Badger Meter Inc (BMI)

Badger Meter, Inc. is a leading innovator, manufacturer and marketer of products incorporating flow measurement, quality, control and other system solutions serving markets worldwide, with approximately 95% of net sales derived from water-related applications. The Company's offerings, marketed as BlueEdge, represent a suite of tailorable solutions that connect water management technology, software, and support services to deliver insights enabling the proactive management of water across the water cycle. The largest geographic market in which the Company operates is North America, primarily the United States. The industry continues to undergo a conversion from manually read water meters to meters with radio technology, and for AMR systems to be upgraded to digital AMI solutions. The Company estimates that approximately 40% of water meters installed in the United States have been converted to AMI systems. There are more than 50,000 water utilities in the United States.

Competitors in the utility water product line vary based on specific hardware, communication and/or software elements, and organizations such as Sensus (Xylem Inc.), Neptune (Roper Technologies, Inc.), Hach (Veralto Corp.), Itron Inc., Aclara (Hubbell Inc.), Mueller Water Products Inc., Kamstrup and others have select elements of competitive hardware, communication and/or software solutions. A number of the Company's competitors in certain markets have greater financial resources than the Company. The Company, however, believes it currently provides the leading technologies that span the full water cycle. As a result of significant research and development activities, along with first-mover technology advancement, the Company enjoys favorable patent positions and trade secret protections for several of its technologies, products and processes. There are many competitors in the flow instrumentation markets, including Emerson Electric Company, Krohne Messtechnik GmbH, Endress+Hauser AG, Yokogawa Electric Corporation and Cameron International. No single customer accounts for more than 10% of the Company's sales.

The Company generates revenue through two product lines: Utility Water, which includes sales of meters, water quality and sewer monitoring sensors and other hardware, communication, and software and related technologies to water utilities, and Flow Instrumentation, which includes sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers. The Company's net sales and corresponding net earnings depend on unit volume and product mix, with the Company generally earning higher average selling prices and margins on meters coupled with radio technology, software, water quality monitoring, sewer line and lift station monitoring and on ultrasonic compared to mechanical meters. The Company's BEACON Software as a Service (SaaS) is a secure, cloud-hosted software suite that includes customizable dashboards and established alerts for specific conditions, and the Company's revenue from SaaS has increased significantly and is margin accretive.

The Utility Water product line represented approximately 89% of Net Sales in 2025. Utility water smart metering solutions are comprised of water meters along with the connected radio endpoints and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues, enabling operating efficiencies and engaging with their end consumers. This product line further comprises other instruments and sensors used in the water distribution and collection system to ensure the safe and efficient treatment, delivery and return of water, including sensors used to detect leaks, monitor various water quality parameters throughout the distribution system and treatment process, and monitor, detect and prevent sewer overflow spills. The ORION family of endpoints offers water utilities a choice of industry-leading options for communicating meter reading and event data, with ORION Cellular endpoints powering the Network as a Service (NaaS) approach to AMI. The Company also provides various other hardware, instruments and sensors, and related software, to enhance the scope and breadth of connected data valuable to a water utility's operation, including water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH, chlorine, nitrates and approximately 40 others, high frequency pressure and leak detection sensors that provide real-time alarms and event location triangulation, and sewer and lift station monitoring sensors to measure sewer and hydrogen sulfide levels.

The Flow Instrumentation product line represented approximately 11% of Net Sales in 2025. This product line primarily serves water applications throughout the broader industrial market, with both standard and customized solutions, and includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids, including water, air, steam, and other liquids and gases. These products are used in a variety of industries and applications, with the Company's primary market focus being water/wastewater, heating, ventilating and air conditioning (HVAC) and corporate sustainability. Flow instrumentation products are generally sold through manufacturers' representatives and original equipment manufacturers as the primary flow measurement device within a product or system.

Effective January 30, 2025, the Company acquired 100% of the outstanding stock of Hadronex, Inc, a Delaware Corporation d/b/a SmartCover Systems (SmartCover), headquartered in Escondido, California, for total purchase consideration net of cash acquired of $184.0 million ¹, following a net working capital adjustment of $0.9 million ². The allocation of the purchase price at December 31, 2025 included $6.6 million ³ of receivables, $4.5 million ⁴ of inventories, $4.8 million ⁵ of other assets, $59.6 million ⁶ of developed technology intangible assets, $26.0 million ⁷ of other intangible assets and $118.3 million ⁸ of goodwill that is not deductible for tax purposes. The Company also assumed $1.6 million ⁹ of payables, $18.3 million ¹⁰ of net deferred income tax liabilities, $12.2 million ¹¹ of deferred revenue and $3.7 million ¹² of other liabilities. Revenue associated with SmartCover for the eleven months ended December 31, 2025 was $39.7 million ¹³. In November 2025, the Board authorized the repurchase of up to $75 million ¹⁴ of the Company's Common Stock through November 2028, superseding the previous share repurchase authorization of 200,000 shares ¹⁵. During the quarter ended December 31, 2025, the Company repurchased 82,448 ¹⁶ shares at an average price of $181.50 ¹⁷ and $182.15 ¹⁸ per share in October and November, respectively. The Company had $154.7 million ¹⁹ of unused credit lines available at December 31, 2025.

Net sales in 2025 increased $90.1 million ²⁰, or 10.9% ²¹, to $916.7 million ²² from $826.6 million ²³ in 2024. Operating earnings in 2025 were $183.4 million ²⁴, or 20.0% ²⁵ of sales, compared to $157.9 million ²⁶, or 19.1% ²⁷ of sales, in 2024. Net earnings were $141.6 million ²⁸ in 2025 compared to $124.9 million ²⁹ in 2024. On a diluted basis, earnings per share were $4.79 ³⁰ in 2025 compared to $4.23 ³¹ in 2024. Cash provided by operations in 2025 was $183.7 million ³² compared to $155.0 million ³³ in 2024.

Capital expenditures for fiscal 2026 are expected to be in the $15.0-19.0 million ³⁴ range, but could vary depending on timing of projects, growth opportunities and the amount of assets purchased.

The Company believes it is well positioned to meet the continuing conversion trends to AMI with its comprehensive radio and software solutions. The Company estimates that approximately 40% ³⁵ of water meters installed in the United States have been converted to AMI systems, and there are more than 50,000 ³⁶ water utilities in the United States. The Company has made inroads into select regional markets outside the U.S. such as the Middle East, U.K. and others with its BlueEdge offering. The Company's strong relationships with telecommunication providers such as AT&T and Verizon (among others) allows it to stay abreast of emerging cellular technology changes to provide the premier infrastructure-free AMI solution. The Company also seeks opportunities for additional revenue enhancement through strategic mergers and acquisitions.

The Company's revenue from SaaS has increased significantly and is margin accretive. Gross margin as a percent of sales increased from 39.8% ³⁷ in 2024 to 41.7% ³⁸ in 2025, driven by favorable product mix, including growth in ultrasonic meters, ORION Cellular radios, water quality products and SmartCover. The Company has enacted certain price increases to offset tariff costs that it is not able to mitigate.

The Company had $154.7 million ³⁹ of unused credit lines available at December 31, 2025. The Company had no borrowings as of the end of 2025 or 2024. At the end of 2025, the Company was in a net cash position of $226.0 million ⁴⁰. The Company's financial condition remains strong. The credit agreement includes a $150.0 million ⁴¹ multi-currency line of credit that supports commercial paper (up to $100.0 million ⁴²).

Research and development expenditures were $21.6 million ⁴³ in 2025, $19.2 million ⁴⁴ in 2024 and $19.0 million ⁴⁵ in 2023. Capital expenditures were $14.0 million ⁴⁶, $12.8 million ⁴⁷ and $12.0 million ⁴⁸ in fiscal 2025, 2024 and 2023, respectively. Dividends paid were $43.5 million ⁴⁹ in 2025, $35.8 million ⁵⁰ in 2024 and $29.1 million ⁵¹ in 2023. Cash dividends per share were $1.48 ⁵² in 2025, $1.22 ⁵³ in 2024 and $0.99 ⁵⁴ in 2023.

In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries, resulting in reciprocal tariffs and other actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. The Company evaluates the impact of global tariffs and trade restrictions on its business and operations and leverages its manufacturing footprint, when possible, through the use of the USMCA trade agreement to minimize impact. Additionally, the Company has enacted certain price increases to offset tariff costs that it is not able to mitigate. The Company relies on single suppliers for certain brass castings, resins and electronic subassemblies, and the loss of such suppliers could temporarily disrupt operations in the short term. The Company's operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and a widespread outbreak of an illness or other health issue.

The Company's regrettable turnover decreased to 5.7% ⁵⁵ in 2025, compared to 6.6% ⁵⁶ in 2024, and 8.3% ⁵⁷ in 2023. The Company and its subsidiaries employed 2,477 ⁵⁸ persons at December 31, 2025. There are 108 ⁵⁹ employees covered by a collective bargaining agreement with District 10 of the International Association of Machinists, which expires on October 31, 2028 ⁶⁰.

Management's message emphasizes that the Company is a leading innovator with more than a century of water technology innovation, and that the Company's BlueEdge tailorable smart water solutions provide actionable information through data analytics derived from an interconnected and interoperable network of sensors and devices. Management highlights that the Company is well positioned to benefit from the adoption of smart water solutions, and that the Company's strong relationships with telecommunication providers such as AT&T and Verizon allows it to stay abreast of emerging cellular technology changes. Management notes that the Company has been at the forefront of innovation across measurement hardware and communication and software technologies, and that revenue from SaaS has increased significantly and is margin accretive. Management also states that the Company seeks opportunities for additional revenue enhancement through strategic mergers and acquisitions, and that capital expenditures for fiscal 2026 are expected to be in the $15.0-19.0 million ⁶³ range.

Net sales were $916.7 million ⁶⁴ in 2025, compared to $826.6 million ⁶⁵ in 2024 and $703.6 million ⁶⁶ in 2023. Net earnings were $141.6 million ⁶⁷ in 2025, $124.9 million ⁶⁸ in 2024, and $92.6 million ⁶⁹ in 2023. Diluted earnings per share were $4.79 ⁷⁰ in 2025, $4.23 ⁷¹ in 2024, and $3.14 ⁷² in 2023. Gross margin was $382.1 million ⁷³ or 41.7% ⁷⁴ of sales in 2025, compared to $329.2 million ⁷⁵ or 39.8% ⁷⁶ of sales in 2024 and $276.4 million ⁷⁷ or 39.3% ⁷⁸ of sales in 2023. Operating earnings were $183.4 million ⁷⁹ or 20.0% ⁸⁰ of sales in 2025, compared to $157.9 million ⁸¹ or 19.1% ⁸² of sales in 2024 and $118.0 million ⁸³ or 16.8% ⁸⁴ of sales in 2023. Cash provided by operations was $183.7 million ⁸⁵ in 2025, $155.0 million ⁸⁶ in 2024, and $110.1 million ⁸⁷ in 2023. The Company had cash and cash equivalents of $226.0 million ⁸⁸ at December 31, 2025, compared to $295.3 million ⁸⁹ at December 31, 2024. The effective tax rate was 24.9% ⁹⁰ in 2025, 25.0% ⁹¹ in 2024, and 24.1% ⁹² in 2023. Utility water net sales were $816.1 million ⁹³ in 2025, an increase of 12.5% ⁹⁴ over the prior year's $725.5 million ⁹⁵. Flow instrumentation net sales were $100.6 million ⁹⁶ in 2025, a decrease of 0.5% ⁹⁷ from the prior year's $101.1 million ⁹⁸.

The Company relies on single suppliers for certain brass castings, resins and electronic subassemblies in several of its product lines, and the loss of such suppliers could temporarily disrupt operations in the short term. The Company is affected by the availability and prices for raw materials and component parts, including purchased castings made of metal or alloys such as brass, which uses copper as its main component, aluminum, stainless steel, cast iron and bismuth, plastic resins, microprocessors and other electronic subassemblies. The imposition of significant tariffs or other trade barriers by the United States or other foreign nations may harm the Company's sales, costs and results of operations, and increased tariffs on imports into the United States, including those from China, Mexico, Canada and Europe could harm sales and results of operations. The Company's products carry warranties that generally range from one to twenty years, and the reserve for product warranties was $21.6 million ⁶¹ at December 31, 2025 and $16.7 million ⁶² at December 31, 2024. The municipal water industry is continuing to see the adoption of static water meters, which has lower barriers to entry than mechanical metering that could affect the competitive landscape in North America.