Badger Meter Reports Record Third Quarter 2022 Financial Results

Badger Meter, Inc. (NYSE: BMI) today reported results for the third quarter ended September 30, 2022.

Third Quarter 2022 Highlights

  • Record total sales of $148.0 million, 15% higher than the prior year’s $128.7 million. Excluding the unfavorable impact of the stronger US dollar, sales increased nearly 17%
  • Operating profit increased 23% with operating profit margins expanding 100 basis points year-over-year
  • Diluted earnings per share (EPS) increased 13% to $0.61, up from $0.54 in the comparable prior year period
  • Strong cash flow with $23.8 million in net cash provided by operations
  • Announced the 30th consecutive increase in the annual dividend rate

“Badger Meter delivered another quarter of strong financial results reflecting our innovative product and software offerings, differentiated execution and durable underlying demand for smart water solutions in our served markets. In the third quarter, we achieved 15% sales growth, extending our track record to four consecutive quarters of double-digit organic revenue performance. We also delivered record EPS of $0.61, an increase of 13% year-over-year. Operating margin performance remains solid despite ongoing supply chain and inflation challenges. The resilient order pace and bid funnel bodes well for continued sales and earnings performance,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “I want to thank the global Badger Meter team for continuing to adeptly navigate the dynamic environment in support of our customers.”

Third Quarter Operating Results

Utility water sales growth was outstanding, increasing 17% year-over-year and the fourth consecutive quarter of mid-teens sales growth. Consistent with past quarters, the sales increase was broad-based and most notable in E-Series® Ultrasonic meters, ORION® Cellular endpoints and BEACON® SaaS revenue. Backlog expanded further as market demand remained strong and more than offset operational productivity that yielded higher production output.

Sales of flow instrumentation products increased 5% year-over-year, the result of solid order demand across the water-focused end market applications, partially offset by component constraints that limited manufacturing output.

Operating earnings increased 23% year-over-year, with operating profit margins expanding 100 basis points to 16.1% in the third quarter of 2022 up from the prior year’s 15.1%. Gross margin as a percent of sales was 38.9%, in the middle of the Company’s normalized range, yet as anticipated, below the prior year’s 39.8%. The cumulative impact of input cost inflation across various electronic and other components, logistics and other categories were partially offset by higher sales volumes and ongoing pricing gains.

Selling, engineering and administration (SEA) expenses in the third quarter of 2022 were $33.7 million, or 22.7% as a percent of sales, compared to $31.7 million, and 24.7% in the comparable prior year quarter. The approximately $2.0 million increase in SEA expenses was due to higher personnel costs, R&D investments and travel, while the year-over-year improvement in SEA expense leverage is the result of effective spending controls and higher sales.

The tax rate for the third quarter of 2022 was 25.1%, higher than the prior year’s 18.3% which included a discrete favorable income tax benefit related to equity compensation transactions. As a result of the above, EPS increased 13% year-over-year, to $0.61 compared to $0.54 in the comparable prior year period.

Outlook

Bockhorst added, “The demand environment remains robust as customers continue to adopt our digital smart water solutions that deliver efficiency, resiliency, and sustainability to address the variety of underlying secular challenges the water industry faces. Our success in selling our broad ‘choice-matters’ water quality and quantity offerings continue to illustrate the benefits of our differentiated, flexible and comprehensive smart water AMI solutions.

“This commercial excellence, combined with nimble execution have demonstrated our ability to navigate persistent macro challenges and drive outperformance. Our strong order pace and bid funnel, combined with the value-based pricing actions we have taken throughout this unprecedented inflationary environment, are supportive of revenue growth and margin expansion throughout economic cycles.

“Robust cash flow and ample credit availability provide us with the financial flexibility to execute our capital allocation priorities, including the recent increase in the annual dividend, and continued investments in growth.”

Bockhorst concluded, “Badger Meter is well-positioned to continue its track record of profitable growth enhanced by our innovative offerings, end market resiliency and differentiated execution. We believe this combination, along with our durable business model aligned with our vision to preserve and protect the world’s most precious resource, will generate positive shareholder value over the long term.”

Conference Call and Webcast Information

Badger Meter management will hold a conference call to discuss the Company’s third quarter 2022 results today, Wednesday October 19, 2022 at 10:00 AM Central/11:00 AM Eastern time. The webcast and related presentation can be accessed via the Investor section of our website. Participants can also register to take part in the call using this online registration link: https://www.netroadshow.com/events/login?show=ad683104&confId=42665. The webcast will be archived on the Company’s website until its next earnings release.

Safe Harbor Statement

Certain statements contained in this news release, as well as other information provided from time to time by Badger Meter, Inc. (the “Company”) or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those statements. Potential factors that could affect such forward-looking statements include the possible negative impacts of COVID-19 on the global economy, the Company’s operations and those of our customers and suppliers. In addition, the Company’s results are subject to general economic conditions, variation in demand from customers, continued market acceptance of new products, the successful integration of acquisitions, competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, tax reform and foreign currency risk. See the Company’s Form 10-K filed with the Securities and Exchange Commission for further information regarding risk factors, which are incorporated herein by reference. Badger Meter disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

About Badger Meter

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters. These offerings provide our customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious resource. For more information, visit www.badgermeter.com.

BADGER METER, INC.
       
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and earnings per share data)
       
       

Three Months Ended September 30,

 

Nine Months Ended September 30,

2022

 

2021

 

2022

 

2021

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

       
Net sales

$

148,009

 

 

$

128,738

 

$

418,244

 

 

$

369,449

       
Cost of sales

 

90,487

 

 

 

77,554

 

 

255,239

 

 

 

218,801

       
Gross margin

 

57,522

 

 

 

51,184

 

 

163,005

 

 

 

150,648

       
Selling, engineering and administration

 

33,651

 

 

 

31,744

 

 

98,184

 

 

 

94,786

       
Operating earnings

 

23,871

 

 

 

19,440

 

 

64,821

 

 

 

55,862

       
Interest (income) expense, net

 

(108

)

 

 

14

 

 

(86

)

 

 

28

Other pension and postretirement costs

 

32

 

 

 

30

 

 

97

 

 

 

90

       
Earnings before income taxes

 

23,947

 

 

 

19,396

 

 

64,810

 

 

 

55,744

       
Provision for income taxes

 

6,014

 

 

 

3,541

 

 

15,853

 

 

 

12,136

       
Net earnings

$

17,933

 

 

$

15,855

 

$

48,957

 

 

$

43,608

       
Earnings per share:      
       
Basic

$

0.61

 

 

$

0.54

 

$

1.68

 

 

$

1.50

       
Diluted

$

0.61

 

 

$

0.54

 

$

1.67

 

 

$

1.49

       
Shares used in computation of earnings per share:      
       
Basic

 

29,215,982

 

 

 

29,157,628

 

 

29,211,488

 

 

 

29,124,491

       
Diluted

 

29,372,464

 

 

 

29,341,832

 

 

29,363,097

 

 

 

29,324,534

BADGER METER, INC.
   
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
   
   

Assets

September 30,

 

December 31,

2022

 

2021

(Unaudited)  
   
Cash and cash equivalents

$

114,787

 

$

87,174

Receivables

 

83,491

 

 

65,866

Inventories

 

113,608

 

 

99,611

Other current assets

 

13,742

 

 

8,709

Total current assets

 

325,628

 

 

261,360

   
Net property, plant and equipment

 

72,369

 

 

78,050

Intangible assets, at cost less accumulated amortization

 

54,314

 

 

64,176

Other long-term assets

 

22,962

 

 

22,919

Goodwill

 

99,100

 

 

104,313

Total assets

$

574,373

 

$

530,818

   
   

Liabilities and Shareholders' Equity

 
   
Payables

$

65,462

 

$

41,859

Accrued compensation and employee benefits

 

17,734

 

 

20,644

Other current liabilities

 

18,589

 

 

19,643

Total current liabilities

 

101,785

 

 

82,146

   
Deferred income taxes

 

4,575

 

 

5,385

Long-term employee benefits and other

 

45,154

 

 

40,217

Shareholders' equity

 

422,859

 

 

403,070

Total liabilities and shareholders' equity

$

574,373

 

$

530,818

BADGER METER, INC.
     
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
     
     

Three Months Ended September 30,

 

Nine Months Ended September 30,

2022

 

2021

 

2022

 

2021

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Operating activities:      
Net earnings

$

17,933

 

 

$

15,855

 

 

$

48,957

 

 

$

43,608

 

     
Adjustments to reconcile net earnings to net cash provided by operations:      
     
Depreciation

 

2,791

 

 

 

2,756

 

 

 

8,413

 

 

 

8,619

 

Amortization

 

3,915

 

 

 

4,270

 

 

 

11,748

 

 

 

12,358

 

Deferred income taxes

 

8

 

 

 

(34

)

 

 

24

 

 

 

11

 

Noncurrent employee benefits

 

(74

)

 

 

72

 

 

 

(138

)

 

 

232

 

Stock-based compensation expense

 

704

 

 

 

590

 

 

 

2,170

 

 

 

1,537

 

Changes in:      
Receivables

 

(6,832

)

 

 

(10,607

)

 

 

(18,860

)

 

 

(8,985

)

Inventories

 

(3,184

)

 

 

(873

)

 

 

(16,207

)

 

 

(5,685

)

Payables

 

3,742

 

 

 

2,054

 

 

 

23,870

 

 

 

7,420

 

Prepaid expenses and other current assets

 

(1,252

)

 

 

(10,389

)

 

 

(9,405

)

 

 

(11,648

)

Other liabilities

 

6,040

 

 

 

11,670

 

 

 

2,171

 

 

 

12,967

 

Total adjustments

 

5,858

 

 

 

(491

)

 

 

3,786

 

 

 

16,826

 

Net cash provided by operations

 

23,791

 

 

 

15,364

 

 

 

52,743

 

 

 

60,434

 

     
Investing activities:      
Property, plant and equipment expenditures

 

(1,918

)

 

 

(1,465

)

 

 

(4,690

)

 

 

(5,843

)

Proceeds from company owned life insurance plans

 

-

 

 

 

596

 

 

 

-

 

 

 

596

 

Acquisitions, net of cash acquired

 

-

 

 

 

(767

)

 

 

-

 

 

 

(45,273

)

Net cash used for investing activities

 

(1,918

)

 

 

(1,636

)

 

 

(4,690

)

 

 

(50,520

)

     
Financing activities:      
Dividends paid

 

(6,580

)

 

 

(5,837

)

 

 

(18,292

)

 

 

(16,318

)

Proceeds from exercise of stock options

 

61

 

 

 

1,684

 

 

 

61

 

 

 

2,037

 

Repurchase of treasury stock

 

-

 

 

 

-

 

 

 

(427

)

 

 

(460

)

Issuance of treasury stock

 

-

 

 

 

-

 

 

 

-

 

 

 

72

 

Net cash used for financing activities

 

(6,519

)

 

 

(4,153

)

 

 

(18,658

)

 

 

(14,669

)

Effect of foreign exchange rates on cash

 

(777

)

 

 

104

 

 

 

(1,782

)

 

 

(480

)

     
Increase (decrease) in cash and cash equivalents

 

14,577

 

 

 

9,679

 

 

 

27,613

 

 

 

(5,235

)

Cash and cash equivalents - beginning of period

 

100,210

 

 

 

57,359

 

 

 

87,174

 

 

 

72,273

 

     
Cash and cash equivalents - end of period

$

114,787

 

 

$

67,038

 

 

$

114,787

 

 

$

67,038

 

 

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