Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Badger Meter Inc (BMI, Financial) reported a strong 12% year-over-year top-line sales growth in the third quarter, despite challenging comparisons.
- The company achieved record operating margins of 19.5%, with both gross margin expansion and SEA leverage contributing.
- Software as a service revenues increased approximately 35% in the quarter, highlighting the growing customer reliance on their BEACON digital solution.
- Badger Meter Inc (BMI) generated record quarterly free cash flow of $42 million, a 48% increase from the prior year.
- The company continues to see strong demand for its BlueEdge suite of utility smart water solutions, with utility water product line sales increasing 14% year-over-year.
Negative Points
- Sales for the flow instrumentation product line were flat in the quarter, indicating challenges in certain end markets.
- The company anticipates fewer customer operating days in the fourth quarter due to the US holiday season, which could impact sales.
- Hurricane-related recovery activities in the Southeastern US have the potential to temporarily delay certain utility projects.
- The income tax provision increased to 25.3% from 20.3% in the prior year, impacting net earnings.
- Despite strong performance, the company acknowledges the potential for unevenness in sales growth due to external factors like weather events and market conditions.
Q & A Highlights
Q: Can you provide insights into the sales growth expectations for 2025, considering the strong performance in recent years?
A: Kenneth Bockhorst, Chairman, President, and CEO, stated that while growth can be uneven year-to-year, they feel strong going into 2025. They are not signaling any expected weakness and remain confident in their strategic cycle and market dynamics.
Q: What were the primary drivers for the margin improvements this quarter?
A: Robert Wrocklage, CFO, explained that the margin improvements were driven by a combination of increased unit volumes, ASP and customer mix, and positive price/cost management.
Q: How might the recent hurricanes in the Southeastern US impact Badger Meter's business?
A: Kenneth Bockhorst noted that while there could be temporary delays in projects, they do not expect cancellations. The company has strong direct relationships with customers, which provides insights into potential impacts.
Q: Can you elaborate on the growth in SaaS revenues and its drivers?
A: Robert Wrocklage highlighted that the growth in SaaS revenues is primarily driven by a 100% attachment rate to hardware sales, particularly ORION cellular radios. Additional contributions come from water quality and leak detection devices.
Q: How is Badger Meter leveraging its BlueEdge portfolio to enhance customer offerings?
A: Kenneth Bockhorst explained that BlueEdge allows Badger Meter to offer tailored solutions to customers based on their technological journey. This approach facilitates cross-selling and bundling of products and services, enhancing customer engagement and satisfaction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
