Badger Meter (BMI) 20 Jul 232023 Q2 Earnings call transcript

Ladies and gentlemen, welcome to the Second Quarter 2023 Badger Meter Earnings Conference Call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. [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.

you conference the call. thank quarter Meter and earnings XXXX morning, for Badger joining second Good

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

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

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

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

pleased record you for to delivering delivering our joining I earnings Demand and global with Badger year-over-year. quarter, second above again, revenue customers. thank growth X. team second efforts remain book-to-bill, levels Karen, Thanks, quarter thank EPS operating support and an XX% for of our improvement a performance, execution profit were margin and with all-time our their quarter once our strong want very call. resilient Meter exceptional We again

in update key market We sustainability and to highlight few ESG in report the elements later outlook on an addition progress of weeks published I'll providing the macro our and ago, a XXXX our environment call.

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

Thanks, good and Ken, morning, everyone.

four. Turning to Slide

an $XXX.X quarter in Our sales representing of total Meter. all-time the year, sales last million, compared Badger increase period another to for in were quarter $XXX.X same second XX% the million the record

Most from chain Software across endpoints differentiated and actions including adoption with water demand, offerings. associated portfolio value-based a AMI levels utility with prior dynamics Service. sales. increases of utility cellular as and we sales Cellular order and line product of the benefited Total the BEACON utility water our ongoing higher notably, experienced above solution, shipments XX% pricing Strong improving broad-based year increased quarter, sequentially first sequentially smart supply ORION solution XX% were

both commercial and ultrasonic of volumes and mechanical E-Series for inclusive residential meters Additionally, increased applications.

product was the in Sales component demand while instrumentation end water-related industrial market improved year-over-year, general flow supply led for solid muted. increased availability, line markets demand by and X%

We of very basis normalized a sales, as points just shy to pleased with XX.X%. $XX.X margin and of reaching the the year-over-year, of Turning of the profit our XX.X%, operating quarter last were dollars were and end higher year's margins. XX at expansion in Gross million percent range increased XX.X%.

costs, $X $XX.X contributed with expenses Syrinix year-over-year, to intangible million, SEA which million were The travel. approximately included the amortization asset commissions, related its of an compensation higher salaries, the second sales of in increase addition quarter incentive personnel-related encompassing and increase. also headcount,

a in robust year XXX prior higher of the declined Despite higher comparable XXXX summary, consolidated basis income $X.XX, spend from period. a growth, the to support in levels a from quarter. the year-over-year was higher comparable comparable in tax percent offset the second SEA partially sales EPS XX.X% a as of In the modestly impact year XX% prior interest of in quarter of by compared was XX.X% to prior year record XX.X% points improvement $X.XX rate XX.X% to quarter. The

prior was a XX.X% XX.X% end year capital the XX.X% percent and quarter Working at period. sales comparable as of compared to last

for the higher full capital in by was net capital working do higher earnings, expect flow and for of flow We conversion on partially cash half to offset While the inventory remain expenditures. plus free on year. track inventory modest year. XXX% back remains million improved elevated ago year to cash earnings the reductions drive of support strategic from growth, we $XX.X a Free

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

Thanks, Bob.

from related published social our positive to our five. Meter and reducing to Slide across few we applications, and play to of business loss, efficiency matters. providing the offerings has our world role our a impact asset our governance our ago, we the working our customers understand water to With water history progress various long grow of the do in XX% A sustainability of water promoting environmental, and highlighting on augmenting weeks crucial revenue and Turning water-related by XXXX Badger same. life, sustainability cycle. stemming affordability, optimizing report, the enabling resiliency

and greenhouse our strive our years of for same gas operations. in to After paving impact own XX% time, XXXX new intensity exceeded XXXX. just progress emissions, intensity, minimizing reduce related baseline and waste by we from strong goal, emissions in both our our original we our the At environmental way absolute a water by energy, two usage reduction reducing the

careers. was are workforce contributions, of and open and attracting through culture of advantage roles value Work roles More XX% survey, delivering to referrals. enhancing employees In we year increasing purpose short, and grow have award. retaining our global in another achieved committed via by our talent XX% Best to XX% by our their opportunities with by competitive to resulting ideas of ESG to our Places internal for are participation engagement strong both performance. filled their in XX% encouraged promoted shareholder We We promotions growth where employee and financial manufacturing key industry by support energized than to furthering valued are last share our our

chain year. Despite gradual couldn't first gross margins our more outlook. difficult well sales we expansion of to as and for we at half pleased of with look growth, SEA continued solid back ahead. the opportunities be comparisons team expected. continued leverage the Improving Turning of within range with XXXX, execution, bode expect our I and the year-over-year performance continue our normalized sales building margin more momentum off to dynamics the half the supply our and inflation the of the

and severe conservation, remains Awards, and by water aging strong, water events workforce activity others. shortages, macro well-understood facing weather the include orders industry. the supported and drivers funnel bid among These retirements infrastructure,

to rates as sectors, some provide demand in higher secular our While recurring the growth potential outlook. durability well curb drivers and to uncertainty with long-term replacement-driven underlying coupled our remains markets, macroeconomic software as within interest for the revenue, activity

turn the I investment we compelling want to key believe Q&A, a for I Badger highlight reasons Before over opportunity. Meter five remains call

an of water we a First, industry portfolio acquisitions solutions through leader address are smart water investment developed and organic expanding challenges. customer and with differentiated to growing tailored

We trends demand. driving secular favorable have multiyear market

allocation aristocrat cash ample strategic in we With our cash to flow and acquisitions investing execute free R&D, dividend on sheet, and priorities, on shareholders, returning capacity strong status. on hand, debt-free a balance have capital our generation cash to building

deliver And last, mix, we leverage expansion. a but SEA sales engaged serving structural with continue not tremendous exceptional least, opportunity, and certainly positive have driving We coupled results. to committed have in to which team will margin customers

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

comes question from Nathan first line ahead the Our from is Please Instructions] Jones go of Stifel. Nathan, your [Operator open. today now line

Obviously, guys growing Good on just going and shouldn't the topline the basis about here. quarterly still morning, why reason market expect suggests there the forward? very you strong any here. in which run starting up book-to-bill on a talking strong revenues to are quarter continue X, very Is and we above Maybe everyone. a second rate

drivers acquisition level, time, of quality, benefits in years and the of early that together. high a within metering, long AMI we've macro and really a the for the just we're acceptance these about now way at dynamics growing continuing around the talked Syrinix to is believe water and absolute the things the Nathan, industry, seeing the go Well, bundling

continue time. felt be we about a markets able execution, a have with we long best-in-class for basis. feel, to our We strongly our to expect about great very drive And -- on to growth coupled certainly consistent

this before X are out year. being changed? that talked there ASPs replacement before like million more the into proactive think with going about higher to primarily reason is shortages of to all in of any talked industry number has to adopt -- the secular or utilities the we've issues that, driven Do market by higher you technology? the meters every things because think moving labor You've and AMI has that is Like

Yes.

they're the ASPs and when on replacement technology, people a our driven radio that, adding by cycle adopt the with then as software. primarily it's higher meter the in So BEACON they're a and to buying

So cellular in product what's about additionally, radios replace it's can just to buy the ASP unique I would a with having our someone our And offering. meter the AMI, of bundle. even higher offering for without point out

it of communications. So portfolio those isn't Cellular like two tied together things ORION our with are

it's I I volumes don't meter So don't guess feel in total in if -- short, so, -- that And minimal. that feel important. -- not we we It's growing. the it's not are don't

don't that then you for that capacity. additional suggest need additional So would CapEx

a up. mix kind support to SG&A kind because is same number amount thing need don't shifting the You you're of of more selling of units. The huge of just this

several we've to output. pretty want consistently mean in improvements So we've let radar the our the general, you. much working improvements I you'd let think clearly culture, continue I'll I and under the But on continuous our then add about been investments. as along it. I product it of to I to that future grow capacity. consistently machinery think We investments might that -- we and answer improvement lead that and to me equipment to lines to and to increased in we're operational Bob make just last made had way. do years, with we've we've over we But investments -- think able -- Bob understand, the growth the talk

start of take SEA different a than just I with asked think. out Yes. I'll leverage, I would order those them. probably you

Our as a consistent to we price for you and just message SEA has long to. average period of what can sell time sales that continue grow alluded leverage exactly there the been of because dynamic

new story I So for a us. think that's don't

that over seen frankly. quarters, spades really out you've last fact, quite In six play in the

first to time, right. continuously We've volumes The of been dawn CapEx we've exactly company. over both second for time. This for is responded increased growing ever OpEx-related yes, since at a and Ken of then period CapEx growth-related the long this the and the we've growth years, looked isn't and piece,

capacity, it to Obviously, continue pivot and have necessarily but those is to we'll with a us past, current we and directly evolves. than shift where growth that. have backlog more in continue in market the change the clearly, at the so landscape aspirations but CapEx, our market And investments prudent looking be we'll in do mean doesn't probably as that the and

in true one you volumes That Every because sales is the not me generally there remain in last point let increased true Yes. follow on talking been to about other radios. several for That's BEACON meters. said And the we've years, quarter, same. in radio. our

that growing a volume about radio is has sequentially attachment rate every to as then the key to Software And Service. the quarter. remember is that BEACON also So XXX% the

And in different metering volume, shifts and a more within even processes technology areas. less got that manufacturing in require assembly you've or static tables

the if mean expansions you aren't constant holding volume up So for as just as doesn't or there needed it's another. trade not one investments

questions. my taking for much very Thanks sense. Makes

from from comes today question line the line next now Krill open is of go your Please Bank. ahead, The Andrew, Andrew Deutsche

morning, Thanks. Good everyone.

I like to think on wanted forward? major meaningful I repeating view, wanted just helped of check, were and onetime any, in of which I sales going was results not there kind to the And your follow like the that execution results, kind backlog projects or up are looking impressive. to be

No.

if fact, it slightly recall, from did our greater were come our this any orders So eating grew. than so growth in not if down you sales, backlog,

execution So think backlog it's about that that meaningful one-off as and there's projects model. you you not to would any not need be

and I Okay. like water guidance, give you're provide how just And to flow willing trending instrumentation? of on kind don't July but secondly, Great. you is color Makes between just any sense. utility maybe see

pretty you're but So about us, a know you we'll nice Andrew, to that I talk try, to months. never new was and

for So and there's give like it feel a really we a don't quarterly it's because value to good really it, investors for us And provides for don't frankly, provide we guidance. guidance. reason

run we long-term But here. customers every from the doing XX-year and July cycles. we're quarters really And think Our very strategic deliver what would in view. XX-, think XX-, would future you strive a for certainly do of tell We to we the We long to term. execute meaningless our fantastic in business I whatever quarter. be

Okay, I’ll pass great. Thank sense. on. All it you. makes

Rob go of from ahead question now Instructions] open. comes line Rob, Mason next your is Our Baird. from [Operator line today Please the

the I funnel? with were revenue Ken, about your COVID, saying about it's morning. over the during you it than stepping seeing the even of start Are evolved XX curious think what has hear just in or we bogged keeping free -- good lot that up. quarter. that's months? singles projects deliberation order that how are large maybe just larger bookings to as doubles revenue items more Yes, pace in funnel, I'm no despite large onetime the in a you're the last order the or and But still you down up in just process

mix in come doubles. still home singles for There runs of some the part, U.S. of any number changed way funnel, bid the what's shipping there of not meaningfully in than course, more that mix But what's are in XX,XXX utilities and tremendous our in most with that a we're -- backlog, of mix what XX,XXX sizes. our varying And of are has in. of

to portfolio water the we've home quality years differentiated to and of do we've our used I participate over able to portfolio. of last with able more been several bringing our think with in what we the acquisitions is been in runs than the

average can think that I is really that's probably power. hit for we So the difference and

Very good.

the mix volume, you there would favorable SEA as maybe leverage in think on FX are sales year anything previewed Just But as anything over just you year, the against again, I'm revenue that been had margin curious, more that it sounded emphasizing If just all unfolds. gross keeping the from you've mix going to go volume? particular? standpoint. margin, flattish leverage underlying maybe than there given sequentially to higher be this the or I gross a Is

pointed in in the a conversion continue other So first and some the the that projects XXX% We some elements and mechanical adding mix general structural you have positive structural rate software, future. conversion things. statement of durable of into with that ultrasonic general. mix me sometimes attachment within impact about sales have and to the a radios, are quarter positive, The just ASP will mix to mix may drives let long we take average out

within sales be So mix slight lasting. there the mix some overall, But might a quarter. is positive trend long

of at not end we've of any apologetic installation in we're about, factors think now as sustained is, In The our of basis. out a technologies, variety of play pass-through. quarter, normalized range the margin, all our upper being that customers, talked given I mix whether metering And times. mix, multiple mix cost, on about there's always Yes. that's a reality here in price of mix

there's of lot So pleased expect very there's and we -- environment. more well the price that. peak going still had, we performance feel and while a what certainly relative execute in to the we're I'll as And still with again, on on we're of I been an there. signs because still don't moderating present, I extremely actions confident realization continuing inflation levels, they're to inflation pricing call as value-based mechanical we're inflationary some

I as And is sometimes nature? Understood. out SEA maybe follow-up. there well. last call performance comp incentive is up that just -- Around I care balance Was year? to think Or one the or legal if of the the you'd onetime with in expenses, had don't rate to for that quarter? about run or increased don't more sequentially know anything health in costs, step the a

had those small change, Yes. whether or the of things quarter would don't step mean nothing all significant. of second nature, we the is script. I that things diagnosis the there's recur you're modest to out quarter listed a always but first year-over-year I say looking in

Very good. Thank you.

additional this time. questions no are waiting There at

over So to I'd pass any like Karen for back remarks. the closing to conference Bauer

Great. Thank thanks, our you, joining for operator, call everyone, and today.

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

for all call. your conference participation. today's Thank you concludes This

You may now disconnect your lines.