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Badger Meter Reports Fourth Quarter and Full Year 2020 Results

Badger Meter, Inc. (NYSE: BMI) today reported results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

  • Total sales of $112.3 million, an increase of 4% compared to $107.6 million in the comparable prior year quarter.
  • Net earnings and diluted earnings per share (EPS) were $13.1 million and $0.45, respectively, compared to $12.3 million and $0.42 in the comparable prior year period.
  • Deployed $29.1 million, net of cash acquired, for s::can GmbH (“s::can”) effective November 1, 2020, adding online water quality monitoring to existing trusted Badger Meter solutions.

Full Year 2020 Highlights

  • Full year 2020 sales of $425.5 million, a slight increase compared to $424.6 million in 2019 reflecting the resiliency of the utility water industry.
  • Strong incremental profitability with a 70 basis point increase in operating profit margins.
  • Net earnings and diluted earnings per share (EPS) were $49.3 million and $1.69, respectively, compared to $47.2 million and $1.61 in the comparable prior year period.
  • Generated $89.6 million of cash provided by operations, an 11% increase year-over-year.

“Badger Meter delivered another quarter of strong performance and an outstanding year in light of the many and varied challenges associated with managing through the pandemic,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “Our performance is the direct result of the durability of our business model and the efforts of our employees across the globe who have helped us safely maintain our operations and serve customers.”

Fourth Quarter Operating Results
Utility water sales increased 8% from the strong comparable prior year quarter, with the acquisition of s::can contributing approximately 3% of the sales increase. Existing AMI (advanced metering infrastructure) project installation schedules progressed and we experienced growth in sales of ultrasonic meters and ORION® Cellular radios with related BEACON® Software as a Service (SaaS). Sales of flow instrumentation products were 10% lower year-over-year, sequentially improved from the third quarter, yet continuing to reflect the sluggish activity across most of the varied industrial end markets served.

Operating margins of 15.1% were 10 basis points lower than the prior year’s 15.2%. Gross margin increased $2.9 million year-over-year, and gross margin percent increased 100 basis points to 39.2% from the prior year’s 38.2%. The quarter benefitted from favorable sales mix with higher SaaS, cellular radio and ultrasonic meter sales and favorable facility utilization. Margins were also supported by positive price/cost dynamics, the result of strategic pricing initiatives in advance of rising brass input costs. These benefits were partially offset by a discrete network sunset provision associated with future equipment upgrades for early-stage Code Division Multiple Access (“CDMA”) radio endpoints for a limited number of North American customers, along with the acquisition-related fair value step-up of acquired s::can inventory.

Selling, engineering and administration (“SEA”) expenses in the fourth quarter of 2020 of $27.1 million increased $2.3 million from the prior year’s $24.8 million with the inclusion of s::can and resulting acquisition-related intangible amortization along with higher personnel costs, partially offset by lower travel and other pandemic-impacted expenses. SEA leverage was 24.1% up from 23.0% in the comparable prior year quarter. The tax rate of 22.6% was modestly lower than the prior year’s 24.3%.

Full Year Recap and Outlook
Bockhorst continued, “Recapping 2020, our team successfully supported customers while managing through the unprecedented health and economic crisis. With the backdrop of countless changes to how we all do business, Badger Meter delivered utility water revenue growth, EBITDA margin and EPS expansion, robust working capital management and free cash flow, and strategic execution of our capital allocation priorities with accretive acquisitions and dividend growth. We are excited about the acquisition of s::can completed in the quarter and the recently announced acquisition of Analytical Technology, Inc. (“ATi) effective January 1, 2021. These accomplishments are a testament to the criticality of the water industry and the exceptional Badger Meter team.”

“While we anticipate the overall economic environment will remain uncertain, we are confident in our strategic growth plans and the fundamental long-term drivers of our offerings. Leveraging our industry-leading ORION® Cellular endpoints, along with current and future communication and software technologies, we are creating robust digital solutions to operationalize real-time data into actionable insights that drive better results and optimize operations. The inclusion of the recently acquired s::can and ATi portfolio of comprehensive and scalable water quality monitoring solutions will now allow us to deliver real-time water quality data to our customers. Access to real-time, on demand water quality parameters will enable water utilities to improve operational security, awareness and efficiency, while our industrial customers will benefit from process and discharge water quality monitoring.”

“Our order backlog, sales momentum, and encouraging pipeline of potential business gives us confidence as we start the new year. Our teams continue to focus on what we can control as we serve our customers and maintain safe operating environments. While strategic pricing initiatives have and continue to be implemented, the recent rapid and significant escalation in brass costs may be an impediment to near-term margin expansion opportunities.”

Bockhorst concluded, "Badger Meter is a company that has successfully managed through challenges over its 115-year history, and this pandemic is no exception. We are fortunate to navigate through this environment from a position of strength. We believe that the combination of our talented team, resilient portfolio of solutions and strong balance sheet uniquely position Badger Meter for success in 2021 and beyond as we work to protect the world’s most precious resource.”

Conference Call and Webcast Information
Badger Meter management will hold a conference call to discuss 2020 results today, January 29, 2021 at 10:00 AM CT/11:00 AM ET. The call and related presentation can be accessed via webcast through the Investor section of our website. Participants can register to take part in the call using this online registration link: http://www.directeventreg.com/registration/event/6277158. After registering, instructions will be shared on how to join the call. If online registration is unavailable, registration can also be accomplished by calling 888-869-1189 or 706-643-5902 and providing the conference ID number: 6277158. 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

Twelve Months Ended

December 31,

December 31,

December 31,

December 31,

2020

2019

2020

2019

(Unaudited)(Unaudited)
 
Net sales

$

112,329

$

107,556

$

425,544

$

424,625

 
Cost of sales

68,274

66,431

257,295

261,097

 
Gross margin

44,055

41,125

168,249

163,528

 
Selling, engineering and administration

27,093

24,782

103,093

101,380

 
Operating earnings

16,962

16,343

65,156

62,148

 
Interest expense (income), net

12

(27

)

30

253

Other pension and postretirement costs

36

165

145

288

 
Earnings before income taxes

16,914

16,205

64,981

61,607

 
Provision for income taxes

3,820

3,931

15,638

14,430

 
Net earnings

$

13,094

$

12,274

$

49,343

$

47,177

 
Earnings per share:
 
Basic

$

0.45

$

0.42

$

1.70

$

1.63

 
Diluted

$

0.45

$

0.42

$

1.69

$

1.61

 
Shares used in computation of earnings per share:
 
Basic

29,057,249

29,039,296

29,052,301

29,028,204

 
Diluted

29,257,929

29,227,804

29,229,868

29,220,165

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

Assets

December 31,

December 31,

2020

2019

(Unaudited)
 
Cash and cash equivalents

$

72,273

$

48,871

Receivables

61,689

61,365

Inventories

81,586

81,948

Other current assets

5,303

7,910

Total current assets

220,851

200,094

 
Net property, plant and equipment

82,705

85,761

Intangible assets, at cost less accumulated amortization

53,598

48,163

Other long-term assets

22,518

16,617

Goodwill

88,708

71,258

Total assets

$

468,380

$

421,893

 
 

Liabilities and Shareholders' Equity

 
Short-term debt

$

-

$

4,480

Payables

34,923

31,523

Accrued compensation and employee benefits

14,617

12,754

Other current liabilities

15,659

8,490

Total current liabilities

65,199

57,247

 
Deferred income taxes

5,696

876

Long-term employee benefits and other

36,226

32,702

Shareholders' equity

361,259

331,068

Total liabilities and shareholders' equity

$

468,380

$

421,893

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

2020

2019

2020

2019

(Unaudited)(Unaudited)
Operating activities:
Net earnings

$

13,094

$

12,274

$

49,343

$

47,177

 
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation

3,121

2,881

12,253

11,569

Amortization

3,160

3,254

12,963

12,577

Deferred income taxes

(3,483

)

(1,542

)

(3,082

)

(1,524

)

Noncurrent employee benefits

(365

)

110

206

(40

)

Stock-based compensation expense

374

332

1,415

1,214

Changes in:
Receivables

(148

)

896

3,036

5,451

Inventories

(59

)

3,039

5,129

(1,220

)

Payables

(6,876

)

757

(391

)

11,642

Prepaid expenses and other current assets

(1,347

)

(1,926

)

(3,522

)

(7,732

)

Other current liabilities

8,429

(500

)

12,228

1,600

Total adjustments

2,806

7,301

40,235

33,537

Net cash provided by operations

15,900

19,575

89,578

80,714

 
Investing activities:
Property, plant and equipment expenditures

(3,204

)

(1,907

)

(9,059

)

(7,496

)

Acquisitions, net of cash acquired

(29,134

)

-

(29,134

)

-

Net cash used for investing activities

(32,338

)

(1,907

)

(38,193

)

(7,496

)

 
Financing activities:
Net decrease short-term debt

-

-

(4,600

)

(13,500

)

Payment of contingent acquisition consideration

(1,001

)

(905

)

(1,001

)

(2,555

)

Dividends paid

(5,232

)

(4,943

)

(20,340

)

(18,595

)

Proceeds from exercise of stock options

553

998

1,058

1,961

Repurchase of treasury stock

(182

)

(1,848

)

(3,116

)

(5,207

)

Issuance of treasury stock

54

44

180

187

Net cash used for financing activities

(5,808

)

(6,654

)

(27,819

)

(37,709

)

Effect of foreign exchange rates on cash

618

129

(164

)

276

 
(Decrease) Increase in cash and cash equivalents

(21,628

)

11,143

23,402

35,785

Cash and cash equivalents - beginning of period

93,901

37,728

48,871

13,086

 
Cash and cash equivalents - end of period

$

72,273

$

48,871

$

72,273

$

48,871

Contacts:

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

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