Badger Meter Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

Badger Meter reported a strong fourth quarter and full-year 2020 performance, with total sales reaching $112.3 million in Q4, up 4% year-over-year. Net earnings rose to $13.1 million, with diluted EPS at $0.45. Full-year sales were $425.5 million, slightly above $424.6 million in 2019. The acquisition of s::can GmbH added online water quality monitoring services, contributing to an 8% increase in utility water sales. Operating profit margins improved by 70 basis points, emphasizing the company's resilience amidst challenges. Strong cash flow generation reached $89.6 million, reflecting robust operational performance.

Positive

• Q4 sales increased to $112.3 million, a 4% rise year-over-year.
• Net earnings for Q4 reached $13.1 million, with diluted EPS at $0.45.
• Full-year sales slightly rose to $425.5 million compared to $424.6 million in 2019.
• Operating profit margins improved by 70 basis points.
• Generated $89.6 million in cash from operations, an 11% increase year-over-year.

Negative

• Flow instrumentation product sales decreased by 10% year-over-year.
• Operating margins of 15.1% were slightly lower than 15.2% in the prior year.
• Recent rapid increases in brass costs may impede near-term margin expansion.

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 Ended								Twelve 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

 

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FAQ

What are the fourth quarter 2020 financial results for Badger Meter (BMI)?

Badger Meter reported Q4 2020 sales of $112.3 million, net earnings of $13.1 million, and diluted EPS of $0.45.

How did Badger Meter perform in full year 2020 compared to 2019?

In 2020, Badger Meter had sales of $425.5 million, slightly up from $424.6 million in 2019, with net earnings increasing to $49.3 million.

What is the impact of the s::can acquisition on Badger Meter's performance?

The s::can acquisition contributed approximately 3% to the sales increase in Q4 2020 and enhances Badger Meter's water quality monitoring solutions.

What challenges does Badger Meter face moving into 2021?

Badger Meter notes that the rapid increase in brass costs may inhibit near-term margin expansion opportunities.

When will Badger Meter discuss its 2020 results in a conference call?

Badger Meter management will hold a conference call on January 29, 2021, at 10:00 AM CT.