Badger Meter, Inc. Q1 FY2026 earnings call

Operate in a market with strong long-term macro drivers. Revenue in 2026 weighted toward back half due to project pacing. Short-cycle order rates weaker than expected. Robert explained project dynamics. Acquired UDLive to complement SmartCover. Implemented cost reduction actions like 10% salary reduction for executives.

First quarter sales were down 9% year over year to $202 million. Utility water sales declined 10% year over year. Lower metering product revenue was partially offset by increased BEACON SaaS, SmartCover, water quality, and network monitoring product revenues. Flow instrumentation product line sales were down 4% year over year. Gross margin was 41.7%, down 120 basis points. Selling, engineering, and administrative expenses were $49.2 million, increasing $3.1 million year over year. Operating earnings were approximately $35.2 million and operating margin was 17.4%. Diluted earnings per share were $0.93. Primary working capital as a percentage of sales decreased. Generated strong free cash flow of about $30 million. Repurchased 256 thousand shares for $38 million.

Expect full-year 2026 organic revenue to be on balance with 2025. Second quarter 2026 organic revenue dollars to sequentially improve from Q1 but be down year over year. Anticipate sequential improvement in absolute quarterly revenue dollars as year progresses.

Uncertainty in project pacing. Unpredictability of short-cycle orders. Tariff and supply chain risks.

Q: Short-cycle orders had $15M to $20M less than expected. Any color?

A: Variability is normal, not one specific thing.

Q: Confidence in PRASA ramping?

A: Higher confidence with PO and installation partners lined up.

Q: Risk of late second-half starts pushing into 2027?

A: Additional transparency, confidence higher closer to deployment.

Q: What drives short-cycle mix?

A: Majority of business is short cycle, utilities order when they want.

Q: Short-cycle order weakness timing-related?

A: Flat organic outlook contemplates some recovery, but least visibility.

Q: Gross margin trend?

A: Still confident in 39%-42% range, mix factors may exist.

Q: Section 232 tariffs impact?

A: Tariff exposure not changed much.

Q: Volumes of meters?

A: Revenue driven by many factors, hard to draw specific conclusion.

Q: Awarded projects competitive conversions?

A: Portfolio, cellular AMI leadership, software enabled market share conversion.

Q: Inherent variability risk to outlook?

A: Business only moves right, expect some recovery.

Q: Project connections relative to volumes?

A: 2.6M - 3.6M connections more than previous 800k.

Q: Connected sewer market penetration?

A: Early adoption, real problems, regulation driving.

Q: Project deployment timing predictability?

A: Variability due to labor, utilities' priorities.

Q: Incremental margin?

A: SEA leverage still interesting, gross margins and SEA managed.

Q: Price trend on competitively bid projects?

A: Not comment on price project to project.