Badger Meter(BMI) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section encompasses the unaudited consolidated condensed financial statements, management's analysis, market risk disclosures, and internal controls Item 1 Financial Statements This section presents the unaudited consolidated condensed financial statements for Badger Meter, Inc., including balance sheets, statements of operations, comprehensive income, cash flows, and shareholders' equity, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial items Consolidated Condensed Balance Sheets This section presents the consolidated condensed balance sheets, detailing assets, liabilities, and equity at specific reporting dates | Metric (In thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $165,208 | $295,305 | $(130,097) | -44.0% | | Receivables, net | $117,667 | $84,325 | $33,342 | 39.5% | | Total inventories | $147,261 | $143,408 | $3,853 | 2.7% | | Total current assets | $448,275 | $540,116 | $(91,841) | -17.0% | | Total assets | $936,420 | $816,413 | $120,007 | 14.7% | | Total current liabilities | $138,710 | $118,205 | $20,505 | 17.3% | | Total shareholders' equity | $677,592 | $606,232 | $71,360 | 11.8% | Consolidated Condensed Statements of Operations This section provides the consolidated condensed statements of operations, outlining net sales, earnings, and diluted EPS for the reported periods | Metric (In thousands except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | YoY % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | :----------- | | Net sales | $238,095 | $216,658 | $21,437 | 9.9% | | Gross margin | $97,810 | $85,368 | $12,442 | 14.6% | | Operating earnings | $44,863 | $41,512 | $3,351 | 8.1% | | Net earnings | $34,584 | $33,056 | $1,528 | 4.6% | | Diluted EPS | $1.17 | $1.12 | $0.05 | 4.5% | | Dividends declared per common share | $0.34 | $0.27 | $0.07 | 25.9% | | Metric (In thousands except per share) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | YoY % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------- | :----------- | | Net sales | $460,306 | $412,938 | $47,368 | 11.5% | | Gross margin | $193,247 | $162,546 | $30,701 | 18.9% | | Operating earnings | $94,288 | $78,090 | $16,198 | 20.7% | | Net earnings | $72,982 | $62,187 | $10,795 | 17.4% | | Diluted EPS | $2.47 | $2.11 | $0.36 | 17.1% | | Dividends declared per common share | $0.68 | $0.54 | $0.14 | 25.9% | Consolidated Condensed Statements of Comprehensive Income This section details the consolidated condensed statements of comprehensive income, including net earnings and other comprehensive income components | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | YoY % Change | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :----------- | | Net earnings | $34,584 | $33,056 | $1,528 | 4.6% | | Comprehensive income | $42,861 | $32,981 | $9,880 | 29.9% | | Metric (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | YoY % Change | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :----------- | | Net earnings | $72,982 | $62,187 | $10,795 | 17.4% | | Comprehensive income | $86,417 | $58,490 | $27,927 | 47.8% | - Foreign currency translation adjustments significantly contributed to comprehensive income in 2025, showing a positive $13,532 thousand for the six months ended June 30, 2025, compared to a negative $3,633 thousand in the prior year[16] Consolidated Condensed Statements of Cash Flows This section presents the consolidated condensed statements of cash flows, categorizing cash movements from operating, investing, and financing activities | Metric (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | YoY % Change | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :----------- | | Net cash provided by operations | $77,613 | $57,879 | $19,734 | 34.1% | | Net cash used for investing activities | $(190,928) | $(8,017) | $(182,911) | 2281.6% | | Net cash used for financing activities | $(19,467) | $(15,125) | $(4,342) | 28.7% | | (Decrease) increase in cash and cash equivalents | $(130,097) | $34,430 | $(164,527) | -477.8% | | Cash and cash equivalents – end of period | $165,208 | $226,212 | $(61,004) | -27.0% | - The significant increase in cash used for investing activities in 2025 was primarily due to the $184.0 million acquisition of SmartCover, Inc[18] Consolidated Condensed Statements of Shareholders' Equity This section outlines the consolidated condensed statements of shareholders' equity, showing changes in equity components over time | Metric (In thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Total Shareholders' Equity | $677,592 | $563,138 | | Reinvested earnings | $600,763 | $505,040 | | Accumulated other comprehensive income (loss) | $5,529 | $(5,343) | - Shareholders' equity increased by $71,360 thousand from December 31, 2024, driven by net earnings and positive foreign currency translation adjustments[11][21] Notes to Unaudited Consolidated Condensed Financial Statements This section provides detailed notes explaining the basis of presentation, accounting policies, and specific financial items supporting the financial statements Note 1 Basis of Presentation This note describes the basis for preparing the unaudited consolidated condensed financial statements, including adjustments and interim reporting considerations - The unaudited consolidated condensed financial statements include all necessary adjustments for fair presentation, consisting primarily of normal recurring accruals, and interim results are not necessarily indicative of full-year results[25] Note 2 Additional Financial Information Disclosures This note provides additional disclosures on financial information, including cash equivalents and warranty reserves - Cash equivalents are highly liquid investments with original maturities of ninety days or less[28] Warranty and After-Sale Costs Reserve (In thousands): | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $16,693 | $11,102 | | Net additions charged to earnings | $7,327 | $6,598 | | Costs incurred | $(4,471) | $(3,851) | | Balance at end of period | $19,549 | $13,849 | Note 3 Accumulated Other Comprehensive Income (Loss) This note details the components of accumulated other comprehensive income (loss), including pension benefits and foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) (In thousands): | Component | June 30, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | | Unrecognized pension and postretirement benefits | $1,049 | $856 | | Foreign currency translation | $4,480 | $(6,199) | | Total | $5,529 | $(5,343) | - The Company experienced a significant positive shift in foreign currency translation adjustments, moving from a loss of $3,633 thousand in the first six months of 2024 to an income of $13,532 thousand in the same period of 2025[30][31] Note 4 Acquisitions This note outlines details of recent acquisitions, including the purchase of SmartCover Systems and the Telog product line - On January 30, 2025, Badger Meter acquired 100% of Hadronex, Inc. (SmartCover® Systems), a provider of sewer line and lift station monitoring solutions, for $184.0 million, net of cash acquired[32][33] - The SmartCover acquisition contributed $16.7 million in revenue for the five months ended June 30, 2025, and resulted in significant increases in intangible assets ($85.6 million) and goodwill ($118.6 million)[33] - On January 1, 2024, the Company acquired Telog® product line and Unity Remote Monitoring software for $3.0 million in cash[34] Note 5 Contingencies, Litigation and Commitments This note discusses the Company's contingencies, litigation status, and commitments, including material legal proceedings and supplier dependencies - The Company is not currently involved in any material legal proceedings[35] - Environmental compliance expenditures were not material in 2024 and the first half of 2025[36] - The Company relies on single suppliers for certain critical components (brass castings, resin, electronic subassemblies) but mitigates risks through close supplier relationships, alternative suppliers, and business interruption insurance[37] Note 6 Income Taxes This note provides information on the Company's effective income tax rates and factors influencing them Effective Income Tax Rate: | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three months ended June 30, | 24.5% | 23.8% | | Six months ended June 30, | 24.4% | 23.7% | - The effective income tax rate increased slightly in both the three-month and six-month periods ended June 30, 2025, compared to the prior year, primarily due to variations in state taxes and the relationship of foreign and domestic earnings[39][40] Note 7 Fair Value Measurements of Financial Instruments This note explains the fair value measurements of financial instruments, particularly for short-term assets and liabilities - The carrying amounts of cash and cash equivalents, receivables, and payables approximate their fair values due to their short-term nature[41] Note 8 Subsequent Events This note discloses any material subsequent events evaluated through the financial statement filing date - The Company evaluated subsequent events through the filing date and determined that no material subsequent events exist[42] Note 9 Industry Segment and Geographic Areas This note describes the Company's single reportable segment and how the Chief Operating Decision Maker assesses performance - 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[43] - The Chief Operating Decision Maker (CODM) assesses performance using gross margin, operating earnings, and net earnings, reviewing budget vs. actual and prior year vs. current year reporting[44] Note 10 Revenue Recognition This note details the Company's revenue recognition policies, disaggregated by geographic area and timing of transfer Revenues Disaggregated by Geographic Area (In thousands): | Region | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $214,350 | $193,963 | $416,325 | $371,153 | | Foreign | $23,645 | $22,790 | $43,981 | $31,786 | | Total | $238,095 | $216,658 | $460,306 | $412,938 | Revenues Disaggregated by Timing of Transfer (In thousands): | Timing | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Recognized over time | $23,086 (9.7%) | $14,345 (6.6%) | $43,372 (9.4%) | $27,078 (6.6%) | | Recognized at a point in time | $215,009 (90.3%) | $202,313 (93.4%) | $416,934 (90.6%) | $385,860 (93.4%) | - Revenue recognized over time, primarily from BEACON® SaaS and SmartCover® revenue, increased significantly, reflecting a growing shift towards subscription-based services[46][50] Receivables and Contract Liabilities (In thousands): | Metric | June 30, 2025 | December 31, 2024 | | :----------- | :------------ | :---------------- | | Receivables | $117,667 | $84,325 | | Contract liabilities | $91,939 | $78,274 | - As of June 30, 2025, the aggregate transaction price allocated to unsatisfied or partially unsatisfied performance obligations was $91.9 million, with approximately $15.2 million expected to be recognized in 2025[51] Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and operational results for the three and six months ended June 30, 2025 BUSINESS DESCRIPTION AND OVERVIEW This section provides an overview of Badger Meter's business, focusing on its water management solutions and product lines - Badger Meter is a global provider of water management solutions, with approximately 95% of net sales from water-related applications, offering measurement and control hardware, connectivity, data analytics, and support services under its BlueEdge™ brand[53] - The Company's solutions are categorized into two product lines: Utility Water (approx. 88% of 2024 Net Sales) and Flow Instrumentation (approx. 12% of 2024 Net Sales)[57][58][67] - Utility water solutions include smart metering (AMR/AMI systems), water quality monitoring, leak detection, and remote sewer monitoring, with a focus on North America[58][59][60][61][62][63][65] - Flow instrumentation serves industrial markets, including water/wastewater, HVAC, and corporate sustainability, providing meters, valves, and sensing instruments for fluid measurement and control[67][68] Long Term Business Trends This section discusses long-term trends driving demand in the water management market, including infrastructure needs and technology adoption - Long-term trends driving demand include infrastructure investment needs, an aging workforce, increasing regulations, and a focus on climate change and sustainability, all requiring better water resource management[69] - The utility water market is seeing a continuing conversion to Advanced Metering Infrastructure (AMI) solutions, with an estimated 40% of U.S. water meters already converted, and a shift from mechanical to ultrasonic static meters for improved accuracy[70][71] - Customers are increasingly seeking more 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[72][73] Acquisitions This section details recent acquisitions, including SmartCover Systems and the Telog product line, and their strategic impact - On January 30, 2025, the Company acquired SmartCover® Systems for $184.0 million, expanding its sewer line and lift station monitoring solutions within the utility water product line[74][75] - On January 1, 2024, the Company acquired the Telog® product line and Unity Remote Monitoring software for $3.0 million, enhancing its remote water monitoring capabilities[76] Revenue and Product Mix This section analyzes the Company's revenue and product mix, highlighting growth in SaaS and international expansion strategies - Revenue from Software as a Service (SaaS), including ORION Cellular and BEACON digital solutions, has significantly increased and is margin accretive, reflecting the industry's evolution towards advanced technologies[77] - The Company is pursuing additional revenue opportunities through expansion into select international markets (e.g., Middle East, UK) with its BlueEdge offering, field installation services, and strategic mergers and acquisitions[78] Current Business Trends – Tariffs This section addresses the impact of increased import tariffs on input costs and the Company's mitigation strategies - Increased import tariffs introduced by the United States in the first half of 2025 have the potential to raise input costs[79] - Badger Meter is managing tariff-related cost burdens through selective supply chain adjustments and pricing actions, with contingency plans in place for various economic scenarios[79] Results of Operations - Three Months Ended June 30, 2025 This section analyzes the Company's financial results for the three months ended June 30, 2025, focusing on net sales, earnings, and key expense drivers Three Months Ended June 30, 2025 vs. 2024 (In millions): | Metric | 2025 | 2024 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Net Sales | $238.1 | $216.7 | $21.4 | 9.9% | | Utility Water Sales | $212.2 | $190.6 | $21.6 | 11.4% | | Flow Instrumentation Sales | $25.9 | $26.1 | $(0.2) | -1.0% | | Operating Earnings | $44.9 | $41.5 | $3.4 | 8.1% | | Gross Margin % | 41.1% | 39.4% | 1.7 pp | | | SEA Expenses | $52.9 | $43.9 | $9.0 | 20.5% | | Net Earnings | $34.6 | $33.1 | $1.5 | 4.6% | | Diluted EPS | $1.17 | $1.12 | $0.05 | 4.5% | - Utility water net sales growth was driven by increased BEACON® SaaS revenues, higher meter volumes, and $10.6 million from the SmartCover acquisition[80] - Gross margin percentage improved due to increased sales volumes and a favorable product mix, including higher SaaS revenues, despite tariff and input cost pressures[81] - Selling, engineering, and administration (SEA) expenses increased significantly, primarily due to the SmartCover acquisition (including intangible asset amortization) and growth-related spending such as higher headcount and incentive compensation[81] Results of Operations - Six Months Ended June 30, 2025 This section analyzes the Company's financial results for the six months ended June 30, 2025, focusing on net sales, earnings, and key expense drivers Six Months Ended June 30, 2025 vs. 2024 (In millions): | Metric | 2025 | 2024 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Net Sales | $460.3 | $412.9 | $47.4 | 11.5% | | Utility Water Sales | $409.5 | $360.6 | $48.9 | 13.6% | | Flow Instrumentation Sales | $50.8 | $52.3 | $(1.5) | -2.9% | | Operating Earnings | $94.3 | $78.1 | $16.2 | 20.7% | | Gross Margin % | 42.0% | 39.4% | 2.6 pp | | | SEA Expenses | $99.0 | $84.5 | $14.5 | 17.2% | | Net Earnings | $73.0 | $62.2 | $10.8 | 17.4% | | Diluted EPS | $2.47 | $2.11 | $0.36 | 17.1% | - Utility water net sales increased due to higher metering and BEACON® SaaS revenues, along with $16.7 million from the SmartCover acquisition over five months[84] - Gross margin percentage improved significantly, driven by increased sales volumes and a favorable customer and product mix, partially offset by tariff and other input cost pressures[85] - SEA expenses rose due to the SmartCover acquisition (including intangible asset amortization) and continued investment in growth-related areas like headcount and merit increases[85] LIQUIDITY AND CAPITAL RESOURCES This section discusses the Company's liquidity sources, working capital, cash flow, and available credit lines - The Company's primary sources of liquidity are cash from operations and available borrowing capacity, with potential access to capital markets[88] Primary Working Capital (PWC) (In thousands): | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Receivables | $117,667 | $84,325 | $33,342 | | Inventories | $147,261 | $143,408 | $3,853 | | Payables | $(74,125) | $(55,659) | $(18,466) | | Primary Working Capital | $190,803 | $172,074 | $18,729 | | PWC as % of trailing twelve month Net sales | 21.8% | 20.8% | 1.0 pp | - Cash provided by operations increased to $77.6 million in the first six months of 2025, up 34.1% from $57.9 million in the prior year, driven by higher net earnings and working capital changes[90] - Cash and cash equivalents decreased by $130.1 million to $165.2 million at June 30, 2025, primarily due to the $184.0 million SmartCover acquisition, partially offset by operating cash flow[91] - The Company had $154.7 million of unused credit lines available at June 30, 2025, and was in compliance with all credit facility covenants[92] Item 3 Quantitative and Qualitative Disclosures about Market Risk This section refers to the Company's Annual Report on Form 10-K for the year ended December 31, 2024, stating that there have been no material changes to the quantitative and qualitative disclosures about market risk since that report was filed - No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for December 31, 2024[96] Item 4 Controls and Procedures 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 This section reports on management's conclusion regarding the effectiveness of the Company's disclosure controls and procedures - Management, with the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[97] Changes in Internal Control Over Financial Reporting This section reports on any material changes in the Company's internal control over financial reporting during the quarter - There were no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025[98] Part II. Other Information This section presents other required information, including risk factors, equity security sales, and exhibits Item 1A Risk Factors This section indicates 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 have occurred since the Annual Report on Form 10-K for December 31, 2024[100] Item 2 Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's share repurchase program, indicating no shares were purchased during the quarter ended June 30, 2025 - The Board authorized the repurchase of up to 200,000 shares of Common Stock through February 2026[101] Share Repurchase Program Activity (Quarter Ended June 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 | | :-------------------------- | :--------------------- | :--------------------------- | :----------------------------------------------------------- | :------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | - | $ - | - | 200,000 | | May 1, 2025 - May 31, 2025 | - | $ - | - | 200,000 | | June 1, 2025 - June 30, 2025 | - | $ - | - | 200,000 | | Total as of June 30, 2025 | - | | - | 200,000 | Item 5 Other Information This section confirms that no directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b-1 trading arrangements during the second quarter of 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b-1 trading arrangements during the second quarter of 2025[103] Item 6 Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications by the CEO and CFO, and the interactive data files in iXBRL format - Exhibits include CEO and CFO certifications (31.1, 31.2, 32) and iXBRL formatted financial statements (101, 104)[105] Signatures This section contains the signatures of the authorized officers of Badger Meter, Inc., certifying the filing of the report - The report is 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 July 23, 2025[109]