Business Wire | Jan 28, 2022 08:30AM EST

Badger Meter Reports Fourth Quarter and Full Year 2021 Results; Sales Surpass $500 Million Milestone

Jan. 28, 2022

MILWAUKEE--(BUSINESS WIRE)--Jan. 28, 2022--Badger Meter, Inc. (NYSE: BMI) today reported results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Highlights

* Record total sales of $135.7 million, an increase of 21% compared to $112.3 million in the comparable prior year quarter. * Strong incremental profitability with a 170 basis point increase in operating profit margins. * Diluted earnings per share (EPS) were $0.59, a 31% increase compared to $0.45 in the comparable prior year period. * Robust $27.1 million of cash provided by operations. * Strong order momentum continued, exited quarter with a record backlog.

Full Year 2021 Highlights

* Full year 2021 record sales of $505.2 million, 19% higher than $425.5 million in 2020. * Operating profit margins increased year-over-year by 30 basis points despite widespread supply chain and inflation dynamics. * EPS increased 23% to $2.08 compared to $1.69 in the comparable prior year period. * $87.5 million of cash provided by operations.

"The fourth quarter was an excellent finish to an outstanding year, where we achieved record financial results and surpassed $500 million in annual revenues," said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. "These results reflect the combination of strong demand and order momentum for our innovative smart water solutions, successful water quality acquisition integration activities, relentless execution in the face of acute supply-chain challenges and a world-class team committed to serving customers. We faced many challenges in 2021 and I am extremely proud of how our worldwide team rose to the occasion time and again."

Fourth Quarter Operating Results

Utility water sales increased a robust 23.4% year-over-year, the result of strong order activity, backlog conversion and water quality acquisition-related sales. Excluding the year-over-year sales benefit from acquisitions of approximately $9 million, core utility water sales increased 14.4% over the prior year comparable quarter and established a new quarterly record. The growth was due to higher ORION(r) Cellular endpoint sales as well as increased BEACON(r) SaaS revenue. Backlog grew as continued strong order momentum more than offset recovering production output, as intermittent supply chain limitations continued to impact full conversion of utility water orders to net sales.

Sales of flow instrumentation products grew 8.9% year-over-year as improved demand and easier comparisons across the varied end markets was partially offset by the impact of supply chain disruptions that limited manufacturing output.

Gross margin increased $10.8 million year-over-year, with gross margin as a percent of sales of 40.4%, an increase of 120 basis points over the prior year comparable quarter. The Company executed well on pricing realization and manufacturing output optimization in the face of prevalent inflationary pressures and production volatility caused by restricted component availability. Gross margins benefitted from favorable product and acquisition mix, including higher SaaS revenues. The prior year included a non-recurring discrete network sunset provision benefitting the year-over-year comparison.

Selling, engineering and administration ("SEA") expenses in the fourth quarter of 2021 were $32.0 million, or 23.6% as a percent of sales, compared to $27.1 million, and 24.1% in the comparable prior year quarter. The year-over-year increase in expenses is primarily the result of the addition of the water quality acquisitions, including the related intangible asset amortization as well as higher compensation expenses. Additionally, certain pandemic-impacted expenses such as travel, returned to more normalized levels.

As a result of the above, operating margin was 16.8%, a 170 basis point increase from the prior year's 15.1%. The tax rate of 24.5% was higher than the prior year's 22.6%.

Full Year Recap and Outlook

Bockhorst continued, "We achieved record sales and earnings in fiscal 2021, and I am proud of the way Badger Meter employees came together to generate these strong results while navigating supply chain complexities, inflation and continued challenges from the pandemic. We capitalized on strong customer demand trends for our leading water instrumentation and software offerings. Through disciplined execution, we were are able to differentiate our performance, enhance our competitive position, and deliver for our customers."

"Badger Meter ended 2021 with strong demand for our smart water solutions, and we are well positioned to continue to capitalize on the opportunities in front of us. Our record backlog and order momentum continue to benefit from positive industry fundamentals, including customer requirements to enhance operational efficiency, security and awareness. Leveraging our industry-leading ORION Cellular endpoints and our BEACON digital platform, Badger Meter is transforming our engagement with customers, enabling their ability to address water-related challenges. We remain focused on growth by leveraging innovative technologies, driving higher recurring software revenues and investing in developing robust digital solutions across the water eco-system."

"Looking ahead, sporadic supply chain disruptions and inflation headwinds are expected to continue in the near term. Our teams have demonstrated nimbleness in the face of these challenges in the past, and by sustaining this execution momentum, we expect to continue to deliver strong financial results."

Bockhorst concluded, "I want to thank our employees for putting us in an admirable position for continued success as we start the new year. We have an excellent balance sheet, enabling us to execute our growth strategies including enhancing our digital solutions portfolio, and expanding our employee talent base to address the attractive long-term growth opportunities in our market. We remain excited about the road ahead as we work to preserve and protect the world's most precious resource."

Conference Call and Webcast Information

Badger Meter management will hold a conference call to discuss the company's 2021 results today, Friday January 28, 2022 at 10:00 AM Central/11:00 AM Eastern time. The call and related presentation can be accessed via webcast through the Investor section of our website. Participants can also register to take part in the call using this online registration link: https://events.q4inc.com/attendee/473741639. 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. Potential factors that could affect such forward-looking statements include the duration, severity and geographic spread of the COVID-19 pandemic, government actions to address or mitigate the impact of the COVID-19 pandemic, and the potential negative impacts of COVID-19 on the global economy, the company's operations and those of our customers and suppliers. In addition, the company's results are subject to general economic conditions, variation in demand from customers, continued market acceptance of new products, the successful integration of acquisitions, competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, tax reform and foreign currency risk. See the company's Form 10-K filed with the Securities and Exchange Commission for further information regarding risk factors, which are incorporated herein by reference. Badger Meter 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 December Twelve Months Ended 31, December 31,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Net sales $ 135,748 $ 112,329 $ 505,198 $ 425,544

Cost of 80,913 68,274 299,714 257,295sales Gross 54,835 44,055 205,484 168,249margin Selling, engineering 31,975 27,093 126,761 103,093and administration Operating 22,860 16,962 78,723 65,156earnings Interest (income) (49) 12 (20) 30expense, netOther pension and 30 36 120 145postretirement costs Earnings before 22,879 16,914 78,623 64,981income taxes Provision for 5,603 3,820 17,739 15,638income taxes Net $ 17,276 $ 13,094 $ 60,884 $ 49,343earnings Earnings pershare: Basic $ 0.59 $ 0.45 $ 2.09 $ 1.70

Diluted $ 0.59 $ 0.45 $ 2.08 $ 1.69

Shares used incomputation ofearnings per share: Basic 29,194,121 29,057,249 29,144,160 29,052,301

Diluted 29,367,693 29,257,929 29,337,586 29,229,868

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

2021 2020

(Unaudited)

Cash and cash equivalents $ 87,174 $ 72,273

Receivables 65,866 61,689

Inventories 99,611 81,586

Other current assets 8,709 8,140

Total current assets 261,360 223,688

Net property, plant and equipment 78,050 82,705

Intangible assets, at cost less accumulated 64,176 53,598amortizationOther long-term assets 22,919 22,518

Goodwill 104,313 88,708

Total assets $ 530,818 $ 471,217

Liabilities and Shareholders' Equity

Payables $ 41,859 $ 34,923

Accrued compensation and employee benefits 20,644 14,617

Other current liabilities 19,643 18,496

Total current liabilities 82,146 68,036

Deferred income taxes 5,385 5,696

Long-term employee benefits and other 40,217 36,226

Shareholders' equity 403,070 361,259

Total liabilities and shareholders' equity $ 530,818 $ 471,217

BADGER METER, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS(in thousands) Three Months Ended Twelve Months Ended December 31, December 31,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Operating activities:Net earnings $ 17,276 $ 13,094 $ 60,884 $ 49,343

Adjustments to reconcilenet earnings to net cash provided by operations:Depreciation 2,672 3,121 11,291 12,253

Amortization 4,213 3,160 16,571 12,963

Deferred income taxes (3,066) (3,483) (3,025) (3,082)

Noncurrent employee (466) (365) (234) 206benefitsStock-based compensation 793 374 2,330 1,415expenseChanges in:Receivables 7,745 (148) (1,240) 3,036

Inventories (7,948) (59) (13,633) 5,129

Payables (415) (6,876) 7,005 (391)

Prepaid expenses and 3,367 (1,347) (8,281) (3,522)other current assetsOther current liabilities 2,906 8,429 15,842 12,228

Total adjustments 9,801 2,806 26,626 40,235

Net cash provided by 27,077 15,900 87,510 89,578operations Investing activities:Property, plant and (903) (3,204) (6,746) (9,059)equipment expendituresProceeds from company - - 596 -owned life insuranceplansAcquisitions, net of cash - (29,134) (45,273) (29,134)acquiredNet cash used for (903) (32,338) (51,423) (38,193)investing activities Financing activities:Net decrease short-term - - - (4,600)debtPayment of contingent - (1,001) - (1,001)acquisition considerationDividends paid (5,839) (5,232) (22,155) (20,340)

Proceeds from exercise of - 553 2,036 1,058stock optionsRepurchase of treasury - (182) (460) (3,116)stockIssuance of treasury - 54 72 180stockNet cash used for (5,839) (5,808) (20,507) (27,819)financing activitiesEffect of foreign (199) 618 (679) (164)exchange rates on cash Increase (decrease) in 20,136 (21,628) 14,901 23,402cash and cash equivalentsCash and cash equivalents 67,038 93,901 72,273 48,871- beginning of period Cash and cash equivalents $ 87,174 $ 72,273 $ 87,174 $ 72,273- end of period View source version on businesswire.com: https://www.businesswire.com/news/home/20220128005014/en/

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