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Badger Meter Reports Second Quarter 2022 Results

Badger Meter, Inc. (NYSE: BMI) today reported results for the second quarter ended June 30, 2022.

Second Quarter 2022 Highlights

  • Total sales of $137.8 million increased 12% over the prior year’s $122.9 million. Excluding the unfavorable impact of the stronger US dollar, sales increased nearly 14%
  • Diluted earnings per share (EPS) increased 19% to $0.57 compared to $0.48 in the comparable prior year period
  • Operating profit margins expanded 80 basis points year-over-year
  • Robust demand environment continued with strong order pace and record backlog
  • Strong cash flow with $19.7 million in net cash provided by operations

“Record sales for the second quarter were the result of continued strong customer demand, effective supply chain management and continued price realization. Operating margins improved year-over-year despite persistent cost inflation, and we continued to experience robust orders and correspondingly, a further expansion of our already record-high backlog,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “I want to thank the global Badger Meter team for their tireless commitment to serving our customers.”

Second Quarter Operating Results

Utility water sales increased 14% year-over-year, representing the third consecutive quarter of mid-teens sales growth. The sales increase in the quarter was most notable in E-Series® Ultrasonic meters, ORION® Cellular endpoints and BEACON® SaaS revenue. Backlog grew as continued strong order momentum more than offset the recovering production output, as sporadic supply chain constraints limited the conversion of utility water orders to net sales.

Sales of flow instrumentation products increased 4% year-over-year, the result of strong order demand across most end market applications partially offset by supply chain constraints that impacted manufacturing output.

Operating margin was 16.0% in the second quarter of 2022, an 80 basis point improvement from the prior year’s 15.2%. Gross margin as a percent of sales was 39.7%, an increase of 140 basis points sequentially, as the pacing of price realization and manufacturing output improved. Gross margin as a percent of sales declined from the prior year’s 40.8%, as expected, as elevated material, logistics and other costs were partially offset by higher sales volumes and pricing gains.

Selling, engineering and administration (“SEA”) expenses in the second quarter of 2022 were $32.7 million, or 23.7% as a percent of sales, compared to $31.4 million, and 25.6% in the comparable prior year quarter. The $1.3 million spending increase was due to higher personnel and travel expenses, while the year-over-year improvement in SEA expense leverage is the result of effective spending controls and higher sales.

The tax rate for the second quarter of 2022 was 24.4%, modestly lower than the prior year’s 25.0%. As a result of the above, EPS increased 19% year-over-year, to $0.57 compared to $0.48 in the comparable prior year period.

Outlook

Bockhorst added, “We continue to experience strong demand for our digital water solutions coupled with modestly improving supply chain conditions. Our supply chain execution, along with pricing actions aligned with the value we deliver, are working to mitigate the inflation pressures of the past year. Our demonstrated capability to navigate external challenges and capitalize on the robust demand environment differentiates Badger Meter.

The positive industry fundamentals driving demand, including customer requirements to enhance operational efficiency, security and sustainability, are resilient. Badger Meter solutions harness the power of our smart devices, advanced ORION cellular communication technology and BEACON software for the remote monitoring and management of water networks to address these customer challenges.

We continue to advance our ESG-related priorities and have highlighted our progress in the recently published 2020-2021 Sustainability Report. We are proud to have recently been recognized as a Manufacturing Industry Top Workplaces Award recipient, which is especially meaningful given the employee survey feedback that garnered the award.

Bockhorst concluded, “While we are mindful of the uncertain macroeconomic conditions, our durable business model, increasing digital solutions mix, proven execution and our strong balance sheet position us well to deliver sustainable sales growth and shareholder value while furthering our vision to preserve and protect the world’s most precious resource.”

Conference Call and Webcast Information

Badger Meter management will hold a conference call to discuss the Company’s second quarter 2022 results today, Wednesday July 20, 2022 at 10:00 AM Central/11:00 AM Eastern time. The webcast and related presentation can be accessed via the Investor section of our website. Participants can also register to take part in the call using this online registration link: https://ige.netroadshow.com/registration/q4inc/11203/badger-meter-inc-second-quarter-2022-earnings/. 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. Potential factors that could affect such forward-looking statements include the possible ongoing negative impacts of COVID-19 on the global economy, the Company’s operations and those of our customers and suppliers. In addition, the Company’s results are subject to general economic conditions, variation in demand from customers, continued market acceptance of new products, the successful integration of acquisitions, competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, tax reform and foreign currency risk. See the Company’s Form 10-K filed with the Securities and Exchange Commission for further information regarding risk factors, which are incorporated herein by reference. Badger Meter 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 June 30,

 

Six Months Ended June 30,

2022

 

2021

 

2022

 

2021

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

$

137,833

$

122,869

$

270,235

$

240,711

 
Cost of sales

 

83,073

 

72,767

 

164,752

 

141,247

 
Gross margin

 

54,760

 

50,102

 

105,483

 

99,464

 
Selling, engineering and administration

 

32,672

 

31,427

 

64,533

 

63,042

 
Operating earnings

 

22,088

 

18,675

 

40,950

 

36,422

 
Interest expense, net

 

9

 

7

 

22

 

14

Other pension and postretirement costs

 

33

 

29

 

65

 

60

 
Earnings before income taxes

 

22,046

 

18,639

 

40,863

 

36,348

 
Provision for income taxes

 

5,382

 

4,667

 

9,839

 

8,595

 
Net earnings

$

16,664

$

13,972

$

31,024

$

27,753

 
Earnings per share:
 
Basic

$

0.57

$

0.48

$

1.06

$

0.95

 
Diluted

$

0.57

$

0.48

$

1.06

$

0.95

 
Shares used in computation of earnings per share:
 
Basic

 

29,210,444

 

29,114,346

 

29,204,535

 

29,105,429

 
Diluted

 

29,344,351

 

29,312,174

 

29,353,708

 

29,313,392

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

Assets

June 30,

 

December 31,

2022

 

2021

(Unaudited)
 
Cash and cash equivalents

$

100,210

$

87,174

Receivables

 

77,247

 

65,866

Inventories

 

111,437

 

99,611

Other current assets

 

15,027

 

8,709

Total current assets

 

303,921

 

261,360

 
Net property, plant and equipment

 

74,040

 

78,050

Intangible assets, at cost less accumulated amortization

 

57,772

 

64,176

Other long-term assets

 

23,092

 

22,919

Goodwill

 

101,206

 

104,313

Total assets

$

560,031

$

530,818

 
 

Liabilities and Shareholders' Equity

 
 
Payables

$

61,597

$

41,859

Accrued compensation and employee benefits

 

14,941

 

20,644

Other current liabilities

 

20,797

 

19,643

Total current liabilities

 

97,335

 

82,146

 
Deferred income taxes

 

4,937

 

5,385

Long-term employee benefits and other

 

41,576

 

40,217

Shareholders' equity

 

416,183

 

403,070

Total liabilities and shareholders' equity

$

560,031

$

530,818

BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)

Three Months Ended June 30,

 

Six Months Ended June 30,

2022

 

2021

 

2022

 

2021

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Operating activities:
Net earnings

$

16,664

 

$

13,972

 

$

31,024

 

$

27,753

 

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

 

2,862

 

 

2,990

 

 

5,622

 

 

5,863

 

Amortization

 

3,817

 

 

4,022

 

 

7,833

 

 

8,088

 

Deferred income taxes

 

50

 

 

7

 

 

16

 

 

45

 

Noncurrent employee benefits

 

48

 

 

79

 

 

(64

)

 

160

 

Stock-based compensation expense  

 

851

 

 

573

 

 

1,466

 

 

947

 

Changes in:
Receivables

 

481

 

 

(2,242

)

 

(12,028

)

 

1,622

 

Inventories

 

(9,260

)

 

(6,096

)

 

(13,024

)

 

(4,812

)

Payables

 

9,379

 

 

1,075

 

 

20,128

 

 

5,366

 

Prepaid expenses and other current assets  

 

(5,249

)

 

(831

)

 

(8,153

)

 

(1,259

)

Other current liabilities

 

59

 

 

964

 

 

(3,908

)

 

1,296

 

Total adjustments

 

3,038

 

 

541

 

 

(2,112

)

 

17,316

 

Net cash provided by operations

 

19,702

 

 

14,513

 

 

28,912

 

 

45,069

 

Investing activities:
Property, plant and equipment expenditures  

 

(1,631

)

 

(2,619

)

 

(2,773

)

 

(4,378

)

Acquisitions, net of cash acquired  

 

-

 

 

55

 

 

-

 

 

(44,506

)

Net cash used for investing activities  

 

(1,631

)

 

(2,564

)

 

(2,773

)

 

(48,884

)

Financing activities:
Dividends paid

 

(5,843

)

 

(5,240

)

 

(11,712

)

 

(10,479

)

Proceeds from exercise of stock options  

 

-

 

 

-

 

 

-

 

 

352

 

Repurchase of treasury stock

 

(427

)

 

(460

)

 

(427

)

 

(460

)

Issuance of treasury stock

 

-

 

 

30

 

 

-

 

 

72

 

Net cash used for financing activities  

 

(6,270

)

 

(5,670

)

 

(12,139

)

 

(10,515

)

Effect of foreign exchange rates on cash  

 

(810

)

 

(322

)

 

(964

)

 

(584

)

Increase (decrease) in cash and cash equivalents  

 

10,991

 

 

5,957

 

 

13,036

 

 

(14,914

)

Cash and cash equivalents - beginning of period  

 

89,219

 

 

51,402

 

 

87,174

 

 

72,273

 

Cash and cash equivalents - end of period  

$

100,210

 

$

57,359

 

$

100,210

 

$

57,359

 

 

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