BADGER METER INC

Previous wording

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water management solutions, with approximately 95% of net sales derived from water-related applications. The Badger Meter offerings, marketed as BlueEdge®, are comprised of a suite of tailorable solutions that connect water management technology, software, and support services to deliver insights enabling the proactive management of water across the water cycle. These tailorable solutions encompass measurement and control hardware, connectivity and communication, data visualization and software-delivered actionable insights as well as ongoing support and expertise essential to optimize customers' operations and contribute to the sustainable use and protection of the world’s most precious resource.

Current wording

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water management solutions, with approximately 95% of net sales derived from water-related applications. The Badger Meter offerings, marketed as BlueEdge TM, are comprised of a suite of tailorable solutions that connect water management technology, software, and support services to deliver insights enabling the proactive management of water across the water cycle. These tailorable solutions encompass measurement and control hardware, connectivity and communication, data visualization and software-delivered actionable insights as well as ongoing support and expertise essential to optimize customers' operations and contribute to the sustainable use and protection of the world’s most precious resource.

Previous wording

The Company’s solutions fall into two product lines: sales of meters, water quality and sewer monitoring sensors and other hardware, communication, and software and related technologies, to water utilities (utility water) and sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers, including water related applications (flow instrumentation).

Current wording

The Company’s solutions fall into two product lines: utility water product line, which includes sales of meters, water quality and sewer monitoring sensors and other hardware, communication, and software and related technologies, to water utilities and flow instrumentation, which includes sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers, including water related applications.

Previous wording

The total purchase consideration for SmartCover, net of cash acquired, was $184.9 million. The Company's allocation of the purchase price at March 31, 2025 included $6.7 million of receivables, $4.8 million of inventories, $4.8 million of other assets, $88.3 million of intangible assets and $117.4 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily developed technology, customer relationships and trademarks with estimated average useful lives of 12 to 20 years. The Company also assumed $1.7 million of payables, $20.3 million of net deferred income tax liabilities, $11.9 million of deferred revenue and $3.2 million of other liabilities as part of the acquisition. The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of March 31, 2025, the Company had not completed its analysis for estimating the fair value of the assets acquired. Revenue associated with SmartCover for the two months ended March 31, 2025 was $6.2 million. SmartCover is reported within the utility water product line and the Company will continue to operate under a single segment.

Current wording

The total purchase consideration for SmartCover, net of cash acquired, was $184.0 million, following the net working capital adjustment of $0.9 million. The Company's allocation of the purchase price at June 30, 2025 included $6.7 million of receivables, $5.0 million of inventories, $4.8 million of other assets, $85.6 million of intangible assets and $118.6 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily developed technology, customer relationships and trademarks with estimated average useful lives of 12 to 20 years. The Company also assumed $1.6 million of payables, $19.7 million of net deferred income tax liabilities, $12.0 million of deferred revenue and $3.4 million of other liabilities as part of the acquisition. The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of June 30, 2025, the Company had not completed its analysis for estimating the fair value of the assets acquired. Revenue associated with SmartCover for the five months ended June 30, 2025 was $16.7 million. SmartCover is reported within the utility water product line and the Company will continue to operate under a single segment.

Previous wording

increasing expectations for accurate and actionable data and insights. As technologies such as ORION Cellular and BEACON digital solutions have become more widely adopted, the Company’s revenue from Software as a Service (SaaS) has increased significantly, and is margin accretive.

Current wording

As the industry continues to evolve, the Company has been at the forefront of innovation across measurement hardware (metering, water quality, pressure sensors, etc.), radio and software technologies in order to meet its customers’ increasing expectations for accurate and actionable data and insights. As technologies such as ORION Cellular and BEACON digital solutions have become more widely adopted, the Company’s revenue from Software as a Service (SaaS) has increased significantly, and is margin accretive.

Previous wording

During the first quarter of 2025, the United States introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions such as USMCA-compliant imports. These tariff changes and subsequent retaliatory actions have the potential to increase various input costs for the Company. At present, the Company is managing applicable tariff-related cost burdens with selective supply chain and pricing actions, as has been our historical practice during uncertain and turbulent economic times. The Company has contingency plans in place to adequately respond to a wide range of potential economic scenarios and our management, along with the Board of Directors, continues to monitor and evaluate the ongoing situation.

Current wording

During the first half of 2025, the United States introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions such as USMCA-compliant imports. These tariff changes and subsequent retaliatory actions have the potential to increase various input costs for the Company. At present, the Company is managing applicable tariff-related cost burdens with selective supply chain and pricing actions, as has been our historical practice during uncertain and turbulent economic times. The Company has contingency plans in place to adequately respond to a wide range of potential economic scenarios and our management, along with the Board of Directors, continues to monitor and evaluate the ongoing situation.

Previous wording

The Company's net sales for the three months ended March 31, 2025 were $222.2 million compared to $196.3 million during the same period in 2024. Net sales into the utility water market were $197.3 million, an increase of 16.0% from the prior year’s $170.1 million. Utility water net sales grew as a result of increased mechanical and ultrasonic meter, ORION® Cellular endpoint, and BEACON® SaaS revenue, as well as two months of revenue associated with the acquisition of SmartCover of $6.2 million. Sales of products into the global flow instrumentation end markets were $24.9 million compared to the prior year’s $26.2 million, a decrease of 4.8%, with modest growth in water-related markets more than offset by lower demand in the de-emphasized non-water applications.

Current wording

The Company's net sales for the three months ended June 30, 2025 were $238.1 million, an increase of 9.9% compared to $216.7 million during the same period in 2024. Sales into the utility water market were $212.2 million, an increase of 11.4% from the prior year’s $190.6 million. Utility water net sales grew as a result of increased BEACON® SaaS revenues, increased meter volumes, as well as revenue associated with the acquisition of SmartCover of $10.6 million. Sales of products into the global flow instrumentation end markets were $25.9 million compared to the prior year’s $26.1 million, a decrease of 1.0%, as a result of steady order demand within the water-focused end markets, offset by decreases in de-emphasized industrial markets.

Previous wording

Total operating earnings for the three months ended March 31, 2025 were $49.4 million, or 22.2% of sales, compared to $36.6 million, or 18.6% of sales, in the comparable prior year quarter. Gross margin dollars increased $18.3 million, with gross margin as a percent of sales of 42.9%, an increase from 39.3% in the prior year comparable quarter. Gross margin in the current quarter benefited from increased sales volumes and favorable customer sales and product mix, including higher SaaS revenues. Selling, engineering and administration (“SEA”) expenses were $46.0 million or 20.7% of sales in the first quarter of 2025 compared to $40.6 million or 20.7% of sales in the comparable prior year quarter. The increase in SEA expenses was mainly due to the inclusion of two months of SEA expenses associated with SmartCover, inclusive of the acquired intangible asset amortization, combined with higher personnel costs including higher salaries and benefits.

Current wording

Total operating earnings for the three months ended June 30, 2025 were $44.9 million, or 18.8% of sales, compared to $41.5 million, or 19.2% of sales, in the comparable prior year quarter. Gross margin dollars increased $12.4 million, with gross margin as a percent of sales of 41.1%, an increase from 39.4% in the prior year comparable quarter. Gross margin in the current quarter benefited from increased sales volumes and favorable product mix, including higher SaaS revenues, offset by tariff and input cost pressures. Selling, engineering and administration (“SEA”) expenses were $52.9 million or 22.2% of sales compared to $43.9 million or 20.2% in the comparable prior year quarter. The increase in SEA expenses was mainly the result of the inclusion of SmartCover, inclusive of the acquired intangible asset amortization, combined with continued growth-related spending including higher headcount, merit increases, and incentive compensation, as well as deferred compensation expense driven by the increase in our stock price during the quarter.

Previous wording

The provision for income taxes as a percentage of earnings before income taxes for the quarter ended March 31, 2025 was 24.4% compared to 23.5% for the comparable prior year period. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, other credits, allowances and discrete items.

Current wording

The provision for income taxes as a percentage of earnings before income taxes for the quarter ended June 30, 2025 was 24.5% compared to 23.8% for the comparable prior year period. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits and allowances.

Previous wording

As a result of the above-mentioned items, net earnings for the three months ended March 31, 2025 were $38.4 million, or $1.30 per diluted share, compared to $29.1 million, or $0.99 per diluted share, for the same period in 2024.

Current wording

As a result of the above-mentioned items, net earnings for the three months ended June 30, 2025 were $34.6 million, or $1.17 per diluted share, compared to $33.1 million, or $1.12 per diluted share, for the same period in 2024.

Previous wording

Overall, PWC increased $15.4 million compared to the previous year-end, of which $9.8 million was attributed to the SmartCover acquisition. Receivables at March 31, 2025 increased $27.5 million due to higher sales activity in the first quarter of 2025. Inventories increased $6.0 million due to increased sales activity. Payables as of March 31, 2025 were $18.1 million higher than the prior year-end due to timing of payments and modest increase in inventory levels.

Current wording

Overall, PWC increased $18.7 million compared to the previous year-end. Receivables at June 30, 2025 increased $33.3 million due to higher sales activity. Inventories increased $3.9 million due to increased sales activity. Payables at June 30, 2025 were $18.5 million higher than the prior year-end due to timing of payments and increased inventory levels.

Previous wording

Cash provided by operations in the first three months of 2025 was $33.0 million compared to $21.5 million in the same period of 2024. Higher net earnings, offset by higher incentive compensation payments in 2025 versus 2024, contributed to the increase in cash provided by operations compared to the same quarter in 2024.

Current wording

Cash provided by operations in the first six months of 2025 was $77.6 million compared to $57.9 million in the same period of 2024. Higher net earnings and working capital differential were the largest contributors to the increase in cash provided by operations compared to the same period in 2024.

Previous wording

Property, plant and equipment expenditures for the first three months of 2025 were $3.0 million compared to $2.7 million in the comparable prior year period.

Current wording

Property, plant and equipment expenditures for the first six months of 2025 were $6.9 million compared to $5.0 million in the comparable prior year period.

Previous wording

Cash and cash equivalents at March 31, 2025 decreased to $131.4 million from $295.3 million at December 31, 2024, the result of the $33.0 million of cash provided by operations, offset by $184.9 million deployed for the SmartCover acquisition and payment of the quarterly dividend.

Current wording

Cash and cash equivalents decreased to $165.2 million from $295.3 million at December 31, 2024, the result of the $77.6 million cash provided by operations, offset by $184.0 million deployed for the SmartCover acquisition and payment of quarterly dividends.

Previous wording

The Company's credit facility includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the Company's financial flexibility including an increase feature, acquisition holiday, and favorable financial covenants. The Company was in compliance with all covenants as of March 31, 2025. The Company believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company had $154.3 million of unused credit lines available at March 31, 2025.

Current wording

The Company's credit facility includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the Company's financial flexibility including an increase feature, acquisition holiday, and favorable financial covenants. The Company was in compliance with all covenants as of June 30, 2025. The Company believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company had $154.7 million of unused credit lines available at June 30, 2025.

Previous wording

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2024 and the first quarter of 2025 were not material.

Current wording

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2024 and the first two quarters of 2025 were not material.