Badger Meter(BMI)2025-04-17 22:40Financial 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 0.99 in the prior year [17][18] - Free cash flow for the quarter was 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]