Badger Meter, Inc. — Q1 2023 Form 10-Q
Business context and period. Global water-technology provider serving utility-water and flow-instrumentation markets. This unaudited report covers the three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise noted. Amounts below are in millions except per-share data.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date | Change |
|---|---|---|---|
| Net sales | $159.1 | $132.4 | +20.2% |
| Gross profit / margin | $62.8 / 39.5% | $50.7 / 38.3% | Margin +1.2 percentage points |
| Operating earnings / margin | $25.0 / 15.7% | $18.9 / 14.2% | +32.8% |
| Net earnings | $19.4 | $14.4 | +35.2% |
| Diluted EPS | $0.66 | $0.49 | +$0.17 |
| Cash from operations | $18.0 | $9.3 | +$8.7 |
| Cash and equivalents | $128.4 at Mar. 31 | $138.1 at Dec. 31 | Down $9.7 |
| Total assets / shareholders’ equity | $633.4 / $458.0 | $603.0 / $442.4 at Dec. 31 | Up $30.4 / $15.6 |
Utility-water sales rose 19.8% to $132.2 million; flow-instrumentation sales increased 21.8% to $26.9 million. Management attributed utility-water growth to ultrasonic meters, ORION Cellular endpoints and BEACON SaaS; flow-instrumentation growth reflected water-focused demand and improved supply availability. Gross-margin gains reflected volume, favorable mix, SaaS growth and pricing actions offsetting input-cost pressures. Selling, engineering and administration expenses were $37.8 million, or 23.7% of sales, versus $31.9 million, or 24.1%. The effective tax rate was 24.3%, compared with 23.7%.
Capital expenditures were $4.3 million, versus $1.1 million. Investing cash outflow was $21.3 million, including $17.1 million net cash consideration for the Syrinix acquisition; dividends paid were $6.6 million. No debt balance or borrowing outstanding is clearly stated in the filing text. The company reported a $150 million multi-currency credit facility supporting commercial paper up to $100 million, $156.7 million of unused credit lines, and compliance with all covenants. Management said operating cash flow, borrowing capacity and access to capital should provide adequate resources for operations, investment and product development.
Material changes, outlook and risks
- Primary working capital rose to $137.0 million, or 23.1% of trailing-twelve-month sales, from $125.1 million, or 22.1%, at year-end. Inventory increased $12.5 million, attributed to component-cost inflation and higher safety stocks amid component shortages; receivables increased $7.6 million, mainly with higher sales.
- Effective January 1, 2023, Badger Meter acquired all of Syrinix Ltd., a UK pressure-monitoring and leak-detection provider, for $17.1 million net of cash acquired. The purchase-price allocation was preliminary and the fair-value analysis was incomplete at quarter-end.
- No formal financial guidance or quantified full-year outlook is provided. Management described continued conversion from manual meters to radio-based systems and from AMR to AMI, and growing demand for static meters, software and water-quality monitoring. It noted seasonality may result in higher sales of certain utility-water products in spring and summer.
- Risks and contingencies include reliance on single suppliers for most brass castings and certain resin and electronic subassemblies, with potential for higher costs, delays and quality-control costs if suppliers are lost. Environmental matters could generate material future costs under changed circumstances, although compliance spending in 2022 and Q1 2023 was not material. The company reported no material pending legal proceedings and no material change to previously disclosed risk factors.
- Management reported disclosure controls as effective and no material change in internal control over financial reporting during the quarter. The filing says no material subsequent events were identified through issuance.
Important facts for investors to verify
- Whether the Q1 sales and margin gains—particularly from ultrasonic meters, cellular endpoints, SaaS and pricing—persist in subsequent quarters.
- Whether inventory and primary working capital normalize as component availability and supply-chain conditions change.
- Final Syrinix purchase-price allocation, goodwill and acquired-intangible values, and the acquisition’s contribution to future results.
- Actual borrowing or commercial-paper usage, given the filing provides facility capacity and unused lines but no clear debt balance.
- Potential supplier-disruption and environmental exposures, including any material changes after the reporting date.