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]

Core Viewpoint - Badger Meter's recent earnings report showed a mixed performance, with earnings per share missing estimates but net sales increasing year over year, indicating potential growth despite challenges in the market [2][10]. Financial Performance - Badger Meter reported Q2 2025 earnings per share (EPS) of $1.17, missing the Zacks Consensus Estimate by 3.3%, but up from $1.12 in the same quarter last year [2]. - Quarterly net sales reached $238.1 million, a 10% increase from $216.7 million in the prior year, driven by higher utility water sales and contributions from the SmartCover acquisition [2]. - Gross profit was $97.8 million, up from $85.4 million year over year, with a gross margin of 41.1%, reflecting a 170 basis point improvement [6]. - Operating earnings increased by 8% year over year to $44.9 million, while operating margin slightly declined to 18.8% from 19.2% [7]. Segmental Performance - Utility water sales rose 11% year over year, supported by the adoption of digital smart water technologies, with organic utility water sales up 6% excluding SmartCover [4]. - Flow instrumentation sales remained flat year over year, as growth in water-related markets was offset by reduced demand in non-water-related applications [5]. Cost and Expenses - Selling, general and administrative (SGA) expenses increased by 20.7% year over year to $52.9 million, primarily due to the SmartCover acquisition [8]. - Without the SmartCover impact, SGA expenses rose by 8%, driven by higher personnel costs and deferred compensation expenses [8]. Cash Flow and Liquidity - In Q2 2025, Badger Meter generated $44.6 million in net cash from operating activities, compared to $36.4 million a year ago [9]. - As of June 30, 2025, the company had $165.2 million in cash and cash equivalents, with total current liabilities of $138.7 million [9]. Outlook - The company is optimistic about achieving high single-digit revenue growth in the long term, supported by strong industry fundamentals and sustained customer demand [10]. - However, estimates have been trending downward, with a consensus estimate shift of -8.68%, leading to a Zacks Rank of 5 (Strong Sell) [11][13].

Core Insights - Badger Meter, Inc. (BMI) reported Q2 2025 EPS of $1.17, missing the Zacks Consensus Estimate by 3.3%, but up from $1.12 in the same quarter last year [1] - Quarterly net sales reached $238.1 million, a 10% increase from $216.7 million year-over-year, driven by higher utility water sales and contributions from the SmartCover acquisition [1] Segment Performance - Utility water sales increased by 11% year-over-year, supported by the adoption of digital smart water technologies and higher demand for metering solutions [4] - Flow instrumentation sales remained flat year-over-year, with slight growth in water-related markets offset by reduced demand in non-water-related applications [5] Financial Performance - Gross profit rose to $97.8 million from $85.4 million in the prior year, with a gross margin of 41.1%, up 170 basis points year-over-year [6] - Operating earnings increased by 8% year-over-year to $44.9 million, while operating margin slightly declined to 18.8% [7] Cash Flow & Liquidity - Cash from operations grew to $44.6 million from $36.4 million a year ago, with cash and cash equivalents at $165.2 million as of June 30, 2025 [11] Management Commentary - Management noted strong demand for its cellular AMI solution and BlueEdge portfolio, despite macroeconomic challenges [2] - The integration of SmartCover is expected to reveal new market opportunities [2] Outlook - The company anticipates high single-digit revenue growth in the long term, supported by strong industry fundamentals and sustained customer demand [12]