Badger Meter, Inc. (NYSE:BMI) is a global provider of industry-leading water management solutions, with nearly 95% of its net sales derived from water-related applications. The company has a long history of innovation in the water technology space, dating back over a century. Badger Meter's tailorable solutions encompass smart measurement hardware, reliable communications, data and analytics software, as well as ongoing support and expertise essential to optimizing customers' operations and contributing to the sustainable use and protection of the world's most precious resource - water.
Business Overview
Badger Meter's product portfolio is divided into two main segments: Utility Water and Flow Instrumentation. The Utility Water segment, which accounts for approximately 85% of net sales, focuses on providing smart metering solutions, including water meters, radio endpoints, and related software and services, to water utilities. These solutions enable water utilities to generate revenue, improve operational efficiency, and engage with end consumers. The Flow Instrumentation segment, representing the remaining 15% of net sales, serves a variety of industrial markets, primarily water-related applications, with a broad range of meters, valves, and other sensing instruments.The company's smart measurement hardware includes mechanical and ultrasonic water meters, water quality monitoring solutions, and high-frequency pressure and leak detection sensors. Badger Meter's communication solutions, such as the ORION® family of radio endpoints, provide customers with industry-leading options for transmitting data from hardware into usable applications. The company's software and analytics platforms, including the BEACON® SaaS, deliver valuable insights to help customers optimize their water systems, improve efficiency, and enhance sustainability.
Badger Meter's solutions are in high demand as the water industry continues to evolve, with increasing focus on accurate and actionable data, as well as the adoption of new technologies like advanced metering infrastructure (AMI) and cellular-based systems. The company has been at the forefront of innovation, meeting its customers' growing expectations for smart water management.
Financial Performance
Badger Meter has delivered strong financial results, with annual net income of $92,598,000, annual revenue of $703,592,000, annual operating cash flow of $110,117,000, and annual free cash flow of $98,114,000 in its most recent fiscal year.In the second quarter of 2024, the company reported net sales of $216,658,000, a 23.2% increase compared to the same period in the prior year. This growth was driven by a 26.3% increase in utility water sales, which reached $190,600,000, as well as a 4.5% increase in flow instrumentation sales to $26,058,000. The strong performance was attributed to increased customer adoption of cellular AMI solutions, including ORION® Cellular endpoints and BEACON® SaaS revenues, as well as higher volumes of both mechanical and ultrasonic meters.
Gross margin in the second quarter was 39.4%, a slight decrease from 39.5% in the prior year period, as the benefits of increased sales volumes and favorable mix were offset by inflationary cost pressures. Selling, engineering, and administrative (SEA) expenses increased to $43,856,000, or 20.2% of sales, compared to $39,932,000, or 22.7% of sales, in the prior year quarter, reflecting continued growth-related spending, including higher headcount, merit increases, incentive compensation, and R&D expenses.
Operating earnings for the second quarter were $41,512,000, or 19.2% of sales, compared to $29,502,000, or 16.8% of sales, in the prior year period. Net earnings were $33,056,000, or $1.12 per diluted share, compared to $22,493,000, or $0.76 per diluted share, in the same quarter of 2023.
For the first six months of 2024, Badger Meter reported net sales of $412,938,000, a 23.3% increase from the prior year period. Utility water sales grew 27.4% to $360,600,000, while flow instrumentation sales increased 0.8% to $52,338,000. Operating earnings for the first half of 2024 were $78,090,000, or 18.9% of sales, compared to $54,548,000, or 16.3% of sales, in the prior year period. Net earnings for the first six months of 2024 were $62,187,000, or $2.11 per diluted share, compared to $41,908,000, or $1.42 per diluted share, in the same period of 2023.
Geographical Breakdown
Badger Meter's primary geographic market is North America, particularly the United States, which accounted for the majority of its sales in the second quarter of 2024. International sales, which represented approximately 10% of total revenue, were driven by growth in Europe, the Middle East, and other regions.Outlook and Guidance
Looking ahead, Badger Meter expects to deliver high single-digit sales growth in the back half of 2024, taking into account the strong year-over-year comparisons and the impact of the second quarter's elevated backlog conversion. The company remains optimistic about the favorable macro drivers supporting the water industry's growth fundamentals, including significant infrastructure investment needs, aging workforce, increasing regulations, and a focus on climate change and sustainability.Badger Meter's balance sheet and cash flow generation provide significant flexibility and capacity to invest in both organic and strategic inorganic growth opportunities, while also supporting an attractive dividend for shareholders. The company's innovative solutions and strong customer relationships position it well to capitalize on the industry's evolving needs and continue its track record of profitable growth.