Badger Meter Reports Record Third Quarter 2021 Results

Badger Meter, Inc. (NYSE: BMI) today reported results for the third quarter ended September 30, 2021.

Third Quarter 2021 Highlights

  • Total sales increased 13.3% to a record $128.7 million, compared to $113.6 million in the comparable prior year quarter.
  • Diluted earnings per share (“EPS”) were a record $0.54 compared to $0.51 in the comparable prior year period.
  • Announced the 29th consecutive increase in the annual dividend rate.
  • Solid cash flow from operations of $17.7 million.
  • Continued strong demand environment and record high order backlog exiting the quarter.

“I am pleased with Badger Meter’s strong performance in the quarter, delivering record sales and earnings amid persistent and widespread supply chain shortages and delays. The results are notable considering the difficult prior year comparisons,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “Throughout the quarter, we took a variety of strategic actions to continue serving our customers in the face of ongoing electronic and other component delays. Additionally, we continue to combat increasing inflationary cost pressures across the business. The strong order progression across our portfolio of innovative water solutions provides us with a record backlog which bodes well for continued sales and earnings momentum as we enter the fourth quarter. I want to thank the Badger Meter team for their tireless efforts to work to temper the impact of the various macroeconomic challenges in support of our customers.”

Third Quarter Operating Results

Utility water sales increased 12.2% year-over-year, the result of strong order activity and the addition of the water quality acquisitions, partially offset by the impact of supply chain disruptions that limited manufacturing output. Excluding acquisitions, core utility water sales increased 1.7% over the strong prior year quarter which benefitted from post-COVID lockdown backlog recovery. The growth was due to increased mechanical meter and ORION® Cellular endpoint sales as well as increased BEACON® SaaS revenue, despite the insufficient supply of electronic and other components which impacted the conversion of utility water orders to net sales.

Sales of flow instrumentation products grew 18.5% year-over-year as improved demand and easier comparisons benefitted orders across the varied water and industrial end markets and applications served.

Gross margin dollars increased $6.2 million year-over-year, with gross margin as a percent of sales of 39.8%, an increase of 20 basis points over the prior year comparable quarter. The Company executed well on pricing realization and manufacturing output optimization in the face of inflationary cost pressures across the supply chain including raw materials, logistics and freight as well as production volatility caused by restricted component availability. Gross margins benefitted from favorable product and acquisition mix, including higher SaaS revenues.

Selling, engineering and administration expenses in the third quarter of 2021 of $31.7 million increased $6.2 million from the prior year’s $25.5 million, which included the benefit of lower travel and other pandemic-impacted expense reductions. The current year expense total includes the water quality acquisitions, including the related intangible asset amortization.

As a result of the above, operating margin was 15.1%, a reduction of 210 basis points from the prior year’s record level. The tax rate of 18.3% was lower than the prior year’s 23.9% due to a discrete favorable income tax benefit related to equity compensation transactions.

Strategic Overview and Outlook

Bockhorst continued, “We are capitalizing on the strong demand for our hardware, communication and digital solutions, including our infrastructure-free ORION® Cellular endpoints and BEACON® software, to help customers be more efficient, effective, and sustainable with water. We remain focused on converting our record order backlog to net sales by working to mitigate the impact of various supply shortages and delays. We anticipate the component shortages and lengthened lead times will ease over time, but assume they will persist well into 2022.

“At the same time we are navigating the current supply chain complexities, we continue to be acutely focused on developing digital solutions that we believe will broaden our competitive advantages. This includes the integration of our water quality monitoring offerings and execution of related digital growth strategies. Our strong cash flow and credit availability provide us with ample financial flexibility to execute our capital allocation priorities, including the recent increase in the annual dividend, and continued investment in growth.”

Bockhorst concluded, "I want to thank our customers for partnering with us to navigate the current environment while working together to solve their water management needs with our proven portfolio of solutions. We are in an excellent position to deliver on our long term strategic and financial goals which we believe will deliver value for shareholders while preserving the world’s most precious resource.”

Conference Call and Webcast Information

Badger Meter management will hold a conference call to discuss the Company’s third quarter 2021 results today, Friday October 15, 2021 at 10:00 AM Central/11:00 AM Eastern time. The call and related presentation can be accessed via the Investor section of the Company’s website. Participants can also register to take part in the call using this online registration link: https://www.incommglobalevents.com/registration/q4inc/8781/badger-meter-inc-third-quarter-2021-earnings-conference-call/.The webcast will be archived on the Company’s website until its next earnings release.

Safe Harbor Statement

Certain statements contained in this news release as well as other information provided from time to time by Badger Meter, Inc. (the “company”) or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those statements. The words “anticipate,” “believe,” “estimate,” “expect,” “think,” “should,” “could” and “objective” or similar expressions are intended to identify forward looking statements. All such forward looking statements are based on the company’s then current views and assumptions and involve risks and uncertainties. Potential factors that could affect such forward-looking statements include the duration and severity of the COVID-19 pandemic and its impact on the company’s operations and those of our customers and suppliers. Other potential factors include the company’s ability to develop and manufacture technologically advanced products that are accepted by the market, supply chain risk, legal and regulatory risks, political and general economic risks, risks related to doing business in foreign countries, including foreign currency risk, competition for skilled employees, material and labor cost increases, competitive pricing and operating efficiencies, the effects of climate change, cybersecurity attacks and disruptions to our information technology and the successful integration of acquisitions. See the company’s Form 10-K filed with the SEC for further information regarding risk factors, which are incorporated herein by reference. The company disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

About Badger Meter

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters. These offerings provide our customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious resource. For more information, visit www.badgermeter.com.

BADGER METER, INC.
     
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and earnings per share data)
     
     
 Three Months Ended Nine Months Ended
 

September 30,

September 30,

September 30,

September 30,

 

2021

2020

2021

2020

 (Unaudited) (Unaudited) (Unaudited) (Unaudited)
     
Net sales 

$

128,738

 

$

113,587

 

$

369,449

 

$

313,214

     
Cost of sales 

77,554

 

68,564

 

218,801

 

189,019

     
Gross margin 

51,184

 

45,023

 

150,648

 

124,195

     
Selling, engineering and administration 

31,744

 

25,509

 

94,786

 

76,001

     
Operating earnings 

19,440

 

19,514

 

55,862

 

48,194

     
Interest expense (income), net 

14

 

(46)

 

28

 

18

Other pension and postretirement costs 

30

 

21

 

90

 

109

     
Earnings before income taxes 

19,396

 

19,539

 

55,744

 

48,067

     
Provision for income taxes 

3,541

 

4,678

 

12,136

 

11,818

     
Net earnings 

$

15,855

 

$

14,861

 

$

43,608

 

$

36,249

     
Earnings per share:    
     
Basic 

$

0.54

 

$

0.51

 

$

1.50

 

$

1.25

     
Diluted 

$

0.54

 

$

0.51

 

$

1.49

 

$

1.24

     
Shares used in computation of earnings per share:    
     
Basic 

29,157,628

 

29,048,683

 

29,124,491

 

29,049,675

     
Diluted 

29,341,832

 

29,220,497

 

29,324,534

 

29,219,537

BADGER METER, INC.
    
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
    
    

Assets

 

September 30,

December 31,

  

2021

2020

  

(Unaudited)

    
Cash and cash equivalents  

$

67,038

 

$

72,273

Receivables  

73,747

 

61,689

Inventories  

91,824

 

81,586

Other current assets  

9,103

 

5,303

Total current assets  

241,712

 

220,851

    
Net property, plant and equipment  

79,941

 

82,705

Intangible assets, at cost less accumulated amortization  

67,076

 

53,598

Other long-term assets  

21,592

 

22,518

Goodwill  

104,726

 

88,708

Total assets  

$

515,047

 

$

468,380

    
    

Liabilities and Shareholders' Equity

  
    
Payables  

$

42,408

 

$

34,923

Accrued compensation and employee benefits 

18,874

 

14,617

Other current liabilities  

14,573

 

15,659

Total current liabilities  

75,855

 

65,199

    
Deferred income taxes  

5,998

 

5,696

Long-term employee benefits and other 

41,370

 

36,226

Shareholders' equity  

391,824

 

361,259

Total liabilities and shareholders' equity 

$

515,047

 

$

468,380

BADGER METER, INC.
    
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
    
    
 Three Months Ended Nine Months Ended
 

September 30,

September 30,

September 30,

September 30,

 

2021

2020

2021

2020

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Operating activities:    
Net earnings 

$

15,855

 

$

14,861

 

$

43,608

 

$

36,249

    
Adjustments to reconcile net earnings to net cash provided by operations:    
    
Depreciation 

2,756

 

3,154

 

8,619

 

9,132

Amortization 

4,270

 

3,320

 

12,358

 

9,803

Deferred income taxes 

(3

)

 

9

 

42

 

401

Noncurrent employee benefits 

72

 

114

 

232

 

571

Stock-based compensation expense 

590

 

336

 

1,537

 

1,041

Changes in:    
Receivables 

(10,607

)

 

(3,454

)

 

(8,985

)

 

3,184

Inventories 

(873

)

 

118

 

(5,685

)

 

5,188

Payables 

2,054

 

2,599

 

7,420

 

(2,175

)

Prepaid expenses and other current assets 

(4,083

)

 

(575

)

 

(5,342

)

 

6,485

Other liabilities 

7,660

 

910

 

8,956

 

3,799

Total adjustments 

1,836

 

6,531

 

19,152

 

37,429

Net cash provided by operations 

17,691

 

21,392

 

62,760

 

73,678

    
Investing activities:    
Property, plant and equipment expenditures 

(3,791

)

 

(2,276

)

 

(8,169

)

 

(5,855

)

Proceeds from company owned life insurance plans 

596

 

-

 

596

 

-

Acquisitions, net of cash acquired 

(767

)

 

-

 

(45,273

)

 

-

Net cash used for investing activities 

(3,962

)

 

(2,276

)

 

(52,846

)

 

(5,855

)

    
Financing activities:    
Net decrease short-term debt 

-

 

(4,600

)

 

-

 

(4,600

)

Dividends paid 

(5,838

)

 

(5,230

)

 

(16,317

)

 

(15,108

)

Proceeds from exercise of stock options 

1,684

 

27

 

2,036

 

505

Repurchase of treasury stock 

-

 

(61

)

 

(460

)

 

(2,934

)

Issuance of treasury stock 

-

 

33

 

72

 

126

Net cash used for financing activities 

(4,154

)

 

(9,831

)

 

(14,669

)

 

(22,011

)

Effect of foreign exchange rates on cash 

104

 

(585

)

 

(480

)

 

(782

)

    
Increase (decrease) in cash and cash equivalents 

9,679

 

8,700

 

(5,235

)

 

45,030

Cash and cash equivalents - beginning of period 

57,359

 

85,201

 

72,273

 

48,871

    
Cash and cash equivalents - end of period 

$

67,038

 

$

93,901

 

$

67,038

 

$

93,901

Contacts:

Karen Bauer at (414) 371-7276
kbauer@badgermeter.com

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