Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-06706

BADGER METER, INC.

(Exact name of registrant as specified in its charter)

Wisconsin		39-0143280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
4545 W. Brown Deer Road Milwaukee, Wisconsin		53233
(Address of principal executive offices)		(Zip code)

	(414) 355-0400
	(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BMI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Smaller reporting company	☐
Accelerated filer	☐		Emerging growth company	☐
Non-accelerated filer	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 10, 2024there were 29,410,656sharesof Common stock outstanding with a par value of $1 per share.

BADGER METER, INC.

Quarterly Report on Form 10-Q for the Period Ended September 30, 2024

Index

	Page No.
Part I. Financial Information:
Item 1	Financial Statements (unaudited):	4
	Consolidated Condensed Balance Sheets - September 30, 2024 and December 31, 2023	4
	Consolidated Condensed Statements of Operations - Three and Nine Months Ended September 30, 2024 and 2023	5
	Consolidated Condensed Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2024 and 2023	6
	Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 2024 and 2023	7
	Consolidated Condensed Statements of Shareholders' Equity - Three and Nine Months Ended September 30, 2024 and 2023	8
	Notes to Unaudited Consolidated Condensed Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4	Controls and Procedures	20
Part II. Other Information:
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 5	Other Information	21
Item 6	Exhibits	21
Signatures	22

Special Note Regarding Forward Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, as well as other information provided from time to time by Badger Meter, Inc. (the "Company" or "Badger Meter") 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. See Item 1A "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2023for further information regarding risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward looking statements. 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.

Part I - Financial Information

Item 1 Financial Statements

BADGER METER, INC.

Consolidated Condensed Balance Sheets

		September 30,			December 31,
		(Unaudited)
		(In thousands)
		2024			2023
Assets
Current assets:
Cash and cash equivalents		$	258,955			$	191,782
Receivables			93,427				83,507
Inventories:
Finished goods			35,725				34,764
Work in process			39,011				41,261
Raw materials			83,781				77,649
Total inventories			158,517				153,674
Prepaid expenses and other current assets			18,397				13,214
Total current assets			529,296				442,177
Property, plant and equipment, at cost			231,777				225,988
Less accumulated depreciation			(158,498	)			(152,110	)
Net property, plant and equipment			73,279				73,878
Intangible assets, at cost less accumulated amortization			48,957				53,737
Other assets			13,543				11,249
Deferred income taxes			22,785				22,715
Goodwill			115,001				113,163
Total assets		$	802,861			$	716,919
Liabilities and shareholders' equity
Current liabilities:
Payables		$	77,381			$	81,807
Accrued compensation and employee benefits			29,756				29,871
Warranty and after-sale costs			15,660				11,102
Other current liabilities			6,366				9,168
Total current liabilities			129,163				131,948
Long-term deferred revenue			60,879				49,763
Deferred income taxes			5,108				5,061
Accrued non-pension postretirement benefits			3,808				3,614
Other accrued employee benefits			6,704				5,293
Other long-term liabilities			6,014				4,758
Commitments and contingencies(Note 5)
Shareholders' equity:
Common stock, $1par, authorized 80,000,000, issued 37,221,098at September 30, 2024 and December 31, 2023			37,221				37,221
Capital in excess of par value			64,234				59,185
Reinvested earnings			527,080				458,719
Accumulated other comprehensive loss			(650	)			(1,646	)
Less: Treasury stock, at cost, 7,810,442shares at September 30, 2024 and 7,873,781shares at December 31, 2023			(36,700	)			(36,997	)
Total shareholders' equity			591,185				516,482
Total liabilities and shareholders' equity		$	802,861			$	716,919

See accompanying notes to unaudited consolidated condensed financial statements.

BADGER METER, INC.

Consolidated Condensed Statements of Operations

		Three Months Ended September 30,			Nine Months Ended September 30,
		(Unaudited)			(Unaudited)
		(In thousands except share and per share amounts)
		2024			2023			2024			2023
Net sales		$	208,438			$	186,193			$	621,376			$	521,152
Cost of sales			124,560				113,470				374,952				316,179
Gross margin			83,878				72,723				246,424				204,973
Selling, engineering and administration			43,255				41,301				127,711				119,003
Operating earnings			40,623				31,422				118,713				85,970
Interest income, net			(2,301	)			(1,200	)			(5,689	)			(2,649	)
Other pension and postretirement costs			13				32				37				97
Earnings before income taxes			42,911				32,590				124,365				88,522
Provision for income taxes			10,873				6,621				30,140				20,645
Net earnings		$	32,038			$	25,969			$	94,225			$	67,877
Earnings per share:
Basic		$	1.09			$	0.89			$	3.21			$	2.32
Diluted		$	1.08			$	0.88			$	3.19			$	2.30
Dividends declared per common share		$	0.34			$	0.27			$	0.88			$	0.72
Shares used in computation of earnings per share:
Basic			29,369,923				29,294,886				29,351,688				29,275,445
Impact of dilutive securities			178,005				178,488				173,305				173,030
Diluted			29,547,928				29,473,374				29,524,993				29,448,475

See accompanying notes to unaudited consolidated condensed financial statements.

BADGER METER, INC.

Consolidated Condensed Statements of Comprehensive Income

		Three Months Ended			Nine Months Ended
		September 30,			September 30,
		(Unaudited)			(Unaudited)
		(In thousands)
		2024			2023			2024			2023
Net earnings		$	32,038			$	25,969			$	94,225			$	67,877
Other comprehensive income (loss):
Foreign currency translation adjustments			4,726				(3,158	)			1,092				(1,313	)
Pension and postretirement benefits, net of tax			(33	)			(38	)			(96	)			(103	)
Comprehensive income		$	36,731			$	22,773			$	95,221			$	66,461

See accompanying notes to unaudited consolidated condensed financial statements.

BADGER METER, INC.

Consolidated Condensed Statements of Cash Flows

		Nine Months Ended September 30,
		(Unaudited) (In thousands)
		2024			2023
Operating activities:
Net earnings		$	94,225			$	67,877
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation			8,330				8,100
Amortization			15,787				12,820
Deferred income taxes			-				(401	)
Noncurrent employee benefits			(12	)			(274	)
Stock-based compensation expense			4,595				3,963
Changes in:
Receivables			(9,814	)			(11,855	)
Inventories			(3,367	)			(27,628	)
Payables			(5,242	)			12,282
Prepaid expenses and other assets			(7,772	)			(7,279	)
Other liabilities			6,237				14,567
Total adjustments			8,742				4,295
Net cash provided by operations			102,967				72,172
Investing activities:
Property, plant and equipment expenditures			(8,149	)			(9,949	)
Acquisitions, net of cash acquired			(3,000	)			(17,127	)
Net cash used for investing activities			(11,149	)			(27,076	)
Financing activities:
Dividends paid			(25,862	)			(21,134	)
Proceeds from exercise of stock options			751				967
Net cash used for financing activities			(25,111	)			(20,167	)
Effect of foreign exchange rates on cash			466				(71	)
Increase in cash and cash equivalents			67,173				24,858
Cash and cash equivalents - beginning of period			191,782				138,052
Cash and cash equivalents - end of period		$	258,955			$	162,910

See accompanying notes to unaudited consolidated condensed financial statements.

BADGER METER, INC.

Consolidated Condensed Statements of Shareholders' Equity

		Quarter and year-to-date ended September 30,
		Common Stock at $1 par value*			Capital in excess of par value			Reinvested earnings			Accumulated other comprehensive income (loss)			Treasury stock (at cost)			Total
		(Unaudited)
		(In thousands except share and per share amounts)
Balance, June 30, 2023		$	37,221			$	55,833			$	423,877			$	(4,203	)		$	(37,136	)		$	475,592
Net earnings			-				-				25,969				-				-				25,969
Pension and postretirement benefits (net of $(5) tax effect)			-				-				-				(38	)			-				(38	)
Foreign currency translation			-				-				-				(3,158	)			-				(3,158	)
Cash dividends of $0.27per share			-				-				(7,924	)			-				-				(7,924	)
Stock options exercised			-				774				-				-				135				909
Stock-based compensation			-				1,356				-				-				-				1,356
Issuance of treasury stock (<1shares)			-				(1	)			-				-				1				-
Balance, September 30, 2023		$	37,221			$	57,962			$	441,922			$	(7,399	)		$	(37,000	)		$	492,706
Balance, December 31, 2022		$	37,221			$	53,282			$	395,155			$	(5,983	)		$	(37,253	)		$	442,422
Net earnings			-				-				67,877				-				-				67,877
Pension and postretirement benefits (net of $(26) tax effect)			-				-				-				(103	)			-				(103	)
Foreign currency translation			-				-				-				(1,313	)			-				(1,313	)
Cash dividends of $0.72per share			-				-				(21,110	)			-				-				(21,110	)
Stock options exercised			-				824				-				-				143				967
Stock-based compensation			-				3,963				-				-				-				3,963
Issuance of treasury stock (24shares)			-				(107	)			-				-				110				3
Balance, September 30, 2023		$	37,221			$	57,962			$	441,922			$	(7,399	)		$	(37,000	)		$	492,706
Balance, June 30, 2024		$	37,221			$	62,915			$	505,040			$	(5,343	)		$	(36,695	)		$	563,138
Net earnings			-				-				32,038				-				-				32,038
Pension and postretirement benefits (net of $9tax effect)			-				-				-				(33	)			-				(33	)
Foreign currency translation			-				-				-				4,726				-				4,726
Cash dividends of $0.34per share			-				-				(9,998	)			-				-				(9,998	)
Stock-based compensation			-				1,314				-				-				-				1,314
Issuance of treasury stock (1share)			-				5				-				-				(5	)			-
Balance, September 30, 2024		$	37,221			$	64,234			$	527,080			$	(650	)		$	(36,700	)		$	591,185
Balance, December 31, 2023		$	37,221			$	59,185			$	458,719			$	(1,646	)		$	(36,997	)		$	516,482
Net earnings			-				-				94,225				-				-				94,225
Pension and postretirement benefits (net of $31tax effect)			-				-				-				(96	)			-				(96	)
Foreign currency translation			-				-				-				1,092				-				1,092
Cash dividends of $0.88per share			-				-				(25,864	)			-				-				(25,864	)
Stock options exercised			-				646				-				-				105				751
Stock-based compensation			-				4,595				-				-				-				4,595
Issuance of treasury stock (24shares)			-				(192	)			-				-				192				-
Balance, September 30, 2024		$	37,221			$	64,234			$	527,080			$	(650	)		$	(36,700	)		$	591,185

* Each common share of stock equals $1par value; therefore, the number of common shares is the same as the dollar value.

See accompanying notes to unaudited consolidated condensed financial statements.

BADGER METER, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

The Company evaluates subsequent events at the date of the balance sheet as well as conditions that arise after the balance sheet date but before the financial statements are issued. The effects of conditions that existed at the balance sheet date are recognized in the financial statements. Events and conditions arising after the balance sheet date but before the financial statements are issued are evaluated to determine if disclosure is required to keep the financial statements from being misleading. To the extent such events and conditions exist, if any, disclosures are made regarding the nature of events and the estimated financial effects for those events and conditions. For purposes of preparing the accompanying consolidated financial statements and the notes to these financial statements, the Company evaluated subsequent events through the date that the accompanying financial statements were issued, and has determined that no material subsequent events exist through the date of this filing.

Item 2 Management's Discussion and Analysis ofFinancial Condition and Results of Operations

BUSINESS DESCRIPTION AND OVERVIEW

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water management solutions, with nearly 95% of net sales derived from water-related applications. These tailorable solutions encompass smart measurement hardware, reliable communications, data and analytics software as well as ongoing support and expertise essential to optimize customers' operations and contribute to the sustainable use and protection of the world's most precious resource.

The Company's smart measurement hardware is primarily comprised of the following product families:

• meters that measure the flow of water and other fluids and are known for accuracy, long-lasting durability and for providing valuable and timely flow measurement data.

• water quality monitoring solutions, including optical sensing and electrochemical instruments that provide real-time, on-demand data parameters.

• high frequency pressure and acoustic leak detection hardware that provides real-time monitoring data.

The Company's broad range of communication solutions include the ORION® branded family of radio endpoints, providing customers with a choice of industry-leading options for communicating data from hardware into usable applications.

The Company's hardware-enabled software provides the insights and analytics critical to the holistic management of our customers' water systems. These digital solutions increase visibility, empowering customers to monitor system performance and make decisions aiding efficiency, resiliency, and sustainability.

The Company also provides training, project management, technical support and other collaborative services for customers.

The Company's solutions fall into two product lines: sales of meters, water quality sensors and other hardware, communication, and software and related technologies, to water utilities (utility water) and sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers, including water related applications (flow instrumentation).

Utility Water Product Line (approximately 85% of Net Sales in fiscal 2023)

Utility water smart metering solutions are comprised of water meters along with the related radio and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues, enabling operating efficiencies and engaging with their end consumers. This product line further comprises other instruments and sensors used in the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used to detect leaks and to monitor various water quality parameters throughout the distribution system. The largest geographic market in which the Company operates is North America, primarily the United States. The majority of water meters sold are mechanical in nature, with increasing adoption over time of ultrasonic (static) metering technology due to a variety of attributes, including their ability to maintain measurement accuracy over their useful life.

Utility water meters (both residential and commercial sizes) are generally classified as either manually read meters or remotely read meters via radio technology. A manually read meter consists of a water meter and a register that provides a visual totalized meter reading. Meters equipped with radio technology (endpoints) receive flow measurement data from battery-powered encoder registers attached to the water meter, which is encrypted and transmitted via radio frequency to a receiver that collects and formats the data appropriately for water utility usage and billing systems. These remotely read systems are classified as either automatic meter reading (AMR) systems, where a vehicle equipped for meter reading purposes collects the data from the utilities' meters, or advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network (either fixed or cellular) of data collectors or gateway receivers that are able to receive radio data transmission from the utilities' meters. Among other benefits, AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters and provide utilities with more frequent and diverse data from their meters at specified intervals.

The ORION® family of endpoints offers water utilities a choice of industry-leading options for communicating meter reading and event data. ORION Cellular endpoints power our Network as a Service (NaaS) approach to AMI, eliminating the

need for the utility to install or maintain infrastructure, enabling rapid or gradual deployment, and enhancing network reliability. ORION mobile read endpoints support customers looking to deploy an AMR solution.

Information and analytics are critical to the smart water ecosystem. The Company's BEACON® SaaS, amongst others, improves utility visibility to their water and water usage. BEACON is a secure, cloud-hosted software suite that includes a customizable dashboard and has the ability to establish alerts for specific conditions. It also allows for consumer engagement tools that permit end water users (such as homeowners) to view and manage their water usage activity. Benefits to the utility include improved customer service, increased visibility through faster leak detection, the ability to promote and quantify the effects of its water conservation efforts, and easier compliance reporting.

Water meter replacement and the adoption and deployment of new technologies comprise the majority of smart water product sales, including radio products. To a much lesser extent, housing starts also contribute to sales annually. The industry continues to undergo a conversion from manually read water meters to meters with radio technology, and for AMR systems to be upgraded to digital AMI solutions. The Company estimates that approximately one-third of water meters installed in the United States have been converted to AMI systems.

In addition, the Company provides various other hardware, instruments and sensors, and related software, to enhance the scope and breadth of connected data valuable to a water utility's operation. This includes water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH, chlorine, nitrates and approximately 40 others. Utilizing these solutions, water quality can be monitored continually or periodically throughout the network from its original source to the point in which it is recycled and returned. Real-time water quality parameters enhance the scope of actionable data for water utilities to improve operational security, awareness and efficiency. It also includes high frequency pressure and leak detection sensors that provide real-time alarms and event location triangulation to aid operators in responding to burst pipe and other leak events quickly, reducing water loss and system downtime. The data and insights collected from these additional operational sensors are often conveyed by cellular networks and can be leveraged alongside of the metering data within BEACON to unlock powerful insights about the operations of a customer's distribution network.

The Company's net sales and corresponding net earnings depend on unit volume and product mix, with the Company generally earning higher average selling prices and margins on meters coupled with radio technology, software, water quality monitoring and on ultrasonic compared to mechanical meters.

Flow Instrumentation Product Line (approximately 15% of Net Sales in fiscal 2023)

The flow instrumentation product line primarily serves water applications throughout the broader industrial market, with both standard and customized solutions. These solutions include meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids, including water, air, steam, and other liquids and gases. These products, oftentimes leveraging the same technologies used in utility water, are used in a variety of industries and applications, with the Company's primary market focus being water/wastewater, heating, ventilating and air conditioning (HVAC) and corporate sustainability. Flow instrumentation products are generally sold through manufacturers' representatives and original equipment manufacturers as the primary flow measurement device within a product or system. Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets.

The industries served by the Company's flow instrumentation products face accelerating demands to contain costs, reduce product variability, and meet ever-changing safety, regulatory and sustainability requirements. To address these challenges, customers must reap more value from every component in their systems. This system-wide scrutiny has heightened the focus on flow instrumentation and water quality monitoring in wastewater treatment, industrial process, building automation and precision engineering applications where flow measurement, quality and control are critical.

The Company offers one of the broadest flow measurement, control and communication portfolios in the market. Customers rely on the Company for application-specific solutions that deliver accurate, timely and dependable flow data and control essential for product quality, cost control, safer operations, regulatory compliance and more sustainable operations.

Long-Term Business Trends

Across the globe significant infrastructure investment needs, aging workforce, increasing regulations and a focus on climate-change and sustainability are driving companies and utilities to better manage critical resources like water. Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to help automate manufacturing. Other customers employ measurement to comply with government mandates and laws including those associated with process and discharge water quality monitoring. The Company provides flow measurement technology critical to providing baseline usage data and to quantify reductions as customers attempt to reduce consumption. For example, once

water usage metrics are better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where it is most viable. With the Company's technology, customers have found costly leaks, pinpointed equipment in need of repair, and identified areas for process improvements.

Increasingly, customers in the utility water market are interested in more frequent and diverse data collection and the use of water metering, pressure and quality analytics to evaluate water distribution activity. Specifically, AMI technology enables water utilities to capture readings from each meter at more frequent and variable intervals. There are more than 50,000 water utilities in the United States and the Company estimates that approximately one-third of their respective connections have converted to an AMI radio solution. The Company believes it is well positioned to meet the continuing conversion trends to AMI with its comprehensive radio and software solutions.

In addition, certain water utilities are converting from mechanical to static meters. Ultrasonic water metering maintains a high level of measurement accuracy over the life of the meter, reducing a utility's non-revenue water. The Company has over a decade of proven reliability in the market with its ultrasonic meters.

As noted above, customers are increasingly looking for more frequent and diverse data to holistically manage their water networks. As a leading provider of water quality and pressure management monitoring solutions, we are able to meet these needs and enhance the scope of actionable data for customers to help measure, conserve and protect water.

Together, our tailorable smart water solutions provide actionable information through data analytics derived from an interconnected and interoperable network of sensors and devices that help people and organizations efficiently use and conserve water. Badger Meter is well positioned to benefit from the adoption of smart water solutions. With strong relationships with telecommunication providers such as AT&T and Verizon (among others), we stay abreast of emerging cellular technology changes to provide the premier infrastructure-free AMI solution.

Acquisitions

Effective January 1, 2024, the Company acquired select remote water monitoring hardware and software, inclusive of the Telog® product line and Unity Remote Monitoring software as a service (the "Telog/Unity Assets). The total purchase consideration for the Telog/Unity Assets was $3.0 million in cash.

Effective January 1, 2023, the Company acquired 100% of the outstanding stock of Syrinix Ltd. ("Syrinix"), headquartered in the United Kingdom, a provider of high-frequency pressure monitoring and leak detection solutions.

The total purchase consideration for Syrinix, net of cash acquired, was $17.1 million. The Company's allocation of the purchase price at December 31, 2023 included $0.6 million of receivables, $0.7 million of inventories, $2.1 million of other assets, $7.7 million of intangible assets and $10.3 million of goodwill. The intangible assets acquired were primarily developed technology, customer relationships and trademarks with estimated average useful lives of 13 to 15 years. The Company also assumed $1.9 million of payables, $2.0 million of deferred income taxes and $0.4 million of other liabilities as part of the acquisition.

Revenue and Product Mix

As the industry continues to evolve, the Company has been at the forefront of innovation across measurement hardware (metering, water quality, pressure sensors, etc.), radio and software technologies in order to meet its customers' increasing expectations for accurate and actionable data and insights. As technologies such as ORION Cellular and BEACON digital solutions have become more widely adopted, the Company's revenue from SaaS has increased significantly, and is margin accretive.

The Company also seeks opportunities for additional revenue enhancement. For instance, the Company has made inroads into select regional markets outside the US such as the Middle East, UK and others with its tailorable smart water solutions portfolio. The Company is periodically asked to oversee and supervise field installation of its products and provide training and other services for certain customers. Strategic mergers and acquisitions are another avenue for profitable sales growth.

Results of Operations - Three Months Ended September 30, 2024

Net Sales

The Company's net sales for the three months ended September 30, 2024 were $208.4 million, an increase of 11.9% compared to $186.2 million during the same period in 2023. Sales into the utility water market were $183.0 million, an increase of 13.8% from the prior year's $160.8 million. The Company's net sales grew as a result of increased smart water solutions including higher sales across various hardware, communication and BEACON SaaS solutions. Sales of products into the flow instrumentation end markets were $25.4 million in the third quarter of 2024 and 2023. Flow instrumentation sales were flat on steady order demand within the water-focused end markets, generally offset by declines across de-emphasized applications.

Earnings

Total operating earnings for the three months ended September 30, 2024 were $40.6 million, or 19.5% of sales, compared to $31.4 million, or 16.9% of sales, in the comparable prior year quarter. Gross margin dollars increased $11.2 million, with gross margin as a percent of sales of 40.2%, an increase from 39.1% of sales in the prior year comparable quarter. Gross margin improvement in the current year was driven by positive sales mix, including strong AMI and software-related sales, as well as ongoing price/cost benefit and operating execution. Selling, engineering and administration ("SEA") expenses were $43.3 million or 20.8% of sales compared to $41.3 million or 22.2% of sales in the comparable prior year quarter. The increase in spending primarily relates to higher personnel-related investments, while the year-over-year improvement in SEA expense leverage was the result of effective spending controls and higher sales.

The provision for income taxes as a percentage of earnings before income taxes for the quarter ended September 30, 2024 was 25.3% compared to 20.3% for the comparable prior year period. The prior year quarter effective tax rate included a discrete income tax benefit related to stock option exercises and restricted stock vesting transactions. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits and allowances.

As a result of the above-mentioned items, net earnings for the three months ended September 30, 2024 were $32.0 million, or $1.08 per diluted share, compared to $26.0 million, or $0.88 per diluted share, for the same period in 2023.

Results of Operations - Nine Months Ended September 30, 2024

Net Sales

The Company's net sales for the nine months ended September 30, 2024 were $621.4 million, an increase of 19.2%, compared to $521.2 million during the same period in 2023. Sales into the utility water market were $543.7 million, an increase of 22.5% from the prior year's $443.9 million. Utility water net sales grew as a result of increased adoption of smart water technologies, notably AMI. Sales increased across meters, both mechanical and ultrasonic, as well as increased ORION Cellular endpoints and BEACON SaaS revenues. Sales of products into the global flow instrumentation end markets were $77.7 million compared to the prior year's $77.3 million, an increase of 0.5%.

Earnings

Total operating earnings for the nine months ended September 30, 2024 were $118.7 million, or 19.1% of sales, compared to $86.0 million, or 16.5% of sales, in the comparable prior year period. Gross margin dollars increased $41.5 million, with gross margin as a percent of sales of 39.7%, an increase from 39.3% of sales in the prior year comparable period. Gross margin improvement was the result of increased sales volume and favorable structural product mix. SEA expenses were $127.7 million or 20.6% of sales compared to $119.0 million or 22.8% of sales in the comparable prior year period. The year-over-year improvement in SEA expense leverage was the result of effective spending controls and higher sales.

The provision for income taxes as a percentage of earnings before income taxes for the nine months ended September 30, 2024 was 24.2% compared to 23.3% for the comparable prior year period. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits and allowances.

As a result of the above-mentioned items, net earnings for the nine months ended September 30, 2024 were $94.2 million, or $3.19 per diluted share, compared to $67.9 million, or $2.30 per diluted share, for the same period in 2023.

LIQUIDITY AND CAPITAL RESOURCES

The main sources of liquidity for the Company are cash from operations and borrowing capacity. In addition, depending on market conditions, the Company may access the capital markets to strengthen its capital position and to provide additional liquidity for general corporate purposes.

Primary Working Capital

The Company uses primary working capital ("PWC") as a percentage of sales as a key metric for working capital efficiency. The Company defines this metric as the sum of Receivables and Inventories less Payables, divided by trailing twelve-month Net sales. The following table shows the components of our PWC:

		September 30, 2024		December 31, 2023
(In thousands)		$			PWC%		$			PWC%
Receivables		$	93,427			11.6%		$	83,507			11.9%
Inventories			158,517			19.7%			153,674			21.8%
Payables			(77,381	)		-9.6%			(81,807	)		-11.6%
Primary Working Capital		$	174,563			21.7%		$	155,374			22.1%

Overall, PWC increased $19.2 million compared to the previous year-end. Receivables at September 30, 2024 increased $9.9 million due to higher sales activity. Inventories increased $4.8 million due to component cost inflation, higher safety stock levels and increased sales activity. Payables at September 30, 2024 were $4.5 million less than year-end due primarily to a stabilizing inventory balance and timing of payments relative to quarter-end.

Cash Provided by Operations

Cash provided by operations in the first nine months of 2024 was $103.0 million compared to $72.2 million in the same period of 2023. Higher net earnings and favorable working capital trends contributed to the increase in cash provided by operations compared to the same period in 2023.

Property, plant and equipment expenditures for the first nine months of 2024 were $8.1 million compared to $9.9 million in the comparable prior year period.

Cash and cash equivalents increased to $259.0 million from $191.8 million at December 31, 2023, the result of the $103.0 million cash provided by operations, offset by the $3.0 million deployed to acquire the Telog/Unity net assets and payment of quarterly dividends.

The Company's credit facility includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the Company's financial flexibility including an increase feature, acquisition holiday, and favorable financial covenants. The Company was in compliance with all covenants as of September 30, 2024. The Company believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company had $154.5 million of unused credit lines available at September 30, 2024.

Other Matters

On March 6, 2024, the SEC adopted final rules to enhance disclosures pertaining to climate related risks and associated board and management governance of such risks. On April 4, 2024, the SEC voluntarily stayed implementation of the rules pending the completion of judicial review of consolidated legal challenges to the rules by the United States Court of Appeals for the Eighth Circuit. If the rules go effective as currently contemplated, disclosures will be made prospectively, with phased-in effective dates starting with fiscal years beginning on or after January 1, 2025, subject to any additional regulatory or judicial delays. Other governing bodies have passed or are considering passing related legislature requiring certain environmental, social and governance disclosures. The Company is currently assessing the impact of these changes to its consolidated financial statements.

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the

Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2023 and the first three quarters of 2024 were not material.

See the "Special Note Regarding Forward Looking Statements" at the front of this Quarterly Report on Form 10-Q and Part I, Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion of risks and uncertainties that could impact the Company's financial performance and results of operations.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company's off-balance sheet arrangements and contractual obligations are discussed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Off-Balance Sheet Arrangements" and "Contractual Obligations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023and have not materially changed since that report was filed unless otherwise indicated in this Quarterly Report on Form 10-Q.

Item 3 Quantitative and Qualitative Disclosures about Market Risk

The Company's quantitative and qualitative disclosures about market risk are included in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Market Risks" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023and have not materially changed since that report was filed.

Item 4 Controlsand Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Company's management evaluated, with the participation of the Company's Chairman, President and Chief Executive Officer and the Company's Senior Vice President - Chief Financial Officer, the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the quarter ended September 30, 2024. Based upon their evaluation of these disclosure controls and procedures, the Company's Chairman, President and Chief Executive Officer and the Company's Senior Vice President - Chief Financial Officer concluded that, as of the date of such evaluation, the Company's disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There was no change in the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II - Other Information

Item 1A RiskFactors

There have been no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

In February 2023, the Board authorized the repurchase of up to 200,000 shares of the Company's Common Stock through February 2026. The following table provides information about the Company's purchases under this repurchase program during the quarter ended September 30, 2024 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

		Total number of shares purchased			Average price paid per share			Total number of shares purchased as part of a publicly announced program			Maximum number of shares that may yet be purchased under the program
July 1, 2024 - July 31, 2024			-			$	-				-				200,000
August 1, 2024 - August 31, 2024			-			$	-				-				200,000
September 1, 2024 - September 30, 2024			-			$	-				-				200,000
Total as of September 30, 2024			-							-				200,000

Item 5 Other Information

During the third quarter of 2024, none of our directors or executive officers adoptedor terminatedany "Rule 10b5-1 trading arrangement" or non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408(a) of Regulation S-K).

Item 6Exhibits

EXHIBIT INDEX

Exhibit No.		Description
31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, (v) the Consolidated Condensed Statements of Shareholders' Equity, (vi) Notes to Unaudited Consolidated Condensed Financial Statements, tagged as blocks of text and including detailed tags and (vii) the information in Part II, Item 5 Other Information.
104		Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BADGER METER, INC.
Dated: October 18, 2024		By		/s/ Kenneth C. Bockhorst
				Kenneth C. Bockhorst
				Chairman, President and Chief Executive Officer
		By		/s/ Robert A. Wrocklage
				Robert A. Wrocklage
				Senior Vice President - Chief Financial Officer
		By		/s/ Daniel R. Weltzien
				Daniel R. Weltzien
				Vice President - Controller

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