Badger Meter, Inc. has reported results for the third quarter ended September 30, 2024.
Third quarter 2024 highlights
- Total sales of $208.4 million, 12% higher than the prior year’s $186.2 million.
- Operating profit increased 29% year-over-year, with operating profit margins expanding 260 basis points to a record 19.5%.
- Diluted earnings per share (EPS) increased 23% to $1.08, up from $0.88 in the comparable prior year quarter.
- Record cash flow with $45.1 million in net cash provided by operations, which increased 43% year-over-year.
- Increased annual dividend rate by 26% to $1.36 per share, representing the 32nd consecutive year of dividend growth. Increased annual dividend rate by 26% to $1.36 per share, representing the 32nd consecutive year of dividend growth.
“We were pleased with our third quarter financial performance delivering strong sales growth, record operating profit margins and robust cash flow generation. Sales in the quarter continued to benefit from solid demand for our tailorable water management solutions. Notably, we achieved record operating profit margins of 19.5%, the result of favorable sales mix, price/cost management, strong operating execution and continued selling, engineering and administration (SEA) expense leverage,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “I greatly appreciate the efforts of our employees across the globe in serving our customers.”
Third quarter operating results
Utility water sales increased 14% year-over-year against a difficult prior year comparison reflecting continued solid adoption across the BlueEdge™ suite of solutions by utility customers. This included increased sales of meters, water quality, pressure and other sensors coupled with ORION® communication endpoints and BEACON® Software as a Service (SaaS).
Sales of flow instrumentation products were flat year-over-year with modest growth in the water-focused end markets generally offsetting declines across the array of de-emphasized applications, globally.
Operating earnings increased 29% year-over-year, with operating profit margins reaching a record 19.5% in the third quarter of 2024, a 260-basis point improvement from the prior year’s 16.9%. Gross margin dollars increased 15% year-over-year, and gross margin as a percent of sales was 40.2%, an increase of 110 basis points over the comparable prior year period. The gross margin improvement reflects the continued benefits of positive structural sales mix, including strong AMI and software-related sales, as well as ongoing price/cost benefit and solid operating execution.
SEA expenses in the third quarter of 2024 were $43.3 million, $2.0 million higher than the comparable prior year quarter with higher headcount and personnel-related costs. SEA as a percent of sales improved 140 basis points to 20.8% from 22.2% in the comparable prior year quarter as a result of the strong sales.
The tax rate for the third quarter of 2024 was 25.3% compared to 20.3% in the prior year comparable period which included a discrete favorable income tax benefit related to equity compensation transactions. As a result of the above, combined with increased interest income year-over-year, EPS was $1.08, an increase of 23% compared to $0.88 in the comparable prior year period.
Outlook
Bockhorst continued, “As we prepare to close out the year, we remain focused on capitalizing on the durable macro trends benefiting the water industry. By leveraging BlueEdge - our suite of tailorable end-to-end smart water offerings – our expanding customer base is realizing the efficiency, resiliency and sustainability benefits required to best meet their unique water resource management needs.
"Taking into account our normalizing backlog, strong bid funnel and constructive order rates, we anticipate delivering high single-digit sales growth rates over the cycle, noting the prevailing unevenness common in the industry. We continue to strive for modest operating profit margin expansion year-over-year, driven by favorable structural sales mix, value-based price/cost management and SEA leverage.
"Specific to the fourth quarter, similar to prior years we expect sequentially fewer total operating days given the holiday-shortened activity levels at our customers. Additionally, evolving hurricane recovery activities have the potential to delay Southeast U.S. utility projects in the near term.
"Finally, we anticipate continued robust cash flow, with ample cash and credit availability, giving us the financial flexibility to execute our capital allocation priorities as reflected in the recent 26% annual dividend increase.”
Bockhorst concluded, “Our ongoing success is built on our steadfast culture of continuous improvement, enabling our team to execute for customers and drive outperformance for Badger Meter. I remain excited about our ability to deliver shareholder value while we preserve and protect the world’s most precious resource."
