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Executive Summary
Badger Meter Inc (NYSE:BMI) reported strong financial results for the first quarter of 2025, with sales increasing 13% year-over-year to $222.2 million and operating margins reaching a record 22.2%. The company’s earnings per share grew 31% to $1.30, while free cash flow surged 60% to $30 million. These results continue the positive momentum seen in previous quarters, with the company also completing the acquisition of SmartCover during the period.
The water technology company’s shares responded positively to the results, trading up 6.58% at the time of the presentation on April 17, 2025.
Quarterly Performance Highlights
Badger Meter’s first quarter results demonstrated broad-based strength across key financial metrics. The company achieved 13% year-over-year sales growth, or 10% excluding the contribution from the recently acquired SmartCover business. This continues a pattern of consistent growth, as shown in the following quarterly sales growth chart:
Operating profit grew by an impressive 35% compared to the same period last year, with operating margins expanding 360 basis points to reach a record 22.2%. This significant margin improvement reflects the company’s ability to leverage its scale and improve operational efficiency.
The detailed financial snapshot reveals substantial improvements across multiple metrics:
Gross margin improved to 42.9%, up 360 basis points from 39.3% in Q1 2024, while selling, engineering, and administrative (SEA) expenses remained controlled at 20.7% of sales. EBITDA increased 29.4% to $57.7 million, and earnings per share grew 31.3% to $1.30.
Free cash flow generation was particularly strong, reaching $30 million, a 59.6% increase from the prior year. This robust cash generation provides the company with flexibility for future investments and shareholder returns.
Strategic Initiatives
Badger Meter continues to focus on innovation leadership with its expanding technology-enabled software offerings. The company highlighted its attractive bid funnel and strong order rates, along with a growing Software (ETR:SOWGn) as a Service (SaaS) revenue base.
This strategic focus aligns with what the company discussed in its Q3 2024 earnings call, where it reported approximately 35% growth in SaaS revenues and emphasized the importance of its BlueEdge suite of smart water solutions.
The company’s outlook and value creation strategy emphasizes several key elements that position it for continued success:
The acquisition of SmartCover represents another step in Badger Meter’s strategy to expand its portfolio of smart water solutions. This follows the company’s pattern of strategic acquisitions, having completed four acquisitions in the past 3.5 years according to previous earnings information.
Tariff-Related Challenges and Mitigations
The presentation addressed potential tariff-related exposures in the company’s manufacturing and supply chain operations. Badger Meter outlined its reliance on facilities in Mexico, Austria, and the Czech Republic, as well as suppliers in Southeast Asia, China, Israel, and South Korea.
To mitigate these risks, the company has implemented strategic sourcing initiatives and targeted pricing actions. These efforts are designed to minimize the impact of potential tariff changes on the company’s operations and financial performance.
Forward-Looking Statements
Badger Meter remains optimistic about its future prospects, highlighting several durable macro trends supporting long-term smart water solution adoption. These include replacement-driven base demand and the demonstrated benefits of efficiency, resiliency, and sustainability in water management systems.
The company’s strong cash flow and borrowing capacity provide support for both organic growth initiatives and potential future acquisitions. As a dividend aristocrat, Badger Meter has maintained its commitment to shareholder returns while continuing to invest in growth opportunities.
Looking ahead, the company expects positive structural sales mix and SEA leverage to continue driving margin improvements. The presentation emphasized the importance of the company’s strong engagement, values-driven culture, and customer-focused execution in delivering consistent results.
The company announced that its second quarter 2025 earnings are tentatively scheduled for July 22, 2025.
GAAP Reconciliations
For transparency, Badger Meter provided reconciliations between GAAP and non-GAAP financial measures, including EBITDA and free cash flow:
These reconciliations show how the company calculates its key performance metrics and provide additional context for evaluating its financial results.
Badger Meter’s Q1 2025 results demonstrate continued execution of its strategy to lead in smart water technology solutions while delivering strong financial performance. The record margins and robust cash flow generation position the company well for future growth despite potential challenges from tariff-related exposures.
Full presentation:
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