Flow Instrumentation Sales | $26.5 | $25.4 | $1.1 | 4.3% | | Operating Earnings | $46.1 | $40.6 | $5.5 | 13.4% | | Operating Margin | 19.6% | 19.5% | 0.1 pp | | | Gross Margin % | 40.7% | 40.2% | 0.5 pp | | | Net Earnings | $35.1 | $32.0 | $3.1 | 9.7% | | Diluted EPS | $1.19 | $1.08 | $0.11 | 10.2% | - Utility water sales growth was driven by increased ultrasonic meter, water quality solution, BEACON® SaaS revenues, and **$11.1 million** from the SmartCover acquisition[83](index=83&type=chunk) - Gross margin improvement was due to a positive sales mix, including higher SaaS revenues, despite tariff and input cost pressures[84](index=84&type=chunk) - Selling, engineering and administration (SEA) expenses increased due to the inclusion of SmartCover (including intangible asset amortization), higher incentive compensation, and personnel-related expenses[84](index=84&type=chunk) [Results of Operations - Nine Months Ended September 30, 2025](index=22&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030,%202025) Analyzes the financial performance for the nine-month period, including sales, margins, and earnings | Metric (In millions of USD) | 9M 2025 | 9M 2024 | YoY Change | % YoY Change | | :-------------------------- | :------ | :------ | :--------- | :----------- | | Net Sales | $696.0 | $621.4 | $74.6 | 12.0% | | Utility Water Sales | $618.7 | $543.7 | $75.0 | 13.8% | | Flow Instrumentation Sales | $77.3 | $77.7 | $(0.4) | -0.6% | | Operating Earnings | $140.4 | $118.7 | $21.7 | 18.3% | | Operating Margin | 20.2% | 19.1% | 1.1 pp | | | Gross Margin % | 41.5% | 39.7% | 1.8 pp | | | Net Earnings | $108.1 | $94.2 | $13.9 | 14.8% | | Diluted EPS | $3.65 | $3.19 | $0.46 | 14.4% | - Utility water net sales grew due to increased metering, water quality solutions, BEACON® SaaS revenues, and **$27.8 million** from the SmartCover acquisition[87](index=87&type=chunk) - Gross margin improvement was driven by increased sales volume and favorable product mix, partially offset by tariff and input cost pressures[88](index=88&type=chunk) - SEA expenses increased year-over-year due to the inclusion of SmartCover (including intangible asset amortization) and higher personnel costs[88](index=88&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Assesses the company's cash flow, working capital, and available credit for operations and investments - Primary sources of liquidity are cash from operations and borrowing capacity, with potential access to capital markets[91](index=91&type=chunk) | Primary Working Capital (In thousands of USD) | Sep 30, 2025 | PWC% | Dec 31, 2024 | PWC% | | :------------------------------------------ | :----------- | :--- | :----------- | :--- | | Receivables | $115,056 | 12.8% | $84,325 | 10.2% | | Inventories | $152,627 | 16.9% | $143,408 | 17.3% | | Payables | $(69,786) | -7.7% | $(55,659) | -6.7% | | Primary Working Capital | $197,897 | 22.0% | $172,074 | 20.8% | - Primary Working Capital increased by **$25.8 million**, driven by higher receivables and inventories due to increased sales activity, partially offset by higher payables[92](index=92&type=chunk) - Cash provided by operations increased to **$128.9 million** (9M 2025) from **$103.0 million** (9M 2024), supported by higher net earnings and favorable working capital trends[93](index=93&type=chunk) - Cash and cash equivalents decreased to **$201.7 million** from **$295.3 million** at December 31, 2024, primarily due to the **$184.0 million** SmartCover acquisition and dividend payments, partially offset by operating cash flow[94](index=94&type=chunk) - The Company has a **$150.0 million** multi-currency line of credit and **$154.7 million** of unused credit lines available, ensuring adequate resources for operations and future investments[95](index=95&type=chunk) [Other Matters](index=23&type=section&id=Other%20Matters) Covers miscellaneous financial matters, including environmental compliance expenditures - Environmental compliance expenditures were not material in 2024 and the first three quarters of 2025[96](index=96&type=chunk) [Contractual Obligations](index=23&type=section&id=Contractual%20Obligations) Confirms the status of the company's contractual obligations - Contractual obligations have not materially changed since the 2024 Annual Report on Form 10-K, unless otherwise indicated[98](index=98&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes to the Company's quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to market risk disclosures since the 2024 Annual Report on Form 10-K[99](index=99&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=23&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Reports on the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2025[100](index=100&type=chunk) [Changes in Internal Control Over Financial Reporting](index=23&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Addresses any material changes in internal control over financial reporting - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2025[101](index=101&type=chunk) [Part II. Other Information](index=24&type=section&id=Part%20II.%20Other%20Information) Contains additional information not covered in the financial statements, including risk factors and equity matters [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors since the 2024 Annual Report on Form 10-K[103](index=103&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on the Company's share repurchase program, indicating no shares were repurchased during the quarter ended September 30, 2025 | Period | Total shares purchased | Average price paid per share | Total shares purchased as part of a publicly announced program | Maximum number of shares that may yet be purchased under the program | | :----- | :--------------------- | :--------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------------- | | July 1, 2025 - July 31, 2025 | - | $ - | - | 200,000 | | August 1, 2025 - August 31, 2025 | - | $ - | - | 200,000 | | September 1, 2025 - September 30, 2025 | - | $ - | - | 200,000 | | Total as of September 30, 2025 | - | | - | 200,000 | - No shares were repurchased under the authorized program during the quarter ended September 30, 2025, leaving **200,000** shares available for repurchase[104](index=104&type=chunk)[105](index=105&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) This section confirms that no Rule 10b5-1 or non-Rule 10b-1 trading arrangements were adopted or terminated by directors or executive officers during the third quarter of 2025 - No Rule 10b5-1 or non-Rule 10b-1 trading arrangements were adopted or terminated by directors or executive officers during Q3 2025[106](index=106&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and iXBRL formatted financial statements - Exhibits include certifications (**31.1**, **31.2**, **32**) and iXBRL formatted financial statements (**101**, **104**)[108](index=108&type=chunk) [Signatures](index=25&type=section&id=Signatures) Provides the official signatures of the company's executive officers, certifying the report's accuracy - The report was signed by Kenneth C. Bockhorst (Chairman, President and CEO), Robert A. Wrocklage (Senior Vice President – CFO), and Daniel R. Weltzien (Vice President – Controller and Treasurer) on October 22, 2025[110](index=110&type=chunk)[112](index=112&type=chunk)

Core Insights - Badger Meter, Inc. (BMI) reported Q3 2025 EPS of $1.19, exceeding the Zacks Consensus Estimate by 7.2% and up from $1.08 in the same quarter last year [1][7] - Quarterly net sales reached $235.7 million, a 13.1% increase from $208.4 million year-over-year, driven by higher utility water sales [1][7] - The company maintains a positive outlook on long-term growth, supported by strong demand for its smart water management solutions and a robust opportunity pipeline [2][11] Financial Performance - Gross profit for the quarter was $95.8 million, up from $83.9 million year-over-year, with a gross margin of 40.7%, an increase of 50 basis points [5][7] - Operating earnings increased by 13% year-over-year to $46.1 million, while operating margin slightly declined to 19.6% [8] - Selling, engineering, and administration (SEA) expenses rose 11.8% year-over-year to $49.8 million, primarily due to the addition of SmartCover [9] Segmental Performance - Utility water sales grew by 14% year-over-year, with an 8% increase even when excluding SmartCover, driven by higher ultrasonic meter volumes and increased BEACON Software-as-a-Service sales [4] - Flow instrumentation sales increased by 4% year-over-year, supported by strength in water-related markets [4] Cash Flow & Liquidity - In Q3 2025, Badger Meter generated $51.3 million in net cash from operating activities, compared to $45.1 million a year ago [10] - As of September 30, 2025, the company had $201.7 million in cash and cash equivalents, up from $165.2 million as of June 30, 2025 [10] Strategic Outlook - The company expects to achieve an average high single-digit top-line growth rate over the next five years, driven by technology adoption and strategic pricing initiatives [11] - With a raised normalized gross margin range of 39%–42%, the company is well-positioned to invest in innovation and pursue value-creating acquisitions [12]

Core Viewpoint - Badger Meter, Inc. has shown strong financial performance in Q3 2025, leading to an upgrade in stock rating from Hold to Buy by Stifel Nicolaus, with a price target of $215 indicating a potential upside of 21.23% from the current price of $177.35 [1][6]. Financial Performance - Total sales for Q3 2025 reached $235.7 million, marking a 13% increase from $208.4 million in the previous year [2]. - Base sales grew by 8% year-over-year, totaling $224.5 million, reflecting strong demand for the company's products and services [2]. - Operating earnings increased by 13% to $46.1 million, with operating profit margins slightly improving to 19.6% from 19.5% year-over-year [3]. - Base operating earnings rose by 15%, reaching $46.6 million, further supporting the positive outlook [3]. Stock Performance - Despite the positive financial results, Badger Meter's stock price decreased by 5.37%, or $10.06, to $177.35, indicating some market volatility [4][6]. - The stock has fluctuated between a low of $176.04 and a high of $204 during the trading day, with a yearly high of $256.08 and a low of $162.17 [4]. Market Activity - Badger Meter's market capitalization is approximately $5.23 billion, with a trading volume of 1,209,410 shares on the NYSE, suggesting active investor interest in the company's performance and growth potential [5].

Financial Data and Key Metrics Changes - Total sales for Q3 2025 reached $236 million, reflecting a 13% year-over-year increase, with Base sales growth at 8% [5][6] - Operating earnings increased by 13% year-over-year to $46.1 million, with operating margins slightly up to 19.6% from 19.5% [6][8] - Consolidated EPS rose to $1.19, a 10% increase compared to $1.08 in the prior year quarter [8][9] - Record free cash flow of $48.2 million increased by approximately $6 million year-over-year, primarily due to lower cash taxes [9] Business Line Data and Key Metrics Changes - Utility water product line sales increased by 14% year-over-year, or 8% excluding SmartCover, driven by higher ultrasonic meter unit volumes and increased BEACON SaaS sales [5][6] - Flow instrumentation product line sales grew by 4% year-over-year, supported by strength in water-related markets [6] Market Data and Key Metrics Changes - The company noted a steady demand for its cellular AMI solution and BlueEdge suite, supported by macroeconomic drivers encouraging technology adoption across the water cycle [3][10] - The trade environment remains fluid, but the company has effectively managed tariff and trade-related cost pressures [3][7] Company Strategy and Development Direction - The company is focused on long-term growth through its BlueEdge solutions, which are modular and allow customers to adopt technologies at their own pace [10][11] - The company is well-positioned to capitalize on long-term trends in the water industry, with a strong cash flow generation capability and a net cash position of approximately $200 million [14] - The company continues to prioritize organic growth, increasing dividends for the 33rd consecutive year, and pursuing strategic acquisitions [14][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite macroeconomic uncertainties, highlighting ongoing customer enthusiasm for technology adoption [12][13] - The company anticipates a solid close to the year, despite typical seasonal impacts in Q4 due to fewer operating days [12][22] - Management expects to achieve high single-digit average top-line growth over the next five years [12][49] Other Important Information - The company has successfully transitioned certain manufacturing operations to its facility in Racine, Wisconsin, as part of the SmartCover acquisition integration [14] - The company is optimistic about the growth potential of SmartCover, which has shown 25% growth in the quarter [29][30] Q&A Session Summary Question: Insights on gross profit margin expectations - Management indicated that the lack of new tariff news and continued strong performance has led to confidence in raising the gross margin range to 39%-42% [17][19] Question: Project timing and customer decision-making - Management clarified that while Q3 may not show sequential growth over Q2, it does not indicate a decline in business, and customers are still moving forward with projects [20][22] Question: SmartCover growth and profitability - Management remains excited about SmartCover's growth potential, expecting it to become EPS accretive in year two post-acquisition [29][33] Question: Pricing strategies amid tariff impacts - Management noted targeted product-specific price increases to mitigate tariff-related costs, with expectations for price realization to catch up to costs [37][39] Question: Water quality performance and customer needs - Management expressed strong traction in water quality offerings and confidence in their current parameters, with no immediate gaps identified [41][42] Question: 2026 growth outlook and capital allocation - Management refrained from providing specific guidance for 2026 but expressed confidence in achieving high single-digit growth over the cycle [46][49] Question: Federal stimulus impact on metering - Management indicated that very little federal stimulus money has been directed toward metering, with macro drivers remaining the primary focus for utilities [53][55]

Financial Data and Key Metrics Changes - Total sales for Q3 2025 reached $236 million, marking a 13% year-over-year increase, with BASE sales growth at 8% [5][6] - Operating earnings rose 13% year-over-year to $46.1 million, with operating margins slightly up to 19.6% from 19.5% [6][8] - Consolidated EPS increased to $1.19 from $1.08 in the prior year, representing a 10% year-over-year growth [8][9] - Record free cash flow of $48.2 million, up approximately $6 million year-over-year, primarily due to lower cash taxes [9] Business Line Data and Key Metrics Changes - Utility water product line sales increased by 14% year-over-year, or 8% excluding SmartCover, driven by higher ultrasonic meter volumes and increased Beacon SaaS sales [5][6] - Flow instrumentation product line sales grew by 4% year-over-year, supported by strength in water-related markets [6] Market Data and Key Metrics Changes - The company noted a steady demand for its cellular AMI solution and BlueEdge suite, supported by macroeconomic drivers encouraging technology adoption across the water cycle [3][10] - The trade environment remains fluid, but the company has effectively managed tariff and trade-related cost pressures [3][7] Company Strategy and Development Direction - The company is focused on long-term growth through its BlueEdge solutions, which are modular and allow customers to adopt technologies at their own pace [10][11] - The company is well-positioned to capitalize on long-term trends in the water industry, with a strong cash flow generation capability and a net cash position of approximately $200 million [14] - The company plans to continue investing in both organic growth and potential acquisitions, while also returning cash to shareholders through increased dividends [14][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite macroeconomic uncertainties, citing ongoing demand for critical utility water infrastructure [12][13] - The company anticipates a high single-digit average top-line growth rate over the next five years, despite the inherent unevenness in project timing [12][48] Other Important Information - The company has successfully transitioned certain manufacturing operations to its facility in Racine, Wisconsin, as part of the SmartCover acquisition integration [14] - The company has raised its gross margin range from 39% to 42% on a normalized basis, reflecting ongoing structural mix improvements [7][62] Q&A Session Summary Question: Insights on gross profit margin expectations - Management indicated that the lack of new tariff news and continued strong performance gave them confidence to raise the gross margin range [18][19] Question: Project timing and customer decision-making - Management clarified that they do not expect a decline in business but noted the typical seasonal impacts in Q4 due to fewer operating days [22][24] Question: Growth expectations for SmartCover - Management remains excited about SmartCover's integration and growth potential, with expectations of continued strong performance [29][30] Question: Pricing and tariff impacts - Management discussed targeted price increases to mitigate tariff impacts, with expectations of reaching parity between price and cost moving forward [38][39] Question: Water quality performance and customer needs - Management expressed strong traction in water quality offerings and confidence in their current parameters, with no immediate gaps identified [41][42] Question: 2026 growth outlook - Management refrained from providing specific guidance for 2026 but expressed confidence in achieving high single-digit growth over the cycle [47][49] Question: Federal funding impact on metering - Management noted that very little federal funding has gone toward metering, with macro drivers remaining the primary focus for utilities [53][54]

Financial Data and Key Metrics Changes - Total sales reached $236 million in Q3 2025, representing a 13% year-over-year increase or 8% base sales growth, with a sequential decline from Q2 [6][11] - Operating earnings increased by 13% year-over-year to $46.1 million, with operating margins slightly up to 19.6% from 19.5% [7] - Consolidated EPS was $1.19, a 10% increase from $1.08 in the prior year quarter [10] - Record free cash flow of $48.2 million increased by approximately $6 million year-over-year [11] Business Line Data and Key Metrics Changes - Utility water product line sales increased by 14% year-over-year, or 8% excluding SmartCover [6] - Flow instrumentation product line sales increased by 4% year-over-year, driven by strength in water-related markets [7] - Base operating earnings, excluding SmartCover, increased by 15% year-over-year to $46.6 million [7] Market Data and Key Metrics Changes - Gross margins expanded to 40.7% from 40.2% in the prior year quarter, benefiting from structural mix improvement and price increases [8] - The company increased its gross margin range from a historical 38%-40% to a new normalized range of 39%-42% [8] Company Strategy and Development Direction - The company is focused on the long-term growth of its BlueEdge suite of modular smart water management solutions, which is expected to drive future growth [12][14] - The company plans to continue investing in both organic and inorganic growth, with a net cash position of approximately $200 million [16] - The company remains committed to returning cash to shareholders, having increased its dividend for the thirty-third consecutive year [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business amidst macroeconomic and trade uncertainties, citing strong demand for their products [15] - The company anticipates healthy levels of activity across its opportunity pipeline and expects an average top-line growth rate of high single digits over the next five years [14] - Management noted that federal funding noise has not significantly impacted customer decision-making, as utilities continue to prioritize technology adoption [26] Other Important Information - The company is successfully integrating SmartCover into its operations, with reported growth of approximately 25% in the quarter [31] - The company is optimistic about the growth potential of SmartCover, which is expected to become EPS accretive in year two post-acquisition [35] Q&A Session Summary Question: Increase in expected gross profit margin - Management indicated that the increase in gross profit margin was due to a lack of new tariff news and confidence in structural mix benefits [20][21] Question: Project timing and customer decision-making - Management clarified that they did not signal a decline in business but noted the inherent unevenness in project timing [23][24] Question: Smart Cover growth expectations - Management remains excited about Smart Cover's growth potential, which is expected to continue at an outsized level [31] Question: Pricing and tariff impacts - Management discussed targeted product-specific price increases to mitigate tariff impacts, with expectations for price realization to catch up to cost effects [39][40] Question: Water quality performance - Management expressed strong traction in water quality offerings and confidence in their parameter capabilities [42][44] Question: Outlook for 2026 - Management refrained from providing specific guidance for 2026 but expressed confidence in achieving high single-digit growth over the cycle [49][51] Question: Capital allocation and buybacks - Management reiterated their capital allocation priorities, emphasizing organic growth and dividends, while not ruling out buybacks [52][53] Question: Federal stimulus impact - Management noted that very little federal stimulus money has gone toward metering, with macro drivers remaining the same [56] Question: Comparison to 2011 period - Management highlighted significant technological advancements since 2011, making past comparisons less relevant [59]