Badger Meter, Inc. Financial Report Summary and Analysis

Overview of Financial Performance

Badger Meter, Inc. Financial Highlights

For the three months ended September 30, 2024:

Metric	Q3 2024	Q3 2023	Change
Net Sales	$208.4 million	$186.2 million	+11.9%
Operating Earnings	$40.6 million (19.5% of sales)	$31.4 million (16.9% of sales)	+29.3%
Net Earnings	$32.0 million ($1.08 per diluted share)	$26.0 million ($0.88 per diluted share)	+23.1%

For the nine months ended September 30, 2024:

Metric	9M 2024	9M 2023	Change
Net Sales	$621.4 million	$521.2 million	+19.2%
Operating Earnings	$118.7 million (19.1% of sales)	$86.0 million (16.5% of sales)	+38.0%
Net Earnings	$94.2 million ($3.19 per diluted share)	$67.9 million ($2.30 per diluted share)	+38.7%

Revenue and Profit Trends

Badger Meter’s net sales grew significantly in both the third quarter and first nine months of 2024 compared to the prior year periods. This was driven by increased adoption of the company’s smart water technologies, particularly advanced metering infrastructure (AMI) solutions. Sales into the utility water market increased 13.8% in Q3 2024 and 22.5% in the first nine months of 2024.

The company’s operating earnings and net earnings also improved substantially, with operating margins expanding to 19.5% in Q3 2024 and 19.1% in the first nine months of 2024. This was due to favorable sales mix, including strong AMI and software-related sales, as well as ongoing price/cost benefits and effective cost management.

Strengths and Weaknesses

Strengths:

• Leading provider of smart water solutions, including advanced metering, water quality monitoring, and data analytics
• Strong market position in the growing utility water market, with over one-third of U.S. water utility connections using Badger Meter’s AMI technology
• Diversified product portfolio spanning hardware, software, and services
• Improving profitability through favorable sales mix and operational efficiency

Weaknesses:

• Reliance on infrastructure investment and adoption of new technologies by water utilities, which can be uneven
• Exposure to macroeconomic factors and supply chain challenges that could impact costs and margins
• Limited geographic diversification, with the majority of sales in the U.S. market

Outlook and Future Prospects

Badger Meter is well-positioned to benefit from the ongoing transition to smart water technologies and the increasing demand for data-driven water management solutions. The company’s comprehensive portfolio of hardware, software, and services is aligned with key industry trends, including the conversion to AMI, the adoption of ultrasonic metering, and the need for more frequent and diverse water data.

The company’s recent acquisitions of Syrinix and the Telog/Unity assets further strengthen its capabilities in high-frequency pressure monitoring, leak detection, and remote water monitoring. These additions complement Badger Meter’s existing smart water offerings and are expected to drive continued growth and innovation.

Looking ahead, the company’s focus on strategic mergers and acquisitions, international expansion, and diversifying its revenue streams beyond just hardware sales should support its long-term growth and profitability. However, the company will need to navigate potential macroeconomic headwinds and regulatory changes, such as the SEC’s proposed climate-related disclosure rules, which could impact its operations and financial reporting.

Overall, Badger Meter’s strong market position, innovative product portfolio, and improving financial performance position the company well to capitalize on the growing demand for smart water solutions and contribute to the sustainable management of this critical resource.