Badger Meter, Inc. (BMI) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended June 30, 2026. Badger Meter, Inc. is a global provider of water management solutions, operating as a single reportable segment. The company focuses on utility water (approx. 89% of sales) and flow instrumentation (approx. 11% of sales), offering hardware, software (SaaS), and connectivity solutions.
Key Financial Metrics (Six Months Ended June 30, 2026)
| Metric | 2026 (YTD) | 2025 (YTD) | Change |
|---|---|---|---|
| Net Sales | $424.6 million | $460.3 million | -7.8% |
| Gross Margin | $175.1 million (41.2%) | $193.2 million (42.0%) | -0.8 pts |
| Operating Earnings | $74.5 million (17.6%) | $94.3 million (20.5%) | -21.0% |
| Net Earnings | $57.1 million | $73.0 million | -21.8% |
| Diluted EPS | $1.95 | $2.47 | -21.1% |
| Cash from Operations | $60.6 million | $77.6 million | -21.9% |
| Cash & Equivalents | $95.7 million | $226.0 million (Dec 31, 2025) | -57.6% |
| Debt | $0 (No long-term debt reported) | $0 | N/A |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 7.8% year-over-year. Utility water sales dropped 8.8% due to uneven Advanced Metering Infrastructure (AMI) project pacing, partially offset by growth in SaaS (BEACON) and water quality products. Flow instrumentation sales increased slightly by 0.8%.
- Margin Compression: Gross margin percentage declined to 41.2% from 42.0%, attributed to lower sales volumes and product mix shifts. Operating margin fell to 17.6% from 20.5%.
- Acquisition Impact: The company acquired UDlive Limited on May 1, 2026, for $94.4 million (net of cash). This added $2.0 million in revenue and $1.8 million in expenses (including amortization) for the period.
- Working Capital: Inventories increased by $26.1 million due to timing of receipts and sales pacing. Receivables increased by $8.9 million due to shipment timing.
- Shareholder Returns: The company repurchased $63.5 million of common stock and paid $23.3 million in dividends during the six-month period.
Guidance, Outlook, and Risks
- Outlook: Management cites long-term trends including infrastructure investment needs, aging workforces, and sustainability regulations as drivers for smart water adoption. The company expects continued conversion from manual to AMI systems.
- Supply Chain & Tariffs: The company faces potential supply chain constraints and increased costs for electronic components due to global demand for AI and data center infrastructure. Tariff impacts are being mitigated through USMCA trade agreements and price increases, though a February 2026 Supreme Court ruling invalidated certain tariffs, leading to refund applications.
- Acquisition Integration: The UDlive acquisition includes a potential earn-out of up to $50.0 million based on EBITDA targets over 24 months. Preliminary purchase price allocation is not yet finalized.
- Liquidity: The company maintains a $150.0 million credit facility (extended to July 2031) with $154.6 million available. Management believes operating cash flows and borrowing capacity are sufficient for operations and capital expenditures.
Investor Verification Checklist
- AMI Project Pacing: Verify the extent of the slowdown in utility water AMI projects and the timeline for recovery.
- UDlive Integration: Monitor the integration progress of UDlive and the likelihood of achieving the $50.0 million earn-out targets.
- Inventory Levels: Assess the $26.1 million increase in inventory to ensure it aligns with future demand and does not signal obsolescence.
- Component Costs: Track the impact of AI-driven semiconductor demand on the cost of goods sold and the effectiveness of pricing initiatives to offset these costs.
- Share Repurchase Program: Note that $89.7 million remains available under the $150 million repurchase authorization through November 2028.