Badger Meter, Inc. Earnings Recaps
Badger Meter’s shares rose 13.5% after earnings, as higher-than-expected market confidence appears consistent with improving sequential sales and expanding margins. The quarter still showed a 2% year-over-year decline in base sales, but management expects revenue to improve sequentially and year over year in Q4 and sustain growth momentum into 2027.
Key takeaways
- Q3 sales were $235.9 million, flat year over year; excluding $5.6 million of UDlive revenue, base sales declined 2%. Base sales rose 5% sequentially.
- Utility water sales were flat year over year, or down 3% excluding the acquisition, as lower AMI-related product sales were partly offset by higher software revenue. Flow instrumentation sales increased 2%.
- Operating earnings rose 4%, with operating margin up 60 basis points to 20.2%; base operating margin was 20.9%, up 130 basis points. Gross margin increased 120 basis points to 41.9%.
- Diluted EPS was $1.24, up 4% from $1.19. Free cash flow declined to $40.3 million from $48.2 million a year earlier.
- Electronic component cost and availability pressures persist, though the company said it had mitigated their impact so far. Management expects Q4 revenue to improve both sequentially and year over year, with growth momentum continuing into 2027.
Shares fell 15.5% as investors reacted negatively to a pronounced year-over-year revenue decline and margin compression amid continued project pacing headwinds and a cautious full-year outlook reaffirmed to be flat to last year. Weakness in utility water sales and ongoing electronic component cost pressures contributed to investor disappointment.
Key takeaways
- Total Q2 sales declined 7% year-over-year to $222.3 million; organic base sales (excluding acquisition) fell 7.5% y/y but improved 9% sequentially.
- Utility water sales declined 8% y/y and 9% organically, reflecting slower AMI project shipments; flow instrumentation grew 6% y/y.
- Operating earnings fell 12% y/y; base operating margin compressed 40 basis points to 18.4% due to lower volumes and project mix; gross margin declined 30 basis points to 40.8%.
- Rising electronics component costs driven by AI and data center demand are pressuring margins; these challenges show no signs of easing.
- Free cash flow dropped to $21.9 million from $40.6 million year-over-year, impacted by lower earnings and elevated working capital levels from revenue timing.
Badger Meter delivered a 9% decline in Q1 revenue, primarily due to timing and project pacing, with expectations for a solid second half and full-year 2026 revenues aligning with 2025.
Key takeaways
- Q1 revenue dipped to $202 million, impacted by weaker short-cycle order rates and project timing delays.
- Backlog normalization and nearing completion of major AMI projects contributed to revenue unevenness and limited visibility into immediate demand.
- Awarded future AMI deployments are diversified across funding sources and deployment types, supporting long-term growth prospects.
- Management maintains a positive outlook for the second half, emphasizing strong market fundamentals and ongoing technology adoption.
- Revenue momentum expected to improve as pending projects commence deployment in the latter half of 2026 and into 2027.
Badger Meter reported robust Q3 2025 results, achieving 13% year-over-year sales growth and record free cash flows, driven by strong demand for its smart water management solutions despite ongoing economic challenges.
Key takeaways
- Total sales reached $236 million, a 13% increase year-over-year with 8% base sales growth, supported by higher ultrasonic meter volumes.
- Operating earnings rose 13% to $46.1 million, representing stable operating margins of 19.6%.
- Gross margins improved to 40.7%, shifting the normalized range to 39%-42% in light of effective pricing strategies against cost pressures.
- Record free cash flow of $48.2 million, driven by reduced cash taxes from recent tax law changes.
- Confident outlook for continued high single-digit annual growth driven by ongoing demand for modular smart water solutions.