BusinessWire

Badger Meter Reports Third Quarter 2020 Results

MILWAUKEE--(BUSINESS WIRE)--Badger Meter, Inc. (NYSE: BMI) today reported results for the third quarter ended September 30, 2020.


Third Quarter 2020 Highlights

  • Resiliency of municipal water market evident with consolidated third quarter 2020 sales of $113.6 million, an increase of 5% compared to $108.6 million in the comparable prior year quarter; municipal water sales grew 11% year-over-year.
  • Strong incremental profitability with a 210 basis point increase in operating profit margins.
  • Net earnings and diluted earnings per share (EPS) were $14.9 million and $0.51, respectively, compared to $12.7 million and $0.44 in the comparable prior year period.
  • Generated $21 million of cash provided by operations representing strong earnings conversion, ending the quarter with $94 million in cash on the balance sheet.

Overview

“During the quarter, we continued to effectively serve customers while protecting the health, safety and well-being of our employees and communities. We were pleased with the stability of municipal water order rates from the second quarter trough, and with the performance of our manufacturing operations which recovered productivity and output. My thanks go to all the Badger Meter employees who continue to adeptly serve our customers and keep our operations running safely and efficiently,” said Kenneth C. Bockhorst, Chairman, President and CEO of Badger Meter.

Third Quarter Operating Results

Municipal water sales increased 11% over the comparable prior year quarter. Improving order rates, as well as the conversion of backlog built last quarter, the result of modest manufacturing interruptions resulting from the rapid onset of COVID-19, contributed approximately equally to the sales growth in the quarter. Demand for ultrasonic meter technology and ORION® Cellular radios continued to grow, and existing AMI (advanced metering infrastructure) project installation schedules progressed. Sales of flow instrumentation products were 18% lower year-over-year, as the anticipated weakness across the varied industrial end markets served continued.

Operating margins of 17.2% were 210 basis points higher than the prior year’s 15.1%. Gross profit margins were strong at 39.6%, a 120 basis point increase over the prior year’s 38.4%. The favorable product sales mix trend continued with higher software-as-a-service (SaaS), cellular radio and ultrasonic meter sales benefitting margins. In addition, the prior year included a discrete, non-recurring warranty provision for a previously installed product solution outside North America.

Selling, engineering and administration (“SEA”) expenses in the third quarter of 2020 of $25.5 million increased a modest $0.3 million from the prior year’s $25.2 million as higher personnel costs were partially offset by lower travel and other pandemic-impacted expenses. SEA leverage improved to 22.5% from 23.2% in the comparable prior year quarter. The tax rate of 23.9% was slightly higher than the prior year’s 22.1%.

“In summary, I am proud of how our team performed in a coordinated and collaborative way. We continue to make strong progress on our strategic growth plans and providing the best service possible to customers, while doing our part to limit the spread of COVID-19,” stated Bockhorst.

Outlook

“As we look ahead, we will continue to adapt to and execute through the far-reaching implications of the pandemic. While there have been sporadic, short-term award delays, we have not experienced cancellations and our backlog and bid funnel of attractive opportunities remains solid. Unsettled market conditions and related customer budget uncertainty, primarily in North America, could impact a portion of our large and diverse customer base, however, we anticipate the critical municipal water industry in general will be more resilient, on a relative basis. End markets and product applications served by the flow instrumentation product line are expected to remain challenged.

We believe our long term opportunities for growth remain intact, and COVID-19 has spotlighted some of the benefits of our smart water solutions including remote-read AMI offerings and remote-actuated flow control meters. Our infrastructure-free ORION® Cellular radios and BEACON® software solution enable the safe, efficient and sustainable delivery of actionable data and insights to utilities allowing for remote monitoring and control of critical operations. We are well-positioned to further augment these data-driven technology solutions and help our customers resourcefully address their varied challenges.

While we cannot control the cadence of orders, we can and will build on our successes from the first nine months of the year and leverage those in the fourth quarter and into 2021. Our strong cash generation and balance sheet allow us to nimbly execute our capital allocation strategy. This involves investing to grow our business organically and through acquisitions that are consistent with our vision and objectives, as well as returning cash to shareholders via dividends, with this past August marking the 28th consecutive year of increased dividends.”

Bockhorst concluded, "Badger Meter has performed well during the pandemic due to the resiliency of our end markets and the competitive advantages we have created with our innovative offerings. With our deep customer and supplier relationships, incredible employees and relentless innovation focus, I am confident in our long term growth prospects. As the world evolves with the pandemic, we remain focused on our goal of protecting 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 2020 results today, Friday October 16, 2020 at 10:00 AM Central/11:00 AM Eastern time. The call and related presentation can be accessed via webcast through the Investor section of our website. Participants can also register to take part in the call using this online registration link: http://www.directeventreg.com/registration/event/4885843. After registering, instructions will be shared on how to join the call. If online registration is unavailable, registration can also be accomplished by calling 888-869-1189 or 706-643-5902 and providing the conference ID number: 4885843. 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 duration, severity and geographic spread of the COVID-19 pandemic, government actions to address or mitigate the impact of the COVID-19 pandemic, and the potential 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

Badger Meter is an innovator in flow measurement, control and communications solutions, serving water utilities, municipalities, and commercial and industrial customers worldwide. The company’s products measure water and other fluids, and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data. 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,

2020

2019

2020

2019

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 
Net sales

$

113,587

 

$

108,646

$

313,214

$

317,069

 
Cost of sales

 

68,564

 

 

66,976

 

189,019

 

194,666

 
Gross margin

 

45,023

 

 

41,670

 

124,195

 

122,403

 
Selling, engineering and administration

 

25,509

 

 

25,225

 

76,001

 

76,598

 
Operating earnings

 

19,514

 

 

16,445

 

48,194

 

45,805

 
Interest (income) expense, net

 

(46

)

 

66

 

18

 

280

Other pension and postretirement costs

 

21

 

 

41

 

109

 

123

 
Earnings before income taxes

 

19,539

 

 

16,338

 

48,067

 

45,402

 
Provision for income taxes

 

4,678

 

 

3,617

 

11,818

 

10,499

 
Net earnings

$

14,861

 

$

12,721

$

36,249

$

34,903

 
Earnings per share:
 

Basic

$

0.51

 

$

0.44

$

1.25

$

1.20

 

Diluted

$

0.51

 

$

0.44

$

1.24

$

1.19

 
Shares used in computation of earnings per share:
 

Basic

 

29,048,683

 

 

29,013,573

 

29,049,675

 

29,022,080

 

Diluted

 

29,220,497

 

 

29,193,338

 

29,219,537

 

29,215,192

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

Assets

September 30,

December 31,

2020

2019

(Unaudited)

 
Cash and cash equivalents

$

93,901

$

48,871

Receivables

 

57,706

 

61,365

Inventories

 

76,987

 

81,948

Other current assets

 

4,156

 

7,910

Total current assets

 

232,750

 

200,094

 
Net property, plant and equipment

 

82,435

 

85,761

Intangible assets, at cost less accumulated amortization

 

42,884

 

48,163

Other long-term assets

 

19,309

 

16,617

Goodwill

 

71,258

 

71,258

Total assets

$

448,636

$

421,893

 
 

Liabilities and Shareholders' Equity

 
Short-term debt

$

-

$

4,480

Payables

 

37,791

 

31,523

Accrued compensation and employee benefits

 

12,671

 

12,754

Other current liabilities

 

9,730

 

8,490

Total current liabilities

 

60,192

 

57,247

 
Deferred income taxes

 

2,649

 

876

Long-term employee benefits and other

 

34,252

 

32,702

Shareholders' equity

 

351,543

 

331,068

Total liabilities and shareholders' equity

$

448,636

$

421,893

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,

2020

2019

2020

2019

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Operating activities:
Net earnings

$

14,861

 

$

12,721

 

$

36,249

 

$

34,903

 

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

 

3,154

 

 

2,625

 

 

9,132

 

 

8,688

 

Amortization

 

3,320

 

 

3,026

 

 

9,803

 

 

9,323

 

Deferred income taxes

 

9

 

 

33

 

 

401

 

 

18

 

Noncurrent employee benefits

 

114

 

 

117

 

 

571

 

 

(150

)

Stock-based compensation expense

 

336

 

 

328

 

 

1,041

 

 

882

 

Changes in:
Receivables

 

(3,454

)

 

(1,473

)

 

3,184

 

 

4,555

 

Inventories

 

118

 

 

(1,694

)

 

5,188

 

 

(4,259

)

Payables

 

2,599

 

 

1,744

 

 

(2,175

)

 

10,885

 

Prepaid expenses and other current assets

 

(575

)

 

(1,860

)

 

6,485

 

 

(5,806

)

Other current liabilities

 

910

 

 

4,669

 

 

3,799

 

 

2,100

 

Total adjustments

 

6,531

 

 

7,515

 

 

37,429

 

 

26,236

 

Net cash provided by operations

 

21,392

 

 

20,236

 

 

73,678

 

 

61,139

 

 
Investing activities:
Property, plant and equipment expenditures

 

(2,276

)

 

(1,123

)

 

(5,855

)

 

(5,589

)

Net cash used for investing activities

 

(2,276

)

 

(1,123

)

 

(5,855

)

 

(5,589

)

 
Financing activities:
Net decrease short-term debt

 

(4,600

)

 

-

 

 

(4,600

)

 

(13,500

)

Payment of contingent acquisition consideration

 

-

 

 

-

 

 

-

 

 

(1,650

)

Dividends paid

 

(5,230

)

 

(4,936

)

 

(15,108

)

 

(13,652

)

Proceeds from exercise of stock options

 

27

 

 

215

 

 

505

 

 

963

 

Repurchase of treasury stock

 

(61

)

 

(522

)

 

(2,934

)

 

(3,358

)

Issuance of treasury stock

 

33

 

 

46

 

 

126

 

 

142

 

Net cash used for financing activities

 

(9,831

)

 

(5,197

)

 

(22,011

)

 

(31,055

)

Effect of foreign exchange rates on cash

 

(585

)

 

(82

)

 

(782

)

 

147

 

 
Increase in cash and cash equivalents

 

8,700

 

 

13,834

 

 

45,030

 

 

24,642

 

Cash and cash equivalents - beginning of period

 

85,201

 

 

23,894

 

 

48,871

 

 

13,086

 

 
Cash and cash equivalents - end of period

$

93,901

 

$

37,728

 

$

93,901

 

$

37,728

 

 


Contacts

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