BMI — Badger Meter, Inc.

Badger Meter, Inc. Q1 2026 Earnings Call Summary

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 order rates.
• Gross Margin: 41.7%, down 120 basis points from the previous year, primarily due to product mix.
• Operating Earnings: Approximately $35.2 million, with an operating margin of 17.4%, compared to 22.2% in Q1 2025.
• Diluted Earnings Per Share: $0.93, down from $1.30 in the prior year.
• Free Cash Flow: Approximately $30 million, consistent with 2025 levels.
• Share Repurchase: 256,000 shares repurchased for $38 million, with $115 million remaining on the authorization.

2. Strategic Updates and Business Highlights

• The company announced the acquisition of UDLive for $100 million, enhancing its sewer line monitoring capabilities and expected to be EPS accretive in the first year.
• Emphasis on the growth of BEACON SaaS, SmartCover, and network monitoring products, which showed revenue increases despite overall declines in utility water sales.
• Continued focus on advanced metering infrastructure (AMI) projects, with a significant backlog of awarded projects expected to ramp up in the second half of 2026.

3. Forward Guidance and Outlook

• Full-year 2026 organic revenue is expected to be in line with 2025, with a back-half weighting as awarded AMI projects advance.
• Anticipated sequential improvement in revenue in Q2, although still expected to be down year-over-year against a record Q2 2025.
• The company maintains a long-term view of high single-digit growth, with expectations of improved momentum heading into 2027.

4. Challenges and Points of Concern

• Revenue Decline: The 9% drop in sales reflects a combination of project pacing and weaker short-cycle order rates, leading to approximately $15 million to $20 million lower revenue than anticipated.
• Market Variability: The company acknowledged inherent variability in short-cycle orders, which may continue to affect revenue visibility.
• Project Timing Risks: Concerns about potential delays in project deployments, particularly with large projects like PRASA, which could impact revenue timing.
• Increased SEA Expenses: Selling, engineering, and administrative expenses rose due to transaction costs related to the UDLive acquisition and higher personnel costs.

5. Notable Q&A Insights

• Management clarified that the short-cycle order weakness is timing-related rather than indicative of a structural market change.
• Confidence in the PRASA project has increased with the receipt of the first purchase order and alignment of installation partners.
• Questions about pricing trends indicated variability across projects, with management refraining from commenting on specific project pricing.
• The company emphasized that the metering industry inherently experiences variability, and while current conditions are challenging, they do not foresee long-term declines in demand.

Overall, Badger Meter, Inc. is navigating a challenging start to 2026 with expectations of recovery in the latter half of the year, supported by strategic acquisitions and a strong pipeline of projects.