BMI - Earnings call 3 2023 | Badger Meter, Inc.

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Operator

Ladies and gentlemen, welcome to the Third Quarter 2023 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.

Karen Bauer

Good morning, and thank you for joining the Badger Meter Third Quarter 2023 Earnings Conference Call.

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

to uncertainties, I harbor, are filings. during statements subject safe cover outlined this risks you are Quickly, release the forward-looking in reminding our will and of most the important that press any call various which and SEC made

today's will to refer On certain non-GAAP call, we financial metrics.

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

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

Kenneth Bockhorst

call. and elevated earnings Badger for continued our joining to year-over-year. smart our delivered and modest remains digital Karen, record Meter Demand into water tailorable Thanks, thank another robust us quarter team make headway improving and you strong backlog. third sales, EPS for The quarter chain with supply allowed solutions the and operating differentiated profit growth dynamics

call. want customers. macro I serving and later in employees thank on our the update the of to focused outlook environment for efforts their all I'll market an provide our in

over go For turn Bob through the of now, quarter. it the details I'll to to

Robert Wrocklage

morning, and Ken, everyone. Thanks, good

Turning X. to Slide

of This in Our prior was third XX% year. the yet $XXX.X at same record million of quarter last the to an total QX increase period last year. the year another million, XX% top in growth reached on compared in XX% in sales year-over-year $XXX increase and

smart annual with more utility portfolio compounded XX% increased XX% pre-COVID-XX XX% -- sales above To across put which broad-based water utility on our XXXX to solution water multiyear growth the organic basis. sales Total about trend than line quarter sales XXXX line into an year-over-year offerings. perspective, of are product third equates organic levels, growth

chain Similar AMI last meters and and delivered meaningfully quarter, to manufacturing in Service cellular BEACON cellular demand strong revenues. resulted order ultrasonic conditions robust higher a E-Series as Software normalization ORION we on of including endpoints, demand, supply Continued output.

industrial demand contributed line monitoring in line X% year-over-year to quality the instrumentation solid product growth. with sales water partially modestly associated offset increased the by for sales deemphasized flow and lower top applications. water-related general pressure markets, Additionally, Sales with

margins. Turning to

execution favorable million, to $X.X with expenses point both range. reaching upper in XX.X% to profit the and of gross and the normalized personnel-related XX.X% the with million were to of SEA variable and Solid gross XX as basis $XX.X our in year operating half third year-over-year as lines last higher well quarter, as contributing increased product million margins mix dollars sales which an improvement. We [ Gross in XX increase pleased included R&D year. to as such year-over-year, SEA compensation contributed overall again margins salaries of $XX.X last the increase margin XX.X% were higher basis a expenses. versus at ] the increased volumes quarter and in percent XX.X% headcount, costs versus the points

of intangible sales in addition XX.X% higher its support increase. also related to of XX dollar to Syrinix percent The year growth, the Despite the asset quarter. from spend prior as with a amortization SEA points comparable the XX.X% contributed basis to declined levels

in an addition, to occurring from on earned interest benefited year EPS in increasing to increased income quarter. exceptional compared income discrete the balance. our we operating the While XX% transactions And cash third from rate quarter's income equity the delta XX%, The quarter $X.XX benefit the grew in in tax XX.X% $X.XX includes quarter. prior the compensation

last to income minus expect be capital normalized to to XX.X% compared plus quarter of XX%. effective sequentially a rate XX.X% percent our tax end. sales was Working We as continue or

modest continue in move inventory to of as including we and forward. we While has an overall working to reductions capital, percent sales as increased in did inventory see expect total growth, inventory, dollars support a improvement

for on cash XXX% primarily flow year. earnings from on track flow full a of improved conversion higher We million plus cash of ago, free year $XX.X for remain Free net earnings. the

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

Kenneth Bockhorst

Thanks, Bob.

X. Slide to Turning

delivered over earlier, several to As evolving digital water meaningful leveraging solve years, growth -- we've water the our Bob challenges. of our past customers' smart solutions mentioned digital expanding water portfolio

While is Meter of prominent meter. the and Badger a name had the beyond that far will to element meter of and the word a continue goes part deliver we've growth offering, remains our the

conservation spanning instruments, systems, aging is As uniquely the software labor continue positioned shortages, Badger and communication, critical of water evolving support investment customers. serve Meter's of and other macro to solutions, drive our events utility of broad challenges needs into metering, water infrastructure, sensors, and needed much portfolio offerings to the climate customizable

at Badger select continue to other regional the The total M&A disciplined valued is globally market [indiscernible] billion, giving opportunity expand grow in and these and markets U.S. to investments. approximately $XX available Meter ample offerings

ability demonstrated remain capitalize creation. opportunities track growth We've our on positioned these further to and on to we record well our value of build

profitable have taking in growth outlook constructive the account remainder in expect growth, fewer noted operating -- we solid holidays. to ahead, into we sales out with year-over-year a Looking see U.S. close the release, in We a days quarter XXXX. XXXX, for continue fourth year the the of as solid for we as foundation and the

communication dynamics and the consistently in conflict the the potential we're additional impact and improving item for One future As accelerate replacement-driven the in supply times. able position lead we've water well-understood remains as improved, to us The margin as please East evolving offerings to to open efficiencies, chain bid its These our activity orders questions. monitoring ecosystem growth. dynamics well facing macro leverage we've gradual drivers have improving aided note, benefiting Middle also related region. activity industry. for by and strong, supported Awards, been manufacturing discussed. the begin line water the our to expansion across hardware ability software partners analytics to operator, With that, funnel the well underlying data demand the water-related and

Operator

question Our today from Mason Instructions] from Rob [Operator first comes [indiscernible].

Kenneth Bockhorst

about bit. extremely excited that are that and that. in These a about think gap] rates. I [Audio eat happy don't things we're order it times think down just too. Overall, feel would about I this. past about I

So that changed that on time. optimism has not

Robert Mason

Understood. us for been maybe on give in costs settled commodity prices and [Audio RFP framework down, the what just out had either bidding. just that Gap] you're there list seeing, a or particular, as Headwinds have in how well

Kenneth Bockhorst

[Audio from about we've what quarters. Gap] change other the talked in

Gap] are others, difficult are we things is real. the certainly inflation some still inflation but for and as then parts economy operating about moderating largely While great and talked of There throughout that's us interest still rates aren't environment, [Audio a [indiscernible]

Robert Mason

to Gap] [Audio the whether you Gap] in that's January, all just up, speak Which I that mix range. million that in notice $XX e-meters slide some is Or it. back pushing that did or price? mechanical include appreciate was at just the certainly is $XX Can million what dynamic does [Audio between to blended was that and

Robert Wrocklage

current, included there's Gap] increase of [Audio multiple in but price Gap] those occurred probably bit over being that's time that. frames a numbers updated [Audio being between

kind that's question, that reflects the whatever at your if in think in I specific market So point of that was time.

Robert Mason

[Audio selling days Gap] we sequential fewer a revenue? quick XQ. expecting one A XQ decline in on the in be Should

Robert Wrocklage

Yes.

I takeaway, give away working I that So likelihood don't saying. we is potential. obvious guidance, a we're walking that's days, but effectively which what think, That's, think with fewer with you're an

Unknown Analyst

right. All

that about And Okay. think gears, strategic we driving Fair could revenue how talk enough. about investments you growth? then shifting should and

Kenneth Bockhorst

Yes.

in at bringing with brought whether that us that cellular meters think market first we're our our I software. totality, quality water own to just in have or and our strategic at, look what you portfolio radios history the being was our in first market if are or point So with ultrasonic the developing investments the

a and water in advancing invest many continuing keeping it's our our advancing Service, keeping the or integrate on cross-selling. our portfolio Software continuing and broader cases, as to in quality In offering in cellular, Syrinix to into software lead lead

is is yes. short answer long the The So answer yes.

with our dividends R&D continue earnings investment follow to of priding capital mean status, and priorities and in one, leader keeping and we disciplined M&A. annually increasing our allocation I ourselves innovation number line

That's as changed. back. it same hasn't that So the

Robert Wrocklage

I capacity think being thinks space and organic efficiency of business. in as I'd augment I kind in innovation priority of we the operational equally Everyone investment of that innovation but capital R&D, of expansion. always first of the -- allocation think just

output, so higher asking those higher numbers we've growth over and then about. several deliver able to investing higher been us drive And to of you're allows capacity last rates order on which, years be that and the to course,

equal and capital focus parts equal don't it's but I capacity. investment well efficiency it's So the contributory know parts, to from -- operational support innovation as as

Operator

The next Andrew comes Krill from question from Bank. Deutsche

Andrew Krill

growth I prior X I for strong double-digit row. years. ask very for and of on strong first XXXX, sales that's track in been several just on a have on double-digit think growth in basically quarters you're And top

we expect do towards high structurally am you mid- kind So single-digit wondering, go I it's of like historical the think again? that industry. Or growth kind of that higher? should moved Is range is -- to rate for this back to just

Kenneth Bockhorst

Yes.

to -- went as mid-single of you if years a to ago, So rewound we refer couple it you if digits. used

have the single-digit really So know, times, but cycle, we range into the mode. the changed year-over-year. that or provide Things we quarter in guidance uneven strategic can high And at part, basis. the to don't comfortable as single-digit for annual high be the tend most you through thinking we're in

Robert Wrocklage

we cycle, say high when X we're or digit over strategic the single XX-year And cycle. so talking

that annual up X%. years a rate are and there single XX%, compounded are of there digits, So XX% to up growth years that be be may get high may only

that trend line about So we're kind style. talking simply CAGR over a of

don't we guide obviously. annually sustain I ability repeatable double-digit not in year strategic cycle. think every again, think, to doable, this But do I growth that it's market, So the even over

Andrew Krill

just approach update as like balance just capital and maybe at? your Makes next, thinking your or you're continues anything pipeline And there how looking deal just on any update allocation, an like grow you're to the sense. about on on cash

Kenneth Bockhorst

Yes. Sure.

remains pipeline strong. deal the So

building maintained this always that more looking to be M&A? target-rich opportunities anything of certainly the years, does value [Audio quality We over select similar in are companies side, as water at, really last healthy Gap] driven that's industry, out and environment interested that that global where what our footprints in have the in several that Gap] within -- space, get regional software in markets we've [Audio we're has a we'd

Andrew Krill

quarter? Gap] that for the third update [Audio an on

Kenneth Bockhorst

Well, so an a had really I We exceptionally about time mean of. with as situation, just talked strong I we order period had lead improving yes, was proud do that strong and shipment that slightly. better. period that slightly we're really

Operator

comes question Sullivan from Group. next The Instructions] from Tate Maxim [Operator

Tate Sullivan

selling things, historically quality your Can were I I A the than composition you in Gap] to of about at mean that levels expectations more water higher mean mean, talk revenue enter maybe expense expenses? just control. R&D my impressive growth couple exceeded [Audio administration expenses is and under. I

Robert Wrocklage

we've of I exactly what our is -- X certainly Tate, our that I to about, algorithm, that growth saying about because leverage. years to of being $XX term dissect the believe, things that automatic talked those doing than new still that Yes. a that, cetera, et all million think but innovator hate algorithm I we going and we've SEA, won't R&D, at the grow a last sales, we I'm slower integrating still but while the an can things SEA great SEA to businesses been of acquired, say, say think do is growth and way rate leverage for SEA because the you creates

more I SEA not And just mean in as full running at range. think we time quarter were that kind from a And than X a of at we're high XX.X%. for the percent years closed XX% when the removed XX% I of year, we're sales. XX%, we

the SEA of we our being leverage while over organic years, steadfast as and one. priority last being story the capital number invested to is that believe investment X real improvement continue in So and allocation

as and of gain We point operating continue a EBITDA margin to leverage expansion. that

continuation years. about quarter. the the more in been last So we've talking unique there's the trend third X of nothing that It's that over

Tate Sullivan

and to addressable market I meter And including to would mostly mean -- mean if part of of -- you want the and the I $XX understand Great. that, I then billion slide, categorize much fair I real-time replacing the the for thank replacement market, it's market -- Can the it. thought how I the you so I existing creating, billion to quality chart $XX mean, markets software maybe there. you solutions? speak, talk markets? Are in pie the are more creating some market, mean, water I you of about remaining got you're

Kenneth Bockhorst

name, Yes. our but in and know water What's markets the the we larger these as opens us, things small, like market, brand done to other and Syrinix, acquisitions to add history, much develop ATi, integrate to it software, opens when to these companies XXX-year done appear and it we've sometimes s::can I up we And exciting us. these given we've can us. our that up continue markets

we're, opportunities niche spaces of into, for of several markets there's look really these to in quality. a and difficult to there's successful that water and these for great but other get is Welcome. ] to example, enjoy giants established and to more have -- within large technologies everyone wonderfully looking [ in a in strong, some business Hach spaces. be tend follow do growth that We are some room We're for not market the

Operator

back the concluding [Operator Instructions] As further any remarks. no questions, to we call for Bauer I'll have hand Karen

Karen Bauer

for Thanks, operator. you, call Thank everyone, our today. joining

purposes, For any year-end day. scheduled follow-up a your be Have XX, great all day to our have. is planning XXXX. for call tentatively I'll questions take January you around

Operator

This much for call. Thank today's concludes your very you attendance.

your You disconnect may now lines.

Badger Meter (BMI) 19 Oct 232023 Q3 Earnings call transcript