Business Wire | Oct 15, 2021 08:30AM EDT

Badger Meter Reports Record Third Quarter 2021 Results

Oct. 15, 2021

MILWAUKEE--(BUSINESS WIRE)--Oct. 15, 2021--Badger Meter, Inc. (NYSE: BMI) today reported results for the third quarter ended September 30, 2021.

Third Quarter 2021 Highlights

* Total sales increased 13.3% to a record $128.7 million, compared to $113.6 million in the comparable prior year quarter. * Diluted earnings per share ("EPS") were a record $0.54 compared to $0.51 in the comparable prior year period. * Announced the 29th consecutive increase in the annual dividend rate. * Solid cash flow from operations of $17.7 million. * Continued strong demand environment and record high order backlog exiting the quarter.

"I am pleased with Badger Meter's strong performance in the quarter, delivering record sales and earnings amid persistent and widespread supply chain shortages and delays. The results are notable considering the difficult prior year comparisons," said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. "Throughout the quarter, we took a variety of strategic actions to continue serving our customers in the face of ongoing electronic and other component delays. Additionally, we continue to combat increasing inflationary cost pressures across the business. The strong order progression across our portfolio of innovative water solutions provides us with a record backlog which bodes well for continued sales and earnings momentum as we enter the fourth quarter. I want to thank the Badger Meter team for their tireless efforts to work to temper the impact of the various macroeconomic challenges in support of our customers."

Third Quarter Operating Results

Utility water sales increased 12.2% year-over-year, the result of strong order activity and the addition of the water quality acquisitions, partially offset by the impact of supply chain disruptions that limited manufacturing output. Excluding acquisitions, core utility water sales increased 1.7% over the strong prior year quarter which benefitted from post-COVID lockdown backlog recovery. The growth was due to increased mechanical meter and ORION(r) Cellular endpoint sales as well as increased BEACON(r) SaaS revenue, despite the insufficient supply of electronic and other components which impacted the conversion of utility water orders to net sales.

Sales of flow instrumentation products grew 18.5% year-over-year as improved demand and easier comparisons benefitted orders across the varied water and industrial end markets and applications served.

Gross margin dollars increased $6.2 million year-over-year, with gross margin as a percent of sales of 39.8%, an increase of 20 basis points over the prior year comparable quarter. The Company executed well on pricing realization and manufacturing output optimization in the face of inflationary cost pressures across the supply chain including raw materials, logistics and freight as well as production volatility caused by restricted component availability. Gross margins benefitted from favorable product and acquisition mix, including higher SaaS revenues.

Selling, engineering and administration expenses in the third quarter of 2021 of $31.7 million increased $6.2 million from the prior year's $25.5 million, which included the benefit of lower travel and other pandemic-impacted expense reductions. The current year expense total includes the water quality acquisitions, including the related intangible asset amortization.

As a result of the above, operating margin was 15.1%, a reduction of 210 basis points from the prior year's record level. The tax rate of 18.3% was lower than the prior year's 23.9% due to a discrete favorable income tax benefit related to equity compensation transactions.

Strategic Overview and Outlook

Bockhorst continued, "We are capitalizing on the strong demand for our hardware, communication and digital solutions, including our infrastructure-free ORION(r) Cellular endpoints and BEACON(r) software, to help customers be more efficient, effective, and sustainable with water. We remain focused on converting our record order backlog to net sales by working to mitigate the impact of various supply shortages and delays. We anticipate the component shortages and lengthened lead times will ease over time, but assume they will persist well into 2022.

"At the same time we are navigating the current supply chain complexities, we continue to be acutely focused on developing digital solutions that we believe will broaden our competitive advantages. This includes the integration of our water quality monitoring offerings and execution of related digital growth strategies. Our strong cash flow and credit availability provide us with ample financial flexibility to execute our capital allocation priorities, including the recent increase in the annual dividend, and continued investment in growth."

Bockhorst concluded, "I want to thank our customers for partnering with us to navigate the current environment while working together to solve their water management needs with our proven portfolio of solutions. We are in an excellent position to deliver on our long term strategic and financial goals which we believe will deliver value for shareholders while preserving 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 2021 results today, Friday October 15, 2021 at 10:00 AM Central/11:00 AM Eastern time. The call and related presentation can be accessed via the Investor section of the Company's website. Participants can also register to take part in the call using this online registration link: https://www.incommglobalevents.com/registration/q4inc/8781/badger-meter-inc-third-quarter-2021-earnings-conference-call/.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. The words "anticipate," "believe," "estimate," "expect," "think," "should," "could" and "objective" or similar expressions are intended to identify forward looking statements. All such forward looking statements are based on the company's then current views and assumptions and involve risks and uncertainties. Potential factors that could affect such forward-looking statements include the duration and severity of the COVID-19 pandemic and its impact on the company's operations and those of our customers and suppliers. Other potential factors include the company's ability to develop and manufacture technologically advanced products that are accepted by the market, supply chain risk, legal and regulatory risks, political and general economic risks, risks related to doing business in foreign countries, including foreign currency risk, competition for skilled employees, material and labor cost increases, competitive pricing and operating efficiencies, the effects of climate change, cybersecurity attacks and disruptions to our information technology and the successful integration of acquisitions. See the company's Form 10-K filed with the SEC for further information regarding risk factors, which are incorporated herein by reference. The company 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

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters. These offerings provide our customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world's most precious resource. 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 September September September 30, 30, 30, 30,

2021 2020 2021 2020

(Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $ 128,738 $ 113,587 $ 369,449 $ 313,214

Cost of sales 77,554 68,564 218,801 189,019

Gross margin 51,184 45,023 150,648 124,195

Selling, 31,744 25,509 94,786 76,001engineering and administration Operating earnings 19,440 19,514 55,862 48,194

Interest expense 14 (46) 28 18(income), netOther pension and 30 21 90 109postretirement costs Earnings before 19,396 19,539 55,744 48,067income taxes Provision for 3,541 4,678 12,136 11,818income taxes Net earnings $ 15,855 $ 14,861 $ 43,608 $ 36,249

Earnings per share: Basic $ 0.54 $ 0.51 $ 1.50 $ 1.25

Diluted $ 0.54 $ 0.51 $ 1.49 $ 1.24

Shares used incomputation of earnings per share: Basic 29,157,628 29,048,683 29,124,491 29,049,675

Diluted 29,341,832 29,220,497 29,324,534 29,219,537

BADGER METER, INC. CONSOLIDATED CONDENSED BALANCE SHEETS(in thousands) Assets September December 30, 31,

2021 2020

(Unaudited)

Cash and cash equivalents $ 67,038 $ 72,273

Receivables 73,747 61,689

Inventories 91,824 81,586

Other current assets 9,103 5,303

Total current assets 241,712 220,851

Net property, plant and equipment 79,941 82,705

Intangible assets, at cost less accumulated 67,076 53,598amortizationOther long-term assets 21,592 22,518

Goodwill 104,726 88,708

Total assets $ 515,047 $ 468,380

Liabilities and Shareholders' Equity

Payables $ 42,408 $ 34,923

Accrued compensation and employee benefits 18,874 14,617

Other current liabilities 14,573 15,659

Total current liabilities 75,855 65,199

Deferred income taxes 5,998 5,696

Long-term employee benefits and other 41,370 36,226

Shareholders' equity 391,824 361,259

Total liabilities and shareholders' equity $ 515,047 $ 468,380

BADGER METER, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS(in thousands) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30,

2021 2020 2021 2020

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Operating activities: Net earnings $ 15,855 $ 14,861 $ 43,608 $ 36,249

Adjustments to reconcile net earningsto net cash provided by operations:Depreciation 2,756 3,154 8,619 9,132

Amortization 4,270 3,320 12,358 9,803

Deferred income taxes (3 ) 9 42 401

Noncurrent employee 72 114 232 571 benefitsStock-based 590 336 1,537 1,041 compensation expenseChanges in: Receivables (10,607 ) (3,454 ) (8,985 ) 3,184

Inventories (873 ) 118 (5,685 ) 5,188

Payables 2,054 2,599 7,420 (2,175 )

Prepaid expenses and (4,083 ) (575 ) (5,342 ) 6,485 other current assetsOther liabilities 7,660 910 8,956 3,799

Total adjustments 1,836 6,531 19,152 37,429

Net cash provided by 17,691 21,392 62,760 73,678 operations Investing activities: Property, plant and (3,791 ) (2,276 ) (8,169 ) (5,855 )equipment expendituresProceeds from company 596 - 596 - owned life insurance plansAcquisitions, net of (767 ) - (45,273 ) - cash acquiredNet cash used for (3,962 ) (2,276 ) (52,846 ) (5,855 )investing activities Financing activities: Net decrease short-term - (4,600 ) - (4,600 )debtDividends paid (5,838 ) (5,230 ) (16,317 ) (15,108 )

Proceeds from exercise 1,684 27 2,036 505 of stock optionsRepurchase of treasury - (61 ) (460 ) (2,934 )stockIssuance of treasury - 33 72 126 stockNet cash used for (4,154 ) (9,831 ) (14,669 ) (22,011 )financing activitiesEffect of foreign 104 (585 ) (480 ) (782 )exchange rates on cash Increase (decrease) in 9,679 8,700 (5,235 ) 45,030 cash and cash equivalentsCash and cash 57,359 85,201 72,273 48,871 equivalents - beginning of period Cash and cash $ 67,038 $ 93,901 $ 67,038 $ 93,901 equivalents - end of period View source version on businesswire.com: https://www.businesswire.com/news/home/20211015005064/en/

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