Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, welcome to the Fourth Quarter 2022 Badger Meter Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer. Please go ahead, Ms. Bauer.

Karen Bauer

you full joining call. year thank fourth Badger and and quarter XXXX morning, all the for Meter Good earnings conference

the our and today and me and related Officer. call Bockhorst, are release On President available presentation Chairman, on The are earnings Chief Wrocklage, Bob Ken Officer; slide Chief website. Financial Executive with

which to we any are On most during this made Quickly, cover safe the statements press the our I in today's to uncertainties, harbor, are outlined forward-looking non-GAAP various subject release will important filings. and financial metrics. of reminding will you that SEC certain risks call and refer call,

of used. earnings provide Our to non-GAAP the a financial metrics reconciliation slides GAAP

I'll call With turn over the Ken. that, to

Kenneth Bockhorst

earnings another Badger year yet Karen, finished the performance, team strong another call. The growth Thanks, you positive fourth thank and while with Meter solid for delivering revenue joining ratio. achieving book-to-bill quarter our

and profit our shortages range improved persistent sustained component XX% and year. leverage throughout macro SEA within been sporadic consistently we expense gross inflation during XXXX, tightened XX% have to the with challenges of Despite normalized margins

flow talk cash provide recap robust our early our discuss for the hardware that full in to call. and offerings. XXXX, XXXX acquire Syrinix Syrinix generated We in growth capital January software enabled and year comprehensive more adding utilize about I'll to in the a outlook later

call the go to Bob I'll through of to now, over the details for quarter. turn But the

Robert Wrocklage

good morning, and everyone. Thanks, Ken,

X. Slide to Turning

year. in quarter's in than million sales total quarter the $XXX.X higher record last last same Our fourth X.X% to period the were and sequentially million, the level, similar $XXX.X

water against line increased of prior the comparison. a XX%. sales the increased constant a Total U.S. stronger impact year-over-year On dollar, basis, difficult year X% excluding sales product utility currency

Service AMI order we a demand, realization cellular Beacon growing continued Orion experienced strong adoption with Software higher cellular of as and sales. our ongoing solution endpoint and Broadly, price

water environment including record resulted saw we demand line even with ultrasonic strong The utility increased backlog in year Additionally, E-Series exiting the top meters. another sales the performance. strong of meters, sales

product in The increased was year-over-year, stronger with instrumentation for this growth U.S. line X% of related over by markets. flow growth to meaningful XX%. currency just solid line led Sales product most the constant impact of dollar the water

steady applications outperforming the remained water markets. industrial with trends end Order general related more

While the and growth about rate are term, we very our moderate for growth expectations will the excited sales in quarterly anticipate do XXXX. both XXXX that of from near we long

again, was profit as in our as normalized consistent Turning of of a in the quarter fourth with the Gross to quarter range anticipated. prior margins. XX.X%, sales middle and percent the

mix structural While inflation of favorable headwind. trends costs continued, the a stubborn across impact input various remained

After pick industries. price volatility the past in $X.XX of per and all the any an inflation and example you months challenges $X.XX or peaking copper the range back a pound the facing pound six Case around so. graph, copper last spring, nearly of unpredictability point, type over in see inherent settled can up into

now are over back However, we $X.XX. to

pricing rigor. model. managing control, is value-based of remain to gross margin overall includes we input We While control margin these resiliency range we of our fully what continuing confident types normalized within in and costs, committed business our our which are are the our can't

travel. year-over-year research and fourth an of costs, spend compensation $XX.X quarter personnel the increase approximately to million in expenses were higher SEA incentive million, $X.X primarily and development due and

flow robust point comparable XX.X% year did points the quarter accruals worsen of a XX basis in prior sales, SCA fourth higher from our was the percent cash improvement year as resulted at XX compensation leverage quarter. Sequentially, a in in SCA basis As XX.X%, end. incentive

levers as was for ongoing result improve growth endeavor inflation we income the the SEA as quarter. sales In in the consolidated quarter The percent was to and comparable compared quarter. margin comparable fourth increase XXXX a one EPS XX.X% XXXX of quarter prior of the year $X.XX for to dollars a summary, to future leverage prior of continue enhancement. year provision in tax of XXXX in spend to SCA yet $X.XX compared expect the in investments, in We as to fourth just XX.X% of

to Working a the we as XX.X% from at year-end percent sales was capital of of down XX.X% at when QX the end compared started XX.X% and year.

improvement. with has supply increased to payables collection coupled the in corresponding net response increase, resulted receivables While chain overall the complexities, in quality inventory

Fourth million, million result quarter the higher than was free activities. of of the prior year's effective capital management $XX.X cash $XX.X our flow working

million, fifth free consecutive of net conversion year, This was of year was full cash flow and For of greater XXX%. cash net earnings. earnings flow free than conversion $XX.X the the represents XXX%

the turn over I'll Ken. back call that, With to

Kenneth Bockhorst

Bob. Thanks,

X. pressure of our Turning ultrasonic recently time software. to to and expands Their spend solutions and innovative our our want and believe few a to minutes in existing monitoring patent smart I high-frequency of E-Series monitoring acquisition Syrinix brings (ph) and our protected industry-leading complements additional pressure leak how acoustic Slide detection monitoring the synchronized capabilities offerings the Syrinix available of capabilities hardware water announced form on it value meters. portfolio. the in we pressure

Syrinix software, of has the a scope with is actionable to data U.K. Meter keen and which time and Badger and analytics network their operations. utilities radar real interest adds a their the installations history variety in utilities, to monitoring improve U.S. of most to for success of across Of notably

address burst money allows synchronized reactive strategies pipe proactive example, water For time, precious saving and loss. data pressure other versus for leagues, and time to

Additionally, water pressure in tandem. quality and work can sensors

result of identified For infiltration. example, in situations as cracked is where contaminant a a pipe

has Syrinix ATI fact, over team worked the Water Quality years. In the with closely

seen startup small base. has a standpoint, a From growth, very this steady albeit technology financial from

continue it will start to solutions in amortization to believe position Our Meter the a few intangibles. are the of modestly earnings, dilutive future given million long and adding competitively our We dollars, tailorable to over will revenues purchased upon acquired up Syrinix pre-profit and term, acquisition Badger differentiate market. and the comprehensive the digital capabilities

of several challenges. fiscal X, past Slide of the the well a multitude at by a years and executing Taking exceptionally on here strategies have overall macro back face our we our performance distinguished in look XXXX

noted As XXXX, growth, growth the net earnings. record $XX line in and overall flow XXX% and nearly in of delivered orders delivered conversion revenues, product to grew face we release levels, XX% in generated sales software in XX% profit new unprecedented in million outlined grew utility backlog and free cash here, inflation water XX% of operating the

last by accomplishments growth XXXX, reaching goals. CAGR, Looking revenue sizable relative with as our capital the the free a business sales. mindset a focused product utility our a XXX%. years strategic free capital an cash an nearly working $XXX a the growth reduced sales even our over conversion improvement management, of to with longer years. of which all continuous Increased of primary few XX% flow We at to We've million at in as sales, term freeing a software working just percent X% over generate in past at enabled to accelerating three revenue average of rate in capital a grown installing water up flow us of increase three cash

solutions. adding of shareholders monitoring inclusive $XXX capabilities deployed strategic to smart We XX% achieving that form to water of dividend returned acquisitions, in cash tuck-in Of leading three aristocrat we that quality dividend I pressure and nearly R&D of water the Syrinix, dividends, million and nearly annual of to of our our continue status increases invest innovation and years in build we with achievements. smart be the more a track consecutive on water record to proud team's couldn't of portfolio of XX solutions. cash,

of macro tailorable At excited I to cellular resilient real-time the our turning a enable a pressure be to water with smart includes uniquely positioned communications, ahead. as expanding This outlook. and about customers water to level, portfolio our remain systems. with water and more quality their software well and efficient, opportunities as offerings. sustainable Meter is Finally, Badger monitoring industry-leading broad

SaaS adoption replacement proportion demand economic are growth of and drivers multiyear uncertain Our durable stable against macro driven an supportive revenue backdrop. growing AMI of

We continue rates well fourth orders with and the constructive a growth. funnel record future remain order in the sales which on record backlog, for quarter bodes to bid and

leveling gradual margin Coupled in the cost of price this improvement with by some well gross encouraged anticipated gross continued also supply of improvement and chain realization, current XXXX. bode should input trajectory for easing. -- off I'm inflation

generation and allocation priorities, capacity inorganic an of execute including attractive organic capital funnel ample us with our sheet and flow to balance cash Our provide strategic debt-free growth investments.

for the want team again the Meter and their and I efforts accomplishments opportunities many I entire on in XXXX, tremendous executing Badger to thank forward to ahead. look

With that, questions. the open for please operator, line

Operator

Jones Absolutely. the of with Stifel. question comes line Nathan Our [Operator Instructions] first from

Your now open. line is

Nathan Jones

everyone. morning, Good

Kenneth Bockhorst

Nathan.

Nathan Jones

like that do Slide I X.

little bit what impressive. years I easing, capital couple especially challenges the are about and to what supply think cash talk to the last over Maybe chart seeing working sales with see could there there, conversion coming chain the you're pretty these a supply all you're -- free you about down of flow expecting chain the more of there.

chain impact productivity that supply is had see more be productivity within little about has doubt you able bit your being, talk what No a Maybe a with kind you this supply to might all what disruption margin chains? impact negative on of expansion of as facilities. improve the reliable

Kenneth Bockhorst

Yeah. Thanks, Nathan. Yeah.

we've I it So expect industrial couple to better again. seeing for supply that continue some But and yet a here of to the the the of in wouldn't there. improve think, most to say with we're electronics and improve. entire challenges I definitely about, space, last still quarters, that than woods part, chain, as position out been continued across completely in we've the talked

a have very can nothing we've think improvement. throughout a chain that I You're and complexities certainly see there, The huge inefficiencies added And improvement of but but well. our some right. handled to lot supply model facilities, as expect it issues other I you

Robert Wrocklage

Yes.

Nathan, supply we prepared what takeaway, expect opportunity XXXX in staying remarks, in our the for exactly efficiency, versus we're XXXX. is still the would within a which in modest normalized with continuing but margin easing range, greater -- improvement the think that I be resolute the sorry, chain with should

Nathan Jones

in talked 'XX better 'XX? cost are then it in was was some additional inflation expectations through you whatever flattening and about price some on reading 'XX, price/cost to XXXX. prepared what expectation color price you Can than Should 'XX? give same? your the in you're And in us And be

Robert Wrocklage

Yeah.

So pieces there. a lot of moving

'XX way when there's we an actions versus price price/cost had XXXX. we're why of As I comfort relative at traditionally price modestly think average That about cost, But XX% lagging or or leading think said, always mix you effects resolute what addition cost. staying to the XXXX simply that's we people a of targeted sell that we've talk still to dynamic margin XX%. look of, and would that. in We profile XXXX that into dynamics, know better with know, versus oftentimes, zone most plays price to

Nathan Jones

on. I’ll for it taking questions. pass my Great. Thanks

Operator

Mr. Thank you, Jones.

the Stanley. question Morgan next Our from with comes Johnson Thomas line of

is line Your open. now

Thomas Johnson

it start, be we could color To Hi. mention Thanks demand the on but helpful is This here. would congratulations another Obviously, and some on comps. incremental language strong quarter outlook. reasonably maybe constructive, get if year-over-year ordering. in XXXX. strong on did conservative, have in of results we exit record would clear some are pretty headwinds, which you recent easing And it's that the although quarter assume of pretty been face kind fourth delivered operational

are assumptions kind outlook causing some conservatism are XXXX what that year-over-year just underlying on the of of So on a the that basis?

Kenneth Bockhorst

see to Last in bit the year, we've This that and -- But bring right the is XX% Slide And chart chomping Well, we can the XX%. corner, remembering get back XXXX, there I'll even of X. COVID X%. here in you got upper into. at on to if grew I'll And our utility X%. you year, I first, grew revenue. you if we we year, look the go we -- 'XX, grew utility at grew growth Bob

market. excited absolutely about the are we So

The market is great.

record fair We're shipments the continue and have every is than quarter. funnel share strong. We of in increased more this The has quarter our every AMI backlog bid single to market. winning

market, portion feel in grow which feel instrumentation, about about largest our And XX% we of our great as ever we business. as utility that to flow ability the really good the So XX%. is other

don't the perhaps growth XX% just again, percentage not the rate feel saying maybe of of challenged may we We're by right? markets. So be

Robert Wrocklage

Still going of the not excess what the big be absolutely just you XX% where moving here. numbers just that a that's of about year forward. the a on the outlook incrementalizing rate change on So to think Optimism should takeaway of clear But to at law just in that, in growth growth, delivered. anniversarying excess level XXXX. just delivered. robust of be what we very comes of just conservative we of is increases but from a The just delivered

Kenneth Bockhorst

mean, Yeah. to we we And I XXXX clear, longer term in be the and are confident very very with the markets. in see what

Thomas Johnson

the Understand that. Thanks for color.

some information cash clearly, to first helpful capital you've Slide allocation quarter but Really on of still put on the Just high here. sitting levels shifting here. X. to pretty of And work capital in the year,

So this and for recent the here areas there. inorganic pipeline near of other acquisition, maybe deals just growth an on what you perspective the from term? M&A focusing are Post in

Kenneth Bockhorst

Yes. like Syrinix, footprint really customer of some funnel a it built anything that maintained are much a target the software acquisition. and brings have with companies in sort zone. We've And in of space, water base that quality the interesting is and that global space, recent

disciplined. remain we look So We value. for

certainly I found three think last done months. have with we in acquisitions that the the we've XX

we to just in opportunities we that number we're us can, So not trying because but the there's a for of of get certainly mode out continue interesting to bigger work. there

Robert Wrocklage

where tell to that they've we the been today. laneways laneways really couple the years. for very can And play are of are So same core you those Ken last the mentioned, as

available this in very operate with which last years. all most unwavering that So the in from We're That's sudden, we play the perhaps right fairway we we where not of staying over few those the core cash, far to a are really idea laneways likely. now. stray

Thomas Johnson

Thanks I’ll Understood. pass helpful the responses for and back.

Robert Wrocklage

Thanks. right. All

Operator

Johnson. Mr. you, Thank

line question of with from the Our Baird. comes Mason next Rob

now Your open. line is

Robert Mason

Good Yes. all. morning,

over mentioned sits is you I'm I'm ago, Ken, backlog relative I magnitude, the 'XX? book-to-bill one. just square where for. increase -- year-end could Bob, months of guess, up year-end square XX to you looking could again You order The at or what just

Robert Wrocklage

Yeah.

the really last the actually, in demand don't of supply over And we light imbalance months. specifically So environment that's kind backlog. XX disclose the in of been

obviously quite it backlog think XXXX. is confusion. in excess the it end than book-to-bill relevant several can would in at more might sizing be of all not was create Obviously, higher last of if and that you conclude frankly, I XXXX take actually the quarters one, that in you

going I to traditional we to But have aren't because more typically that, but disclosed think of sight business. scenario. think and prior, haven't have isn't that's orders a line actionable -- we this we than now yeah, Granted, do we don't it a backlog size we years in temporary immediately we

And so it, size yes, we're not to Rob. going

Robert Mason

tell And bookings or business the measurement backlog, how the how can book-to-bill it comparatively, does one me you in also that flow if over does the look?

Kenneth Bockhorst

slightly better was one. it Yeah, than

Robert Wrocklage

markets. those remind course, that's markets, I and guess necessarily, many many of not XX% that fragmented the Just me, of business all very small in we're

industries, So other draw data conclusions of if that you're trying to to do. point challenging to

Kenneth Bockhorst

point, more water of Bob's And remember have to in focus group industry. primary And we is Yeah. that small. a that it related now on

has So it's it's within to not now from markets. to flow the used it if then you're even XX%, in And thinking water back than in time, XX-XX other that XX-XX. our be focused gone portfolio instrumentation utility more

recessionary to about different think, it's I used be, quite times than people other or So it thought when challenges.

Robert Mason

Syrinix, very within would just help understand could sales but layer how product if you maybe it? the a product category envision would Understood. you Understood. like just deeper like gets No. like, cycles that me or look typical good Ken, look how on to deployment a I'm market, looks color business. go And that what curious what a interesting

Kenneth Bockhorst

Yeah.

the with different So North even name, small strong a lot can that America, anything a new usually customer of metering to we might these sales view technology coverage our that sell manufacturer. way in and brand customers use to acquisitions with utilities base existing our our that is we

the direct our into fit They Syrinix right sales They the utility can So right distributors product. can channel, it. sell context. know our have

sales also of excited fact then in the get we're comes that able terms component. feel about software the U.S., with to in certainly that. we So it being some the synergy And

software six It when years. AMI significantly primarily over we've that the our here now data. five, Beacon out built was So last really about think you

scan Beacon place. quality Beacon, now can software we leak now pressure, into ATI quantity, and added that Now their RADAR go and the And get to their water in one with people a all data. come acoustic get can now incorporate quality detection utility we'll

good easily leverage really we've sales our force. we it think integrate we can So got into and relatively

similar Thames with really relationships on great -- the top scan, about American again, even but like that, long-standing people then except of Water. smaller, we're like small And even excited Water, ATI, companies,

really you see website, to some If test customer their good go you'll cases.

Obviously, base. are this we too deals with said Speakers] with technology before, big do small no us. always I've our with [Multiple deal flashy So is what deals can but for customer

Robert Wrocklage

Rob. Sorry,

piece I'm that maybe it of then call network. a going that's in So distribution of was is lack the better for gets deployed becomes a largely touch one that a term, we a starts. on once replicated focused pilot in didn't leak there part a deployment can But you how cover defined successful, other model this on about And areas channels. talked a maybe effort a to standpoint, particular on. from detection

have time. you customers basically, installed customer and that with So base that of technology, grows small both footprint but that, of hardware starting a over software

Robert Mason

see. might it I'm on would what gross just this noted be you impact curious I the To the extent margin? dilutive be year. the that modestly

Robert Wrocklage

line, average. the about million we the size margin of sales acquisition. But At is said line again, in to gross of above at dollars this we're a couple talking commentary, what

Robert Mason

Okay. Very good. you. Thank

Robert Wrocklage

Sure.

Operator

you, Thank Mr. Mason.

Our question Tate Sullivan the from Group. with line next Maxim comes of

open. Your now line is

Tate Sullivan

to way following Thank is existing the quality the measurement it have? real-time Or you. it up, around? On businesses other you Good Can is you Syrinix water morning. additive [indiscernible]

Kenneth Bockhorst

that in we Yeah, Tate. a several long-standing relationship Syrinix It's ATI. have had but really years, known for exciting with they've

comments, you the because, of as the vice this and So equipment I you versa. the in a see hand-in-hand prepared in understand lot mentioned contaminants a sometimes can first because the times can water with works equipment water quality leak

system. distribution drinking help So get into out, can plus really each other the it they you

all So it portfolio. the the goes way across

Tate Sullivan

industrial real-time can also, you of the currently those customers And update can for the that water quality update you technology? water on most the give opportunity, Is integrating capability And an you on please? can't if process of comment on customers quality real-time software market, into the there?

Kenneth Bockhorst

Yeah. Sure.

water the applications drinking wide-ranging water effects of industrial the So processes. do have wastewater distribution, quality the quality water

yes, and software. software, customers available. are it we of all of is now water So yes, And fits it quality cover. terms online aspects in It is plus ordering what sensing

Tate Sullivan

Both Ken? and on utility, industrial

Kenneth Bockhorst

Yes. correct. That is

Tate Sullivan

too, mean, given, good to going the XXXX in of was forward, understanding mean growth it portion acquisitions mean, expect on? I moderating growth these many U.S. a percentage And 'XX. we that in on as the such international then internationally, grow I should opportunity, and revenue I of

Kenneth Bockhorst

getting of sometimes because on hard we great U.S. in so America North gets expect right so be we can I'm percent the piece, something is opportunities global the just But international had do well of and every a excited size bullish interested going Yeah. remain a say percent growing to portfolio It about to we're uneven to x little doing growth. revenue because that it more it's be as the than yes, year previously. as core. little tend we but and

Tate Sullivan

much. Thank you very

Kenneth Bockhorst

You’re welcome.

Operator

no There Mr. [Operator questions questions time. Instructions] at this Thank waiting at you, Sullivan. are waiting There time. additional are additional no this

will So conference the Ms. over Bauer to for remarks. I pass closing back

Karen Bauer

joining you call for Thank all our Great. today.

our Have purposes, great any day day. quarter follow-up first be call answer planning I'll XXXX a have. your For April scheduled to is may all you tentatively around questions XX. for

Operator

participation. a call. quarter wonderful Thank earnings concludes day. XXXX Badger That fourth conference the Have for you Meter your

Badger Meter (BMI) 27 Jan 232022 Q4 Earnings call transcript