BMI — Badger Meter, Inc.

Summary of Badger Meter, Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Total Sales: $202 million, down 9% year-over-year.
• Utility Water Sales: Declined 10% year-over-year due to project pacing and weaker short-cycle orders.
• Gross Margin: 41.7%, down 120 basis points from 2025, but remains robust.
• Operating Earnings: Approximately $35.2 million, with an operating margin of 17.4%, compared to 22.2% in the prior year.
• Diluted Earnings Per Share: $0.93, down from $1.30 year-over-year.
• Free Cash Flow: Approximately $30 million.
• Share Repurchases: 256,000 shares for $38 million, with $115 million remaining on the repurchase authorization.

2. Strategic Updates and Business Highlights

• Market Position: Badger Meter is positioned well in a market with strong long-term drivers, including recurring replacement cycles and advanced technology adoption.
• Acquisition of UDLive: Announced a $100 million acquisition of UDLive, enhancing sewer line monitoring capabilities and expected to be accretive to EPS in the first year.
• Project Pipeline: Highlighted a significant pipeline of awarded AMI projects expected to begin deployment in 2026, with a potential of 2.6 million to 3.6 million connections over multiple years.
• Beyond-the-Meter Growth: Notable growth in BEACON SaaS and other product lines, which partially offset declines in metering product revenues.

3. Forward Guidance and Outlook

• 2026 Revenue Outlook: Anticipated to be in line with 2025, with expectations for a stronger second half as awarded projects advance into deployment.
• Q2 Expectations: Revenue expected to sequentially improve from Q1 but down year-over-year against a record Q2 in 2025.
• Long-term Growth: Management remains optimistic about returning to a growth trajectory in 2027, supported by ongoing project deployments and market demand.

4. Bad News, Challenges, or Points of Concern

• Revenue Decline: The 9% year-over-year decline in sales reflects project pacing and weaker short-cycle order rates, resulting in approximately $15 million to $20 million lower revenue than expected.
• Short-Cycle Order Weakness: The company noted inherent variability in short-cycle orders, which could pose risks to revenue if trends do not improve.
• Gross Margin Pressure: While margins remain strong, there is concern about the potential impact of project mix on profitability as new projects ramp up.

5. Notable Q&A Insights

• Short-Cycle Orders: Management emphasized that the decline in short-cycle orders is timing-related and not indicative of a structural change in demand.
• PRASA Project Confidence: Increased confidence in the PRASA project ramp-up due to secured purchase orders and lined-up installation partners, despite historical concerns about the Puerto Rican government's reliability.
• Competitive Landscape: Management noted successful competitive conversions, highlighting the strength of their technology and market position.
• Tariff Implications: Minimal impact from recent tariff changes, with the company managing supply chain costs effectively.

Overall, while Badger Meter faced challenges in Q1 2026, management remains optimistic about future growth driven by a strong project pipeline and strategic acquisitions.