Badger Meter (BMI) 18 Apr 182018 Q1 Earnings call transcript

Company Profile

Participants

Richard Meeusen	Chairman, President & CEO
Richard Johnson	SVP, Finance, CFO & Treasurer
Kenneth Bockhorst	SVP & COO
Nathan Jones	Stifel, Nicolaus & Company
Richard Verdi	Atwater Thornton
Tate Sullivan	Sidoti & Company
Ryan Connors	Boenning and Scattergood
Brian Rafn	Morgan Dempsey Capital Management
Richard Eastman	Robert W. Baird & Co.
Robert Chernow	RBC
Jose Garza	G. Research

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2018 Badger Meter Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Rich Meeusen, Chairman, President and Chief Executive Officer.

begin. may You

Richard Meeusen

quarter Good First Brian. us. and to our welcome after Thank Conference morning, Call. Meter's first released we Quarter market joining Thank Badger the you, closed, everybody, results. you Yesterday, for

see the caused backlog, our to We platform any sales helped for be through increases all-time initiatives quarter, that D-Flow order delays as the well that sales the confidence. COO, their are BEACON our by enlace remain our and acquisitions will sales of about recognized. pleased our January an due spilling the talk by record quarter results hit of Moreover, about did future as our delays of not that the order support our work product stemming do to they other said, from optimistic benefits year Carolina first lower X in That our into ahead. as part quarter. and volumes Bockhorst, quarters price time received not bottom way line while Meter. said, could with be order of That in expectations, some that, Ken meet will quarter, new in the we shipped second developments

to with CFO, our over Senior Rick? So to numbers. turn VP go I'm brief those to comments, going and call the Rick Johnson, through the

Richard Johnson

Thanks, Rich.

these release or statements a that differ results could that see list in of associated yesterday's Certain uncertainties provided contained we employees time such materially a information contain of number earnings to and actual the statements on for risks involve presentation as Please make that call from identify stating will the factors. or usual, in by those statements. I'll statements begin risk today. that to forward-looking its time by and As forward-looking expressions words statements as may from our company other forward-looking this well cause

Let some reiterate me guidelines. of our

terms general line example, specific reasons, sales, in other components of cost disclose not of profitability comment than nor we do do on competitive for product we For copper.

not of interest specific does earnings. our not believe More We importantly, the long-term shareholders. specific on future providing guidance of practice continue we guidance our serve

represented Now year. solutions, on last due The Middle after increase sales higher East $XXX or last to sales first of year. during in sales quarter me. Sales compared quarter X, of increases meters sales quarter residential quarter. volumes $XXX.X in of to quarter BEACON higher the million compared X.X% quarter in sales radios $XX.X increased the These commercial increased first in first the XX.X% first XXXX. $X of from to for by to managed first water XX.X% revenues than pricing what discuss $X.X X.X% or the excuse first -- million same January was Municipal let's and service the this million however, higher million and in positive offset due water products happened $XX.X the Municipal to million of million lower the somewhat last period of year. the were solution to to impact, ordered and

as As attribute year. to we of Rich timing to slower a in volumes decrease at the beginning orders well mentioned, the of the domestic lower start as

Badge being price this Arizona of Scottsdale, XX, completed at products to yet impact first the somewhat $XX.X That regions. sales March The the period a increases. the was weather in Racine, increased million products margin orders, were sold, by X in the location. period role the same million same to or XXXX. million during sales the reasons last or first on of and for the in from million the X% first Flow the year, timing of brass particularly those in for of million XX.X% Scottsdale played XX.X% engineering X.X% expenses is associated increase These year. months We higher costs believe we $XX.X of northern represented $XX.X to and due last price compared the expenses with to and also made facility. Instrumentation of and $X.X we Selling, year. increases that XXXX first industrial the compared margins distribution January year normal a Carolina of markets quarter all project as shutdown namely a The Gross of are increase quarter are had well lower Meter's XX% and increased to quarter sales primary significant additional expenses Wisconsin this volumes impact million in Helping D-Flow the on year. sold channels in the lower to of products of gas rebound X of Meter. Also products and completed the the the continuing inflation strengthening last now percent first see margin. in for our was the margin the contributing of first oil for our administration X the have with from serve. as increases we The acquisitions full markets were months although of $XX.X quarter $X.X to as last associated after XX%

XX% taxes all went before of to was a the due comment Ultrasonic compared taxes quarter Just the rate, to in was The the income D-Flow are provision to the will first E-series of on a quarter focused a for on developing the reminder XX.X% that decrease acquisition the Almost federal but next-generation as the XX%. this moment. reason income not expenses year. their XX.X% of earnings primary their currently book was expertise, in Ken percent lower for business last meters. of which D-Flow of first from the in tax at

some expense. or $X.XX the same XX compared XXXX. diluted amounts of Net to discrete to $X.X per earnings X for or months share contains per tax also million then the quarter in diluted were nominal credits share This million $X.XX March $X.X period ended for

assets Chief the will Ken deciding onetime company's will be less they to the move million year. lower from to point, over be year, Operating That that, Last Vice on, generated be number not the million this this terminating sheet. are remind pretax. lower when declined by a again frozen Cash plan of at until the to December part to will XX operations Senior saw it distributed, finish than to optimistic for what I year That inventories will million reminder call known that recur until the accounts Badger exceed noncash Our a that is decisions we for amount, there a equity along year-end Also, and the of the the $XX.X earnings, will amounts exact Officer. first from how everyone wish operations that. significantly million. employees me that of transaction in Again, now. was their don't did for are quarter, $X on the amount charge turn the our drop to want and and now which charge, of estimated be due a this of year year-end months Bockhorst, as new year. I cash already President at Ken? the them, which Meter's balance approximately we be believe provided of X pension onetime amount $X.X with balance be process last they sheet $XX.X amount we in end receive first fact, which are not Before included we will cash that from making will With remains this At in taking we solid.

Kenneth Bockhorst

Rick. Yes, thanks,

much said, not as sluggish. we quarter, liked, as able the positive. would the contributing the order got bottom second due the to rates do quarter uptick to were in we and timing, about So quarter. optimistic a in the we results for the off as start into disappointing reasons. following an which slow were But remain have to the in in That did rate we full year March, then February increase convert and for line We for January see XXXX incoming in another the the order revenue to was in

project in. Cellular, during which with that will quarter meters we technology, costs. some quarters. for will for the will of system are are rate increase in of us rates manufacturing the March reduce Instrumentation venture the smart the order us which joint continued on utilizes for strength product and which a and Upinar, between In renewed shipments ready X, will a for XXXX, will our in currently we bid year above product E-series announced short, cost distributor year-end. we are rate us the orders. quarter, second improve can't as for offering allow D-Flow Flow Innovative initiatives water will residential daily Solutions, as our April, significant will and into ship first fourth which a D-Flow These due we use, our at Balkan E-series development participate additional monitoring the increase communication features into be increased Moreover, a number with our cellular impactful Also, on. also to large commercial third new April which optimism. which product in residential have the quarter to projects gives we And also our for will to meters, available I Increased offerings our second incorporate into East, average technology, currently Metering Cat-M next-generation the which In our underway. year, business-to-business which next acquisition acquisition. we release version that backlog A well FIN, technology went the will First, in allow we as noted reduce and previously. our the ultrasonic be order Middle And D-Flow ORION increase in the costs of halfway chips position. goes On our chips, provide

look of distributors, Meter sales distributor very be continue partners our are independent complete, Badger company-owned our acquisition will with and a and build and to significant targets our them our success continued distributor strategy. our and Meter. increase larger to continue to strategy complete pleased that have our to process our portion product global technology We will for now channel footprint. Badger forward good out identify our through to With who portfolio remaining will and model We add are we rollout

the I'm about I short Meter, term, that, be was the any for Badger questions. While quarter, Rick, to to and With long am the the will of and take team. of optimistic a be Rich glad both it happy part future very tough and I

Operator

question Nathan Stifel. first of our come And line Instructions]. from [Operator the will Jones with

Nathan Jones

Let's margin items number higher with that main out those impacted any some margins? you of buckets was brass quarter volume. start gross parse bit what the in the you pressure there margins A guys way that there. impact facility from in called of each lower Is closing on the detail can little out more in of the the on Scottsdale, of cost, a

Richard Johnson

those Well, this this basis were Copper this it. is our capacity points. on points rough of XXX of was downward. And we're closure points. looking Rick. a utilization about Scottsdale is how points. hundred couple and was down at basis another The The the of probably The margins basis impact XXX volumes a XXX is basis about lower about is cut, really, probably

somewhat rough then that there the that -- out. main things cut are about increases coming thousand in basis the just on So that's also, little offsetting jump a that's the margin. about the XXX XXX. ones by There's back probably those points. And That's price but were

Nathan Jones

talked basis you also those were X, your in from think -- that's got XXX ship helpful. but January of you about there, you realizing at. No, then prices in very I to backlog that about on points rates that still Could price December comment

quarter increases, XXX realizing going probably second to points? of go basis a quarter XXX Does full price XXX does we're get go to that points? those and Now it that basis a

Richard Meeusen

the Rich. XXX, everything fully hoping going through it about but I'm pick to gets to does up don't it is go XXX I basis that our think we're integrated This mark. closer when reaches points log. XXX order

Nathan Jones

show full until it run to hit up take XQ the rate? in that does XQ? Or Does

Richard Johnson

from the now. second to But I in prices. as lot longer-term it will came impact yet quarter in of it last business quarter, show a with honest the be for be year, in will came ordered quantified under of some The first don't in, up orders you, have Yes, quarter full just More you second in start that new right the the QX. QX. what's there's lagging

Richard Meeusen

without But anymore the we any a escalators them. more don't year in go contracts that do than price

year, of really, everything's is So of by would the vast majority there end by second say quarter. in but there, the the of the the I end in it

Operator

the with from RWB. Richard come will question line next Eastman our And of

Richard Eastman

things I of couple wanted to Just run a by you.

year In would QX year D-Flow a what in contribution ago? Carolina and terms the third-party versus maybe revenue sales, of be acquisition

Richard Johnson

I Carolina over that's million, Meter, $X.X sign. are a $X was People probably $X think to good probably million yes, $XXX,XXX. their it's D-Flow heads, -- nodding million.

So about $XXX,XXX.

kind So we're getting of that impact.

I for another the $X probably year, million revenue the $X up BEACON there. didn't in excess sales of year's had that that's in think first over some first the we right quarter And then and have quarter. is Middle million of last last we East

Richard Eastman

through maybe could okay. speak me -- IMS, piece be you just the Okay, line to revenue let you the there? the line? versus that well, annual would this, revenue And what will flow third-party ask margin The

Richard Johnson

million -- talking of Additional you're couple dollars a annually. Probably incremental revenue?

Richard Eastman

it. That's

in a little the color a maybe bit then did of commercial grow And quarter? meter the okay. Okay, just for piece could around, just you second, provide

Richard Johnson

year there was all of large one customer particular the order last that decrease. The down accounted But there significantly, a No. was in for X/X. about almost from probably commercial

Richard Eastman

okay. about did continuing absorption, capacity meter just okay, the meters curious, and I under your a growth we're mean, the -- ORION you the or then I'm and product the your decline impacted you manufacturing not in in production curious, facility. in capacity And I'm the So from talking business at look has disk But cleaned absorption impact E-series E-series that a of about, versus the absorb again, impression margin little the I'm how grow. the meter's look you is under rates, to meters strategy the E-series meters, the comment compare given that just that the and I'm Well, on and does and at the capacity, Milwaukee my case your disk perspective, curious, Cellular side? up the when under the growth there. gross E-series? product

Richard Meeusen

mechanical cannibalizing mechanical I E-series, we how meters -- in much in pretty Mechanical both, them The from our utilization? of are well, also the impacting some electronic our of the -- partially mean, meters, that's they're got made with no growth here mean do are there's You partially the to Nogales. and extent, in mix meters shift capacity too. We've question, are to some operations meters. Milwaukee split. we're that E-series

and system a -- require meters there's So there whereas between facilities. go the little difference in-depth little less a through they faster, this that through isn't had make impact. It there's they're -- bit metering you're capacity Rick, going that really I a But more they're that absorb sure they with probably meters, I impact the a to overhead. E-series big because total, a quarter, and one don't electronic when -- right. huge we longer, I'm in absorbed not mechanical overhead But from testing where think Generally, the other. total under think more we a products had our for going to said sure the the on system the the was, because utilization don't

Richard Eastman

one balance just surprised talk items? you about bit just touched come from up AR little inventory almost -- just on fourth sheet And but rate a maybe the a fourth despite X. then from sales couple the down first just at mean, question couple then inventory, for sequentially And enough. the quarter end you built build fair of a into last is the the did I'm Could of the I the Okay, Rick. a quarter, also first were quarter. AR quarter, sequentially X% at the that

Richard Johnson

Yes.

one end simply there's the business. sales way question's we at of disappointment of voices low fourth of the itself second get because quarter a hearing we a the of are the talked lot March sales that long higher at December lowest will And Receivables than take So in of Your Whereas point seasonality one of for it's the that. in hence you're because products, And is actually easiest the the up year had, quarter. there's anticipated so always orders. Well, their months, actually in our period. quarter, months terms times, because the the the on stronger second of is care of of inventory, we simply the geared certain first the timing as up we basically today. timing come the because lead about okay? of of the in, into

sold And first inventory in of quarter dropped year, we then more also, because so first last Rick, we're that's point. anything this the a timing doing comp we at lot just a last what a than tough function to a year. But had the we very strong I way. mean, of sell of by else here had planned had quarter.

Richard Meeusen

that, talked Rich. much is quarter. that you had that we're times quarter, We've did. and indicative our about to repeatedly. and into We had minds quarter. I'll some we've point is it's We're we a said expectation disappointing and seeing lumpiness lumpy. the continue. continue build on have about second quarter, times a a in second This we've know extent business In calls, also our we think next of businesses. this stronger seeing, inventory usually -- our had we a out past, we when had these a is we Rick, the of said that it We've optimistic And quarter, time, to a our had have we're of going when not in bad -- the

and have all We build a to inventory that have stronger part we have ready that be that. that is to an of to ship second expectation we're quarter, because going

Operator

Sidoti. Sullivan from our question will Tate come the And next line of with

Tate Sullivan

order the rates I we -- your I correctly. halfway we're hear say you this of comments? year? from some First Did review maybe through off, didn't can already thought that last

Kenneth Bockhorst

sorry. no, No, I'm

Tate Sullivan

just. of end the March? Yes At

Kenneth Bockhorst

getting primarily couple order really compared year off weeks got we we beginning of half March slow. of that that last the the is What to increasing saw end the I at strong there the first continued. at of through rate that of of the we April, with rate has And ended a where was March

to good So that's fact to here the month, a really that continued. just we're start this alluding to off

Tate Sullivan

Okay.

March rate So the into continued April.

current your costs specifically, on And and D-Flow new I you costs E-series. you're manufacturing -- to selling, D-Flow seeing comments, review mentioned series, Okay. you that a you I lower think the of current the But introducing because mentioned, the are mean, already? E-series

Kenneth Bockhorst

No.

about a talked is, So two And things. meters. ways. the helps commercial us earlier wo It in reduction we bit little in first our

some ultrasonic to there that the technology. So customers are converting are

the So in able commercial coming the up line be meters, our by for we'll D-Flow of extend next product finishing quarters. to here couple the

we'll be in So to more participate able commercial on bids side. the

On continue incorporating significant the in the pretty XXXX. meters for residential will cost the year, second residential side, that the will technology see half we'll of reduction which that a in we into be us

my well bit mixed were remainder little my optimism in longer on position so rebounding as revenue as the term. our the comments And there of a improving year the for cost over for

Tate Sullivan

on would specifically, to Okay. target shift And XXXX costs? the be reduce that based

Kenneth Bockhorst

costs Correct. residential We'll 'XX. in Correct. meters on begin see the the reduced to

Tate Sullivan

your maybe in On last your acquisition distribution strategy is amounts. complete your residential, I complete? is okay. then this it Is missed And And -- now? why

Kenneth Bockhorst

Yes.

So we with to wanted we that distributors are the complete now acquire.

So our revenue now of company-owned model. the is our through majority

the go the acquired to forward. have reach don't other region got So now partners it -- distributors worth the that that find to still of the we country. all every but distributors we We've the places, of in is we've acquire think with enough we to don't it value we

Tate Sullivan

Okay.

the then beginning weather? was or great. Okay, weather customer -- in mainly of delay what it funding else uncertainty, it is Was my orders? at last besides contributed And to year the

Richard Johnson

had they as started answer I decline. had picking wish then, got just mean, we in down we again. February, said, I mean, storms the a And a you. I They had This ice east. as the saw Ken snow is definitive Rick. I up into south. for it

we March, it As entered got stronger.

can't Sometimes sometimes just it of don't know lumpy these hearing It timing. tired function often but of mean, know, and enough, use resumed. get we and is things things we have that, word I people -- a I the

Richard Meeusen

can would seeing by because region Right. us Western telling impacts, the look anecdotally force But And that delays delays When our the that plan. is that looked our they're we of indeed, at field it our really the some fell was by that there weather and country. at one And caused East region of northern that people was of our central exceeded what field impact that tend to us, short. these way weather the are sales first support part when customers. we is quarter, the telling

Tate Sullivan

comment to that your American of a bigger look Rich, Is talk anything more, or One out or Okay. can changes for customer you the of here. transactions do of terms rest can this on mean, there series in picture. Water seen in I've landscape see Works I year? in regulation about changes you

Richard Meeusen

No.

of is Water that American there the where other that happen to not states deals favorable continuing and, those possible. water regulators utility are to Works regulatory the states therefore, rates, move think than is return recovery would rates acquiring on a a you prefer Obviously, I view to need from make don't some opportunities. give the point more where

I when like mixed contract. where ones mean, contract over from think they selectively -- It won that with a is convert wholesale. companies We've an did even has landscape. must good properties out our not entered do you that play. us our subsidiaries, smart lot had it don't all they return. American system, But in expectation they a we the that I buy go But meters, other of there Meter. changing the not immediately can. see we their Badger and would and and are tell of their into American very are you some given operate they it say, a

to American that switch immediately goes they by over competitors, us. may our way be a of in supplied same water and that one the buys So utility in when don't

have landscape of impact not big our on does landscape. that a competitive So acquisitions

Operator

from and question And the our Ryan Boenning come will Scattergood. line next of with Connors

Ryan Connors

change, a Rick, things past. in talked At time, of strong the it's distributors? about Distributor's as tough quarter like comp. your about positive kind you from impact step last wasn't you and seems favor the ago, talk as those bigger the picture most mentioned margin relevant of year the of It things kind standpoint. that have business grown, normal to year. And a flow wanted in discussion talked new products higher-margin a Flow the I the maybe new the where copper the And grown. about a recovery Instrumentation's new and of the like in the gone addition and you of back, products come have Instrumentation been

So there's happening that's why just you the can what characterize was tailwinds the of to here least terms on margin. for if of material us weren't case, whether the believe in normalized raw you at still And normal offset those new that a so, side? kind able

Richard Meeusen

Well, Right. Rich. this and is

me we to see higher that And to at continue optimistic this going take am unusual. level. are I -- a I try a shot that. quarter to believe margin was Let still this very first

quickly quarters a fixed-cost we in over I'm didn't the positioned still delays, sorry, and remain when follow. is points. see took you that's and had operation But in of lot now, quarter basis and yet we from a but to flex XXX $X.XX, hard from of had did big are and our we to XXX that and this -- first when charge that, we year pound we Scottsdale, volume-sensitive. those in copper, stronger fairly these orders jump, coming to for a drop. We operation. that It's know hit us for went $X.XX flex the copper quarter first understood A $X.XX for $X account down last some Now pretty order

was shift think continue I to continued quarters, would accelerate -- higher And taken think, believe to in Ryan, that operation. margin large see if a have the order coming see over to quarters. when have actions that the and to margins. of in we have Meter, hard within positioned lot our continue for we there. so go, to we the trend some see first that that for in going going downturn there this, as I like often stay quarter electronic going we shift moving years. believe downturn the margins future rightsize we over improvement the metering. lumpy And to think the were very this once we to that's the eat last it E-series. but I even carry we've But that see is Those the down as opportunity a sizes, other to we quarter a to the we're we those the the far just quarter electronic -- first industry, finish But to over -- and for more, several what years what And the several not BEACON just I to all continue next we've fundamentally, an seen do seen Badger versus it in

So I have not changed my story on that.

Ryan Connors

Okay.

-- business it in or that. has where Instrumentation? as is Now a On that's shift any Flow the that there that so composition still of good of the back. That recovery subset be? Or the to been specific Instrumentation, profile come changed margin of and a question used as it Flow has market

Kenneth Bockhorst

Ken. this Ryan, is Yes,

has So the same. no, remained it's -- that

good that feel strength. and maintaining the that rebound still about in space we So

Richard Meeusen

that, the lot me products. the the has in rebound oil add the let A been that Instrumentation the to margins Flow And gas Ryan. of not different just oil the products. rest margins and products of and in are gas in But than the

So from there in there overall the isn't a that. big margin shift

Ryan Connors

delays. you talked or like for about, are you if project of Is just characterize magnitude? about types missed it Got composition it, XX is that? last okay. And or projects XX? these I Can of but apologize I just X it Or more I mean, X the Rich, me, many it, one how X? rough talking we or

Kenneth Bockhorst

that not it for Yes, X that were of they at than sure, I insignificant. be Ryan, may least I but gone play have so into know more know

Richard Meeusen

add And was there all Western some quarter, okay? name, they the one that utility. large I which I'll won't weather-related, a got utility, during weren't press that bad

This tried evening This ordering affecting installed deal course, for register got and like They news and actually while on press of not they And improperly. quarter it. to the But a of Badger kind somebody bill them. meter. stopped they was the check meters got first some it on put with meters because and their the they wrong utility. wasn't things entire bad huge having that for a doing that. was weather So everything, the was that

some was behind some a million-type went orders, normally it a good and very now what them. coming back, pretty just away customer they they've quarter, placing $X they're So got over for large,

Operator

Brian And our next of from Dempsey. line Morgan with the Rafn question will come

Brian Rafn

have think I beating And XXX inches New getting Yorkers Pennsylvania, we're in assume like. and weather-related, it's we in that and to of Colorado on that's any forward out. play delayed demand up to out well maybe horse. pushed we Are some that a is of those right snow, not time this That just all and pent-up just certainly, quarters? the normal necessarily kind projects The from it's a dead of standpoint, northeastern delayed, doubling been

Richard Johnson

to we'll because limited Yes. the second warehouse pig Rick. the it's them, in didn't basically, quarter, out python space. where they in they sales install the This not is get there Yes, have a double only

in speaking, -- operates if we time period. So and that's on and as it this everything just Generally industry. just resumes the extend carries how

Brian Rafn

yes. Yes,

conservation and Or the is sold to the the somebody across how analytics related that Lakes? still BEACON in analytics for a Western BEACON say, is consumer Great On country? demand side, the versus, primarily

Richard Meeusen

manage. Western of referring analyze you're were in saying, lot particular, who wasting longer is we'd we when that And drought something It came really Right. BEACON, to the significant something us by need was what to better out they're Rich. know the homeowner Boy, A EyeOnWater. better driven our is when no like water. that help to utilities allows we under And first system, conditions with This Western-related. is

a like my -- use on and problem. initial my on like had going and in that's that frankly, fixed So in, introduction We're EyeOnWater utilities EyeOnWater. plumber house I'm seeing system. stop he week. States, in the had because using replaced water, for -- consumption I'd them sorry, BEACON And EyeOnWater, which, I it's BEACON the water if I United EyeOnWater across and found a better got what drove did homeowners Today, running benefit know I've my frankly, that And according information. States. and of BEACON leak, house. problem. simply also running seals across all That's better and to being is product. know provides It it using a in that the utilities January, is to or a the what of come no project to all about a not United -- a is I kind toilet, I'd EyeOnWater. he a on the it section is There particular of the longer sold focused

So we're am, seeing even people in Milwaukee, it like using I extensively.

Brian Rafn

obsolescence an from always Okay. Is water water the new meter and to commercials side commercial there in kind do a residentials viability Rich, a and construction and and the infrastructure older From commercial of are relative the we or bigger X are? of municipal than say, the of on meters side a years from water strategic the sense, -- sewage? talk as the to kind our infrastructure swapped of meters off play kind see, What on of systems that. residential next the talk you X

Richard Meeusen

they is done water Boy, meters. register. not because The that sound the meter replacement replacement here's good down of utilities cash And reason commercial they the to water to get crunches, because love the there water What have mains. have under really their situation. is is tended, coming commercial the would slow of is me. tell budget down the I'd slow the for But when it you

for a but a defective. that's a restaurant with go register with bad while won't stove, go a kind for of they while cash a may So

commercial stayed I and those forward huge going on a replacing water that see utilities have as meters, the shift in So comes don't spending up infrastructure in.

Brian Rafn

Okay. All right.

the seen any moderation With brass that from versus a brass? into nonevent? in Or you the uptick copper across utilities is plastic content, meters costs have

Richard Johnson

make made I'd down are probably the This probably kind It's of now. brass. of No. it -- Plastic XX% -- Rick. gotten right meters is up is drivers XX%. XX% say off still we primary brass from about of was at one time, meters. at leveled for It's about the has

Brian Rafn

Got you. you. Got

headwind PPP. does one, any redrafting about Tweeting negligible a Let or that he's something, on ask out Nogales? talking that -- the it's you whether Trump's When is strategic all more effect Rich. everyday NAFTA, at me

Richard Meeusen

rules, and mean, So the and been me and under, even miles to proposals, companies established they we and few react a I have that's that. automotive NAFTA, was that's ones anymore. anymore. located why maquiladora many within other Nogales well, sure I'm revisit what address would we facility there If let the so a -- say the I which that of were the what Yes, not lot established there on not maquiladora NAFTA, rules companies border. to our of before laws, maquiladora

kind pay? could back do does NAFTA still back the But them, other U.S. we of we into happen. this away they additional but that. of there's our anticipate any with question of rules capability bringing fall both still on work? if do always what that yes, so a has of the to have So are away the What tariffs? in maquiladora How Badger of, work then that in the would happening. leave place, If we plants, don't with

Nogales like bigger a problem. or to much We sort tariffs to we're is it. have of some to trade that efficient. of very a trade there's frankly, before going if going are something, and impacted Our a in that by of be bigger lot other wars companies And hit are going us first companies, lot be changes plant

Richard Johnson

lot the since And our concern got NAFTA I be down amongst going a Washington think but things, really because what's office. people about was clear, first a itself. concern a it's though, to no much But in would there's when that now. at Nogales it the a we right concern just on Trump summer, action. of into say, about plant people And talk was I not get last

Brian Rafn

No, I get I that. that. get

quarter chips You was What give I the the and Cat-M it specifications, Cat-M on those Cellular, do mentioned functionality, guys XXXX. chips, say, ORION of you? also the enhanced first think --

Richard Meeusen

that-- here, Ryan is happening what's So

Richard Johnson

Brian.

Richard Meeusen

What's like or this world which Ryan. are between is transmissions splitting Brian. of I I'm sorry. fast, that. things transmissions packets smaller don't for conversations, Meanwhile, to really in said have LTE is simple starting I'm designed sorry, data I'm And of and very complex split. of machine-to-machine of of Internet Brian. requirements. system, pages, very happening, cellular the Brian, is it's that -- complexity and sorry, the

what cellular allow faster. highway Cat-M by chips, really functionality kind communication using with to will able be these to creating use express of our much, add we'll to our transmissions. is to moving they're to in our the on transmissions, the So be additional some Cat-M it data much doing to fly not highway speed, machine-to-machine will people other for are down and a And we an energy fast who the and for Lane only lane, that be able our improve less able we'll

this of all very us. than operating Law these of for Moore's chips chips thing last coming cheaper the much is still we're is are are in So good that out next there, And course, and using.

to going also cost represent us. that's significant So for a pretty reduction

Brian Rafn

meters time, Good, talking of the And were about have. you one from the just acquisitions. At that good. good, then Okay. standpoint types of you

XX the types. or control different You like of XX XX

add you portfolio might technology products a that meter last presentation, to meter have have that today industrial to then Now might that went on you you the down I saw interest that XX. technology? the might And I you an have anything think don't of the niche side Any in?

Kenneth Bockhorst

Ken. Brian, this is

to we a global to adding X. and universe and of XX some portfolio, products expand to have, we've that's the our Rich's here finding taking than mass. that look an that technologies we sell be we're as on process currently good But begun footprint. same at larger as and that customers portfolio the There's would as we our well technologies, the add M&A on our slide we already where could to that have So thermal the interested good opportunities of well, in one

-- we have opportunities still to pretty we'll add balance a to sheet, have I some and fantastic attractive able be So think to Badger. out find there

Brian Rafn

one there? Trump pressure to What retention wages. hiring tax plan, in -- of -- hire, engineers about more. pressure labor maybe getting are everybody's Rick, of health in bonuses either and looking people, talking SG&A, ask are What salary not on and availability but seeing everyone's care costs, you maybe I'll any guys your... in the with

Richard Meeusen

take I'll question last this Brian. Sure. then,

at we that First of We the that some market. kind get We obviously, people off, the on feel pay the them question our all tax bonus, should cut, are getting we our of people, they from pressure with asked. question competitively. was pay

no compensation I'm taken our to In paying in also their when were anybody Clinton saying think to out case, they're corporate cut didn't of benefits frankly, to people package XXXX, they we would Bill disappointed I that little going that. we our our to to we a that and were in people, adjust as good. everybody's pay. been guess our that I reason income taxes, facilities, see in the now, because lower willing And are see increase point company fairly. a and we've And pay when we're that very taxes, which we going very underpaying they turnover that have raised their We past, tend say says them that's our right. and fairly, pay.

we We're the working we linked our everybody And down and us what employees the recruiting one as talent same think very So their is need. recruiting. are said -- schools the question positions position the road. Having also, with on of technical interns finding want being we part engineering the in get are that, my this that we of with universities them. in and helps aggressive Engineers else. rate. on here, that, pay to But the the closely opinion, to are to find second your I economy. tax don't about corporate hard Certain in in

taking we're we're take, comfortable that to need good the we actions think we've and a So we got that pretty workforce. really

Operator

Verdi the [Operator Richard next of will question with Instructions]. from come Thornton. And line our Atwater

Richard Verdi

a Just question. quick

under Corix. full with first been months five guess, about you've So And QX been quarter I about -- the agreement the now so Corix. with or was it's

Meter sense of I moving penetration just really you give Canadian if and could wondering could that your really forward. So they us presence mean was Canadian if helped what a for expand Badger

Kenneth Bockhorst

Yes.

a get it. that we we because expand early didn't early presence our it's definitely real opportunity issues about quarter to some Unfortunately, So Corix's and But to Canada great -- are the there. X in into our weather positive ability relationship, had the we of on into are experience also. optimistic

Richard Verdi

do opportunity, Meter it just broadly, for for the Badger could What Canada? in

Richard Meeusen

in market time to of for Well, been we than Canadian less been want a and for lot found the in our with in true dollars. around has There deal there've Rich. here. has ways Badger's not this is when We share of Canada was get hedging a to United I've period been that reasons been did And sell that. that. States, the that market share decades and

no our there. competitors them, For that compared to the up one had there of operations helped up operations longer while, has that a

the all what and some we we're now. us where much So didn't Canadian products, are in that's the in ultrasonic pretty And interested there is basis very on past. But meters found these of utilities the the one same that giving an have we cellular. the opportunity newer up

that Corix door channels, of channels these utilities. lot us now we However, the gives in the a Corix us think don't of that. gives I we strength and had in the the foot strong the needed,

us our at grow for could to on over market and the we've up United next sales in got be pretty the market there least States, share percentage that years. growth us. that significant the for several be So share I growth our could think we double-digit can Canadian That

Richard Verdi

have any another that. Since how appreciate the outlook? positive I was issues? about by Deschenes, that then any does on that acquired great. Corix on front. negative And question That's just impact Or

Richard Meeusen

there. a No. the really one other. changes. The them. is with still players Corix pleased And I hasn't had are impact operation. any same see basically, any that way And big good or don't We're

Operator

from of RBC. Chernow Bob line with question next come And will our the

Robert Chernow

you're sales drought-ridden Australia with or other techniques if using are Middle the in how East some benefits, sales product to in California. and areas the like East, going Middle I'm curious your your selling of on the the

Richard Meeusen

than question, good it's think places often and -- and oil. East, Well, the that? Middle that's more I other Bob, Middle is a Middle get off, the in the -- not Sweden valuable the like And water very I England why and first East East often question.

willing perform that water well. -- and take for they are so have premium they products conservation will And very seriously, additional to very spend money they and

really looking particular, global So companies, just Meter they a Qatar countries of to search when for improve systems, their did of other technology, Badger and over the started -- some liked could at there, did they in that. local how instead of And that looking our Dubai led the and -- to they and ultrasonic to technology and technology. them cellular our they

a lot had success we've So there. of

And get to to did over we excitement Ken continues a large there which the the first As mentioned, grow. help is to it going again continues us. of order just grow, quarter, at end and the

I our helped and now, viewed in Dubai, think there. Qatar Dubai us -- position position original in a over get our into is as leader

in East. into being helping Middle in Dubai us is other areas get So strong the

that's very So good. been

stand very over have they theirs. the will under the Our of concerns meters often, selling there, concern very That's is a of how hot one up temperatures. technique

well west, is so there where hot out used we've out point the That meters in very that a Middle that we And selling arid point has selling west, helped do always regions and in us used and temperatures. East. our as

believe suddenly accuracy the like mechanical don't their is places a an dry of you That's meters don't maintain that under billing these with is time, and up customers. they're accuracy drought-ridden lose benefit meter who anymore. don't versus thing over a end electronic other time. in The meter, you that in California, Obviously, quite

they believe last the they But meters. those people just understand to more not out sure that spell. ended. drought will accurate that need their next I the I'm think But there dry has clearly,

well because -- I products sell Middle East there. how of interesting that bring you between and we there sell similarity the up out and how in is think a of features is it's there in lot our we So west regions those the sell this

yes, So your do yes, it. see we answer But to do we long see a question, I that. Bob. apologize. That's

Operator

Garza from question Company. our come next Jose the of with line And & Gabelli will

Jose Garza

the this What's just for budget just that year? relative all keep one, of mind last you're Just like to in your that quick of putting looking just together kind to CapEx in things investments terms a making. year and

Richard Johnson

about $XX XXXX. was but year range it last think I see smidge same down for unusual. a I Well, and Maybe the higher, in nothing Yes. million,

Richard Meeusen

For normal CapEx.

Richard Johnson

For normal CapEx.

Richard Meeusen

acquisitions. Excluding

Richard Johnson

Correct.

I agree. Acquisitions. Excluding

Jose Garza

distribution And is investment nothing worth from Okay. new the that there? noting

Richard Johnson

No. think, I we'll And I paid this million, $X.X we significant, so. Florida. not IMS that the XX-Q, mean, in disclose but for in

Operator

will of question next Jones the from our with Stifel. line And Nathan come

Nathan Jones

Just stuff? markets from could a bid D-Flow in increase meaningful have addressable is market talk kind a opened on bid comment this projects up up you that that technology Ken made earlier this -- couldn't or opening that in that Can couldn't out guys on that be the you're you meaningful that projects of incorporation how the terms before. of looking you said before? Or about

Kenneth Bockhorst

Yes.

So terms we on had the problem were But buying X-inch -- had fine in they that full smaller quantifying, right? the we as it participate as So sizes, still and technology. when of this adding people we was only in is the projects. the shift, now can older the so we're X-inch,

So sometimes, out because getting have we the locked were we just didn't line. full

into get of projects it'll multiple more mean, percentage get into get into us getting it to projects. yes, In it us No. out shut I on points will significance, some profitable today. growth? we're terms But Is us going

Richard Johnson

out be shut we would -- to weren't... continue if I And we if hadn't think we

Kenneth Bockhorst

Absolutely. That's thanks. correct. Yes, Thanks, Rick.

Nathan Jones

the did January, rates above said, you of sense. order But march were February April things the daily slow was picked order up, that to for Got a And picked makes Ken, one you. again. then got year. other say start up off guys you in That you rates the

with better line the order rates, So March March rates? rates are the or order than in order the April

Kenneth Bockhorst

Yes.

March line ramp. So in couple yes, weeks was order which of significant they're of last the what And, with better than rates. a the March, we saw

small it's good it's a relative one again, enough So felt mention. size, sample to that I but

Nathan Jones

Rich, more then one a question. of got I've And philosophical for

right last have the has a to company the picked expense the the decade, of by has XX% XXX picked gone kind Can But expenses over SG&A of on similar margin. up up SG&A points they're you roughly gross sales. higher the back Looking technology a and what basis dynamics are amount, from that result the talk play in XX% about because changed for engineers the is at business Just more you SG&A more the think model? this there of and products? R&D, needing level what's of business. Is

Richard Meeusen

about you're to SG&A. happened what And right Yes. has

force, Now their we part buy of down distributor that of benefit as the cost fall their all sales all incremental because appears a in basically. okay, almost is SG&A. when of And margin, distributor,

up over bought never sales than our as be We the would several much So any end you last SG&A lower of years. a distributors with a it percent of shift. is.

else. XXXX. point on we load just for entire see the which much year this I'll an The the pretty of then thing work in carrying we integrating all form made amortization us, down that's in intangibles, really not out extra and investment year, those to benefit impact other lot on from until happened And technology of and and these those this is have products, engineering SG&A, A year for are an the are we intangibles D-Flow patents, a D-Flow acquisitions, that's everything of in significant will that in of too. having in

in that's having area. on too, engineering an us, So impact the

an think I we So over on, staying SG&A over going of can that rather XX%, low up all XX% would impact. achieve that something those like that I to would our that like having than believe edge, see that come leading on And and it from are XX%, is can the time, the rather time. at I projects XXs, XX%. that, these of technologies all down in

Operator

question Sidoti. line next the from will with our Tate And Sullivan of come

Tate Sullivan

early Got how your remind can dividend balancing and of And talk look you the dividends a quick that at follow-up. too Is about to you it for us acquisitions? this with increase? policy

Richard Johnson

actually, the historically, they decides, it believe do earnings, but that, until sometime be paid because, in position if out time. we're no of XX%. that won't we've reason to early board anything -- summer. later too to to at say continue, not it's But this obviously, trailing we Yes, XX%, won't in XX% in a and probably the do, There's XX%

Richard Meeusen

will say... say, even though a not I we're to position in But

Richard Johnson

anyway. it say But you'll

Richard Meeusen

lot say balance organization very a will cash to continue and in of generate we strong sheet. this so. that We have do a I

dividend. the increased has board Our

Richard Johnson

XX years ago.

Richard Meeusen

Every and deviate they're believe see going year to I to for any years, XX past type that the that don't from policy. of reason

Richard Johnson

haven't Correct. decided. But we

haven't We with come a up even recommendation.

Richard Meeusen

the yet. That's usually Nothing been meeting. decided done board Right. has at August

Operator

next question Brian from of our comes Rafn line with And the Morgan Dempsey.

Brian Rafn

follow-up. Rich, one just

residential ORION what's municipal kind meters at network, the mix -- then look meter old standpoint kind where -- end the are is the markets, fixed from of you or of galaxy of Cellular If drive-by the read-only? and the water between the

Richard Meeusen

we're what the drive-by and of From that. right network XX% it's selling XX% is okay, now. remainder answer then can -- I Yes, a cellular the fixed old and selling we're about right mixture galaxy And [indiscernible]. now, about

that's there's read, a Obviously, going water we people also sell the what that of is Now market. sell radio. still That's a into where reading are mechanical something when with door-to-door meters. portion walking we what's

Richard Johnson

market market. That's what's The going itself... into the

Richard Meeusen

itself market XX% The convergence. is about

the of the with somebody meters of walking manual water XX% my in of just States about kind door-to-door either some customers. of or reading, manually wand system, being not own touch about I'm a everybody, XX% by are And United So versus talking read some automation. sort the by meters.

Brian Rafn

you something? municipal years, the that residential major then Rich, sales-wise. And from looking be Any do Okay, any next the cities national programs, might to say, that couple standpoint of, okay. just of might highlight

Richard Meeusen

city, that and my X longer the could particular, sales no the anything. never cycle. even of if it, timing the speaking, think city bought And Well, the have years bids we in okay? in reaction we really I And of did bigger generally the city, the idea one XX really of is throw

X it I reluctant So It get whole that years. we're to always were do them that complete And one to buy And city if meters. you took X a to announced Houston, order. publicly takes the do years going sometimes to they X, back X, to those even that, actually the then that. harken in years little X

reluctant we're a that's say so anything. why And to little always

Operator

the Thank queue. questions I'm no further And you. showing in

remarks. Mr. my and back pleasure comments Chief some President be to to Rich closing the it'd for quick conference Officer, So Meeusen, and Chairman, hand over Executive

Richard Meeusen

is are I'll business occasionally a And like repeating There this, where strength use our by back seem have business Thank which look orders Great. Brian. And believe But you we the new we we continue conclude we do people year again, time you, And that market down bounce lot, ahead have quarters. as confident helps us to underlying working word in if we typically that to quarters history, strong on. our call. do look to far your in in much forward a we just quickly. the at a in lumpy and the we today's L also remain see fundamental, that that. and as our to future. to in We are the products developments appreciate

Operator

thank wonderful gentlemen, program day. on we and Ladies for conclude Everybody you have our a does This your may disconnect. and participation all conference. today's

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