Financial Data and Key Metrics Changes - Total sales for Q4 2025 reached $221 million, an 8% year-over-year increase, with base sales growth of 2% [7] - Operating profit margins increased by 40 basis points to 19.5%, while base operating profit margins expanded by 140 basis points to 20.5% [9] - Consolidated EPS rose to $1.14, a 10% increase from $1.04 in the prior year quarter [12] - Record quarterly free cash flow of $50.8 million, up approximately $3.4 million year-over-year [12] Business Line Data and Key Metrics Changes - Utility water product line sales increased by 9% year-over-year, or 2% excluding SmartCover [7] - Flow instrumentation product line sales remained flat year-over-year, with modest growth in water-focused end markets [9] - SmartCover generated $40 million in sales for 2025, representing a 25% annualized growth [22] Market Data and Key Metrics Changes - The company reported a 17% compounded annual growth rate over the past five years, with software revenue exceeding $74 million, accounting for 8% of total sales [19] - The U.S. market for meters is approximately 6 million units per year, with Badger Meter holding about 30% market share [35][38] Company Strategy and Development Direction - The company aims to leverage its cellular AMI technology as a foundation for real-time insights and analytics, expanding through the Blue Edge suite of smart water management solutions [15] - The PRASA AMI project is expected to be one of the largest deployments globally, with a focus on enhancing market leadership in cellular AMI technology [15][16] - The company emphasizes long-term growth driven by secular trends in the water industry, with a conviction of high single-digit sales growth over the next five years [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of fewer operating days and project pacing effects on Q4 sales, indicating that these factors are typical in the industry [8][29] - The company expects project pacing dynamics to continue into the first half of 2026, with a higher growth rate anticipated in the second half as awarded projects commence [23][61] - Management remains confident in achieving high single-digit growth despite potential fluctuations in project timing and market conditions [54][57] Other Important Information - The company has a clean balance sheet with over $225 million in cash, providing financial flexibility for reinvestment [20] - The company has increased its dividend for 33 consecutive years and repurchased $15 million in shares in Q4 [21] Q&A Session Summary Question: Did the company see the full impact of project conclusions in Q4? - Management indicated that project pacing and timing can vary, and the second half of the year was expected to show lower growth than the first half due to these factors [27][29] Question: What is the size of the U.S. market for meters? - Management confirmed that the U.S. market is approximately 6 million meters per year, with Badger Meter's share around 30% [35][38] Question: How does the company view gross margins moving forward? - Management noted that while gross margins are strong, there are headwinds expected from turnkey projects and commodity prices, but structural mix will continue to positively impact margins [42][44] Question: How is the PRASA project funded? - The project is partially funded by FEMA dollars in response to Hurricane Maria, which also drives the Buy American requirement for manufacturing [70] Question: What is the expected timeline for the PRASA project? - Management indicated that large AMI projects typically span five years, with variability in deployment timing due to various factors [47][48]