Earnings call transcript: Badger Meter Q2 2025 misses EPS, stock slides

Badger Meter Inc. reported its second-quarter 2025 earnings, revealing a mixed financial performance that led to a notable downturn in its stock price. The company posted earnings per share (EPS) of $1.17, falling short of the forecasted $1.23, marking a 4.88% miss. However, revenue slightly surpassed expectations at $238.1 million against a forecast of $236.95 million. Following the earnings announcement, Badger Meter’s stock dropped 13.36% to $231.15 in pre-market trading, reflecting investor disappointment. According to InvestingPro analysis, the stock currently trades at a premium to its Fair Value, with a P/E ratio of 46.48x and high EBIT and EBITDA multiples.

Key Takeaways

• Badger Meter’s EPS missed expectations, contributing to a significant drop in stock price.
• Revenue grew by 10% year-over-year, slightly beating forecasts.
• The company introduced new products and innovations, bolstering its market position.
• Operating margins declined, raising concerns about cost management.
• Anticipated sales decline in Q3 2025 adds to investor caution.

Company Performance

Badger Meter’s overall performance in Q2 2025 showed mixed results. While the company reported a robust 10% increase in total sales year-over-year, driven by organic growth and strategic pricing, the EPS miss stood out as a negative highlight. The company’s innovative product launches, including the BlueEdge water management solutions, demonstrate its commitment to technological advancement in the water utility market.

Financial Highlights

• Revenue: $238 million, up 10% year-over-year.
• Earnings per share: $1.17, compared to $1.12 in the prior year.
• Operating earnings: $44.9 million, up 8% year-over-year.
• Free cash flow increased by 19% to $40.6 million.

Earnings vs. Forecast

Badger Meter’s actual EPS of $1.17 fell short of the $1.23 forecast, a 4.88% miss. This deviation from expectations is significant, given the company’s historical trend of meeting or exceeding forecasts. In contrast, revenue slightly exceeded expectations, coming in at $238.1 million against a forecast of $236.95 million.

Market Reaction

The market reacted negatively to Badger Meter’s earnings report, with the stock plummeting 13.36% to $231.15 in pre-market trading. This reaction is primarily driven by the EPS miss and concerns about future sales declines. The stock’s movement contrasts with its 52-week high of $256.08, highlighting investor apprehension.

Outlook & Guidance

Looking forward, Badger Meter anticipates a sequential sales decline in Q3 2025, though it remains confident in long-term revenue growth. The company continues to focus on organic and strategic investments to capitalize on the strong fundamentals of the water utility market. InvestingPro data shows that three analysts have recently revised their earnings estimates upward for the upcoming period, with revenue growth forecast at 13% for FY2025. Get access to the complete Pro Research Report for Badger Meter, part of our comprehensive analysis of 1,400+ US stocks, to discover what Wall Street really thinks about this water utility leader.

Executive Commentary

CEO Ken Bockhorst emphasized the importance of meter technology, stating, "The meter is the cash register of the utility and remains a priority for investment." CFO Bob Rockledge highlighted growth potential, noting, "The sewer line monitoring portion of this business is virtually greenfield with very low digital adoption."

Risks and Challenges

• Potential for continued margin pressure due to tariff-related costs.
• Market saturation in advanced metering infrastructure projects.
• Macroeconomic pressures, including potential EPA budget cuts.
• Digital adoption in sewer line monitoring remains low, posing growth challenges.

Q&A

During the earnings call, analysts inquired about the financial impact of the SmartCover acquisition and potential repercussions from EPA budget cuts. The company clarified its strategy for meter technology adoption and addressed concerns about SG&A expense investments.

Full transcript - Badger Meter Inc (BMI) Q2 2025:

Conference Operator: Ladies and gentlemen, welcome to the Second Quarter twenty twenty five Badger Meter Earnings Conference Call. After the prepared remarks, there will be an opportunity to ask questions. It’s now my pleasure to turn the conference over to Barbara Novarini, Head of Investor Relations. Please go ahead.

Barbara Novarini, Head of Investor Relations, Badger Meter: Thank you. Good morning, and thank you for joining the Badger Meter second quarter twenty twenty five earnings conference call. I’d like to introduce myself as the new Head of Investor Relations. With me on the call today are Ken Bockhorst, Chairman, President and Chief Executive Officer and Bob Rockledge, Chief Financial Officer. The earnings release and related slide presentation were made available this morning on our website.

Quickly, I will cover the safe harbor, reminding you that any forward looking statements made during this call are subject to various risks and uncertainties, the most important of which are outlined in our press release and SEC filings. On today’s call, we will refer to certain non GAAP financial metrics. Our earnings slides provide a reconciliation of the GAAP to non GAAP financial metrics used. With that, I’ll turn the call over to Ken.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Thanks, Barb. Welcome to our second quarter twenty twenty five earnings call. I’m pleased to report another quarter of record sales and solid financial results that demonstrated disciplined execution and the durability of the drivers that support technology adoption across the water industry. Against difficult comps in the prior year quarter, sales grew 10% year over year or five percent excluding the Smart Cover acquisition. Despite trade related cost headwinds, gross margins continued to trend above our normalized range of 38% to 40% and we generated robust free cash flow in the quarter.

Halfway through the year, I remain encouraged by the resilience of our business as we face ongoing macroeconomic, trade and policy uncertainty. Our proven history of differentiated operational execution, combined with ongoing customer demand and momentum and technology adoption trends positions us to successfully navigate this near term near term uncertainty while supporting the long term goals of our customers. Bob will review the details of the quarter and then I’ll be back to provide some thoughts on Blue Edge and our outlook. Go ahead, Bob.

Bob Rockledge, Chief Financial Officer, Badger Meter: Thanks, Ken, good morning, everyone. Turning to slide three. Total sales of $238,000,000 in the 2025 represented an increase of 10% year over year or 5% sales growth when excluding just over $10,000,000 in sales from Smart Cover in its first full quarter of under our ownership. Total utility water product line sales increased 11% year over year or 6% excluding SmartCover. As expected, moderating core sales growth from recent double digit levels was primarily a function of the difficult second quarter sales comparison, which was the high watermark for the prior year.

In the quarter, we delivered higher sales of meters, Beacon Software as a Service, water quality and remote monitoring solutions. Sales for the flow instrumentation product line were essentially flat year over year as lower demand in the deemphasized array of market applications offset modest growth in water related end markets. Turning to profitability. Operating earnings increased 8% year over year to $44,900,000 with operating margins down 40 basis points to 18.8% from the prior year’s 19.2%. The structural mix benefit of technology adoption by our customers continues to benefit gross margins, which expanded 170 basis points to 41.1% in the second quarter from 39.4% in the prior year quarter.

As expected, this did represent a sequential decline from 42.9% in the first quarter of the year, which you’ll recall was the result of favorable customer and product mix that quarter that did not repeat this quarter. Gross margin in the 2025 also continued to benefit from ongoing operational excellence initiatives, while recently implemented price increases partially mitigated certain tariff related cost pressures in the quarter. Year to date, we’ve adeptly managed the controllable aspects of the known tariff landscape. However, the trade environment remains fluid. As an example, copper prices recently spiked on copper specific tariff concerns.

Although we primarily use recycled brass in our ingot recipe, secondary markets like these do experience ripple effects when the primary commodity is impacted. Last quarter, we walked you through the manufacturing and supply chain footprint supporting our U. S. Sales along with the tariff related exposures and mitigation efforts. While announced and rumored tariff rates by country and commodity continue to evolve, our underlying tariff related exposures and mitigation actions remain the same.

Most importantly, we continue to see the competitive playing field as level in terms of both exposures and planned mitigation actions, including any potential targeted pricing actions. That said, the ongoing trade uncertainty and lag impact of mitigation actions once again prompts us to leave our normalized gross margin range of 38% to 40% unchanged for now, despite another quarter of gross margin performance above 40%. SEA expenses in the second quarter were $52,900,000 an increase of approximately $9,100,000 year over year, due primarily to the addition of SmartCover, including 1,600,000 of intangible asset amortization. Excluding the acquisition, SEA expenses increased $3,300,000 the result of higher personnel costs to support growth and approximately $1,000,000 of deferred compensation expense resulting from the year over year change in stock price that is unique to this quarter. The income tax provision in the 2025 was 24.5% modestly above the prior year’s 23.8%.

Consolidated EPS was $1.17 versus $1.12 in the prior year quarter. Primary working capital as a percent of sales at 06/30/2025 was 21.8%, consistent with the prior quarter end and about 200 basis points better than a year ago. Free cash flow increased 19% year over year to $40,600,000 largely due to higher earnings and working capital differential between years. With that, I’ll turn the call back over to Ken.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Thanks, Bob. Next, I’d like to talk about the progress we’ve made since the launch of BlueEdge last year. As a reminder, BlueEdge is the brand that unifies the comprehensive suite of products and solutions that enable our customers to manage their water and wastewater systems beyond the meter. In June, our booth at the ACE trade show in Denver, which is our industry’s biggest event of the year, highlighted the various use cases of our extensible solutions and included SmartCover for the first time. We also featured our new field app, which brings the power of our Beacon software to utility field personnel, and we introduced Cobalt, which leverages machine learning for advanced insights within our Beacon platform.

Our booth was the physical representation of our evolution beyond the meter. Today, our BlueEdge portfolio of water management solutions provides tremendous value to customers, and it was exciting to see the energy in our booth as well as the enthusiasm that both long standing and soon to be new customers have for our solutions. While it’s only been a year since we’ve launched this concept, we’ve already seen meaningful momentum in our efforts to inform utilities of the advantages of our BlueEdge solutions. Furthermore, we’ve elevated our already strong reputation as a trusted partner. A long term relationship with us means that we’ll be there to enable our customers as they evolve and plan for the future.

We’re seeing increasing numbers of RFPs that ask for solutions beyond the meter, and our offering elevates our standing in the bid process while providing tangible reasons for us to continue our partnership with customers post sale even after their AMI projects are complete. In summary, we’re very pleased with the strong start to this evolving aspect of our long term strategy. Finally, turning to the outlook. We routinely highlight that our business can be uneven quarter to quarter and year to year. It is simply the nature of the business given utility replacement cycles, project deployment schedules, project phase in, phase outs, etcetera.

The difficult second quarter comparison from a year ago that Bob discussed earlier is just one example of that phenomenon. Another example is that we did have a number of AMI projects wrap up in the second quarter. While we already have new AMI projects in hand to replace them, the timing of the start of those projects is such that we expect absolute sales to decline sequentially in the third quarter of twenty twenty five. Despite the moderation in sales, we still expect sales growth year over year excluding Smart Cover. Nevertheless, despite the macroeconomic trade and policy uncertainty we’ve experienced year to date, the multiple long term secular trends fueling growth where we are positioned in the water industry remains strong.

Our core products and solutions are critical to the operations of the water utility, commercial, and industrial customers. As a reminder, the meter is the cash register of the utility and remains a priority for investment. Thus, our ongoing conviction in high single digit revenue growth over the long term is underpinned by these enduring favorable industry fundamentals along with customer order and demand trends, project awards, pending and future RFP activity, and the competitive positioning of our broad portfolio of solutions to best address water challenges. We continue to generate strong cash flow and retain a balance sheet with significant financial flexibility to withstand macroeconomic pressure while pursuing both organic and strategically relevant inorganic investment, all while paying a dividend that has grown in line with earnings for over three decades. After nearly six months of integration, we remain on track to deliver the anticipated sales and cost synergies associated with the Smart Cover acquisition.

We made tangible progress in leveraging Badger Meter resources across SmartCover’s business, continue to identify go to market opportunities for SmartCover as part of our BlueEdge suite of solutions. Finally, I’d like to call out our recently published 2024 sustainability report. I’m proud that the collective efforts of our team allowed us to exceed and raise our targets for greenhouse greenhouse gas and density reduction while also delivering record 2024 financial results. Our continuous improvement philosophy towards sustainability efforts continues to produce favorable outcomes as it has across the entire business. In summer in summary, we’re carefully managing through uncertainty in the broader environment by focusing on what we can control in the near term while diligently executing against the long term strategic plan that we’re confident will continue to create value for both our customers and our shareholders.

With that, operator, please open the line for questions.

Conference Operator: Thank you. Our first question today comes from Nathan Jones with Stifel. Please go ahead. Your line is open.

Nathan Jones, Analyst, Stifel: Good morning, everyone. Good morning, Nathan. I guess my question is going to be on the SG and A expense line. Just looking at it sequentially, it’s kind of gone up about $7,000,000, which was, I think, more than people were looking for. You’ve got an extra quarter of Smart Cover in there and that one time deferred comp number in that.

Can you talk about the other investments that have been made there to to support future growth, I guess? And ex the the million dollar write up of deferred comp, is this kind of $52,000,000 a a new level of SG and A that we should be expecting going forward?

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. Well, I think you picked up on, I think, the two main pieces that are relevant to the quarter, Nathan. Certainly, yes, a full three months of SmartCover’s SCA run rate, which, of course, we mentioned that acquisition is above line average organically. And then when you add the intangible amortization to that, which, again, we’ve sized for the year and the quarter, That that’s certainly an element of that uptick sequentially. You’ve also picked up on, the very unique item to the quarter, that being the deferred comp expense to the tune of about a million bucks.

So absent, you know, those items, essentially, SCA growth, year over year is up two to three million dollars. And it’s ongoing investment to support the wonderful things that we’re doing in the marketplace in terms of continuing to evolve our software offering to keep it leading, best in class, continue to bring innovative, product development to market that differentiates not only our meter to cash products, but our around, the meter technologies and continue to drive adoption of those technologies, which remain very early stage in terms of US and North American water utility adoption. And so yeah. I mean, those are those are pieces of it. Obviously, we don’t guide, but you’ve picked up on the outliers that would help to inform your outlook moving forward.

Nathan Jones, Analyst, Stifel: I guess the $1,600,000 of intangible amortization, is any of that, like, step up or something that goes away? Or is that what you expect the continuing level of amortization to be?

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. That is entirely the intangible asset amortization. The inventory step up that was a small amount in association with the acquisition passed out in the first quarter. So essentially, that’s the continuing run rate for the life of those varying lived intangibles that we disclose in the financials.

Nathan Jones, Analyst, Stifel: Okay. So there’s no reason to expect it to be less than $52,000,000 in the SG and A line going forward?

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. We’ll leave that to to you to figure out, but, ultimately, you picked up on the two unique pieces. Yep.

Nathan Jones, Analyst, Stifel: Fair enough. I I guess then maybe you could provide a little bit more color. I mean, ran through a few other things there, Bob. But just on what what kind of capabilities, let’s not call them expenses, call them capabilities, have been added to the business to support future growth.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Yeah. So so, Nathan, as, you know, you reflect on the past five years, I it’s probably not fair to think about it because q two twenty twenty was the COVID quarter, but we’re up a 165% revenue over that five year period. So some of it’s just the random things of continuing to increase capacity on some of the the product lines that that we continue to invest in. Some of it is investing in, of course, people as we go through our five year strategic plans every year and we look forward on,

Bob Rockledge, Chief Financial Officer, Badger Meter: you

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: know, what what the new skills and new offerings are we’re gonna have sometimes that drives investing in different kinds of skills that we currently have today, continuing to invest in our software business that we’re totally excited about. So all the things that we told you over the years that we’re investing in to grow, it’s just a matter of continuing continuing to do that. And and, frankly, we still feel, taking the SmartCover piece aside, our ability to grow at a rate faster than our investment in SCA is is is still that that still is intact.

Bob Rockledge, Chief Financial Officer, Badger Meter: I think that’s the key there is that there’s there’s nothing unique about the rate there’s nothing unique about the rate of investment in this quarter. There’s anything different than what we’ve been doing for the last four or five years in terms of our primary cash capital allocation priority of organic investment in the business. It’s just the way I think it’s sequencing on a year over year basis and in concert with those two unique items that you mentioned to start your question.

Nathan Jones, Analyst, Stifel: Great. Thanks very much for taking my questions.

Conference Operator: Our next question comes from Scott Graham with Seaport Research Partners. Please go ahead.

Scott Graham, Analyst, Seaport Research Partners: Yes. Hi, good morning. I have a similar question to Nathan. Just want to maybe come at it a little bit differently. You were, I thought, pretty clear in your bullet points here on the SEA that the 1,600,000 stays, but the 1,000,000 of variable deferred comp is unique to the quarter.

So am I to infer that that means that that goes away next quarter?

Bob Rockledge, Chief Financial Officer, Badger Meter: Not in its entirety, but when you experience a quarter where the stock price goes up over $50 from beginning to end and you have liabilities associated that track that, there’s going to be an oversized impact that is absolutely unique to the second quarter.

Scott Graham, Analyst, Seaport Research Partners: Understood. Got it. That’s clear. Thank you. But one other question though around this, Bob.

You also, I think, indicated that if you strip those out, there was a $3,000,000 core increase. Now if my calculations are right here, that that $3,000,000 core increase on a year over year basis is about the same as your sales number sales increase in total, which would suggest that maybe there was a little bit more because you typically get leverage off of that line. It would suggest maybe a little bit more investment in this quarter, although you just said that was not the case. So maybe you can connect those dots for me.

Bob Rockledge, Chief Financial Officer, Badger Meter: So I I think the simplest way to say this is that we’re we’re comparing to a quarter of SEA as a percent of sales at 20.2%, which is abnormally low, Stripping out all the noise in the quarter, so in essence, stripping out Smart Cover for all intents and purposes, we’d have been at 20.7%. So, yes, there is a 50 basis point increase, but that is no in any no in any way different than where we’ve been historically historically or or on a in recent quarters and is still indicative of our ability to leverage SEA over time, just not quarter to quarter.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Yeah. I mean I mean, we Thank you for that clarity. Have done Yeah.

Scott Graham, Analyst, Seaport Research Partners: Okay. So then let me just ask this one last question, if I may. The third bullet point says that strategic price increases mitigated certain tariff impacts, which suggests to me that you were maybe price cost negative in the quarter. And then if that’s the correct assumption, should you essentially be price cost neutral for the rest of the year?

Bob Rockledge, Chief Financial Officer, Badger Meter: So I think you’re picking up on the right dynamic. Certainly, our our book of business here is varies in terms of go to market. Sometimes we’re direct, other times we’re through distribution. Sometimes we have PO to PO pricing, other times we have long term contracts. Right?

The the pricing actions implemented in the quarter were implemented in, call it, mid mid April. And by default, they won’t be effective on everything that we shipped in the quarter. To the extent tariff cost pressures remained static, which I don’t think anyone is saying those to be the case, you’re exactly right in your diagnosis of how we’ve characterized the second quarter results. Think what remains to be seen and the main priority reason why we’re not redrawing a gross margin line or normalized gross margin range in this quarter despite again, once again having 41.1% gross margins is the uncertainty associated with tariff costs. So the last part of your question is difficult to answer, not knowing exactly what the forthcoming, reciprocal tariff impacts are as well as then, the tariff around copper, which at this time is just a rumored statement, nothing that’s been firmly implemented.

And so that’s the overall hesitancy to tell you that we’re going to be cost neutral moving forward because the cost side can change while equally the price side can change as well.

Scott Graham, Analyst, Seaport Research Partners: Thanks very much.

Conference Operator: Our next question comes from Andrew Krill with Deutsche Bank. Please go ahead.

Andrew Krill, Analyst, Deutsche Bank: Hi. Thanks. Good morning, everyone. Wanted to follow-up on the comments about the AMI projects in the funnel and it being a little unclear when they might start. So just is this like, a change where they’ve been deferred or pushed out a little bit, or is this more normal course of business?

And could you maybe also just generally, comment on, like, muni activity in general? Because I think there have been some fears maybe of, like, a little bit of softness there. Thanks.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Yeah. So, Andrew, yeah. So as we talk about all the time in this business, it it can be uneven from quarter to quarter. So we’re just basically letting you know it’s not a stacked bar where you add one quarter to the next and it can be the same. So just trying to be transparent here that, you know, some projects have rolled off, but we certainly are excited about the projects that will be rolling out that our funnel remains as robust as ever.

So so not a concern for the long term in any way. It doesn’t change our view on high single digits through the cycle. Just just pointing out that, you know, we still expect it to grow, next quarter and into the future, but it’s just not a stack bar from sequential. In terms of total, just market demand, you know, like we always have, we continue to spend a lot of time talking to customers in the several pieces of the the cycle on who’s working with, you know, consulting firms on AMI projects that we’ll see in three to five years, how we’re doing on RFPs that are currently in motion, things that are that are currently, being rolled out, orders, backlog, we’re every bit as bullish as we’ve ever been. So so customer demand side, in terms of people inquiring about new projects or moving forward with projects remains largely unchanged.

Andrew Krill, Analyst, Deutsche Bank: Okay. Great. That’s very helpful. And then a quick clarification on the comments about sales being down quarter over quarter into ’3 q. Just was that a total sales comment or more core sales?

So in other words, like, kind of strip out Smart Cover and your core dollars are down as well. Thanks.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Yeah, Andrew. That that’s a core comment.

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. So the script specifically, clarified excluding SmartCover. So essentially, core core growth within, obviously, the non comparability of SmartCover in q three twenty five not being in q twenty four.

Nathan Jones, Analyst, Stifel: Okay, great. Thanks guys.

Conference Operator: Thank you. Our next question comes from Rob Mason with Baird. Please go ahead.

Rob Mason, Analyst, Baird: Yes. Good morning, Ken, Bob. Maybe I’ll just pick up real quick around Smart Cover. So the sales in the quarter look like they were and this is the guess, the first full quarter we’re seeing of Smart Cover. Above the run rate of sales that they reported last calendar year.

So I’m just curious, is that reflective of seasonality in the business? Is that kind of underlying organic growth? Just how we should be thinking about $10,000,000 contribution this quarter anyway of Smart Cover sales and how the maybe quarter to quarter pattern should look there?

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Yeah. So so I’m I’ll make a general comment, and I see Bob wanted to to to jump into. So let me just talk in general about how, how excited we are about the Smart Cover acquisition. So we’ve, we’ve had it about five months now. I mentioned the, the great reaction that we had at Ace, a lot of the feedback that we’re getting within the market.

So getting a lot of of positive, momentum from both market and just through the integration that we’ve had thus far. I think if we couldn’t be more pleased with the results that we’ve had thus far and the team that’s on board. So feel great about the long term fundamentals there. I think Bob was gonna make a final sales alternative to him, but I I just wanted to be clear that everything that we think that we’ve, everything that we thought we knew about smart cover has proven to be true very early on.

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. I mean, you you hit the main point, which is, of course, I know everybody’s immediate concern is quarter to quarter, but our long term growth outlook for smart cover is multi year, if not multi decade. Again, referencing back to, you know, the sewer line monitoring portion of this business is virtually greenfield with very low digital adoption, in the, less than one half of 1%. So, essentially, we believe not only in the revenue growth in the short term, but but the long term. I would say there’s this is little to do with seasonality and entirely to do with, advancing our positioning as a leader in the market and helping you helping utilities, solve primarily four main use cases in what generally tends to be out of sight, out of mind, in fact, underground infrastructure that is blind spots for those utilities.

And so, yes, we’re we’re pleased with the revenue growth thus far, but certainly have a high aspirations as we move forward as well.

Rob Mason, Analyst, Baird: And and, you know, Bob, you know, my quick math around, the contribution from Smart Cover at the EPS level, you know, I know this is a GAAP number, of course. You know, would have been in the neighborhood of kind of $06 $0.7 dilutive in the quarter year over year.

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. You’re not not too far off as you’ll as I’ll remind everyone, you know, we said at acquisition, EPS decretive in year one, and certainly a path to, EPS contributions shortly thereafter primarily in year two. So as you can imagine, a lot of that is about market adoption and the great sales opportunities and sales growth that we mentioned while also leveraging what at the current time is an above line average SEA business, but that we think over time provides well above line average incrementals both through the combination of software attachment rate and then leveraging the cost base.

Rob Mason, Analyst, Baird: Yep. If if I could sneak in one more real quick. Just, again, we’ll have to see how the, you know, tariffs around copper, you know, ultimately play out. But, you know, if you think that there could be, you know, some added cost to copper or and and that ultimately flows through to scrap brass, Do you think that could have any influence on the adoption rate between mechanical and solid state meters? I mean, does the pricing differential that exist today, does that narrow?

Does it make

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: the value proposition for solid state stronger relatively? Well, yes. So the first thing I’d I’d remind everyone, Rob, and I know you know this is we have a great ultrasonic line. So even if that were to happen, we think that wouldn’t certainly would not be a negative event. We can just lock people up from from mechanical to ultrasonic within our portfolio.

Secondly, people I know I know there’s this myth about mechanical meters, and, clearly, we fully understand a mechanical meter can be smart too with the communication software. And there are tangible reasons why a lot of utilities still want to buy a mechanical meter. So along the way, we feel that we have a strong ability to continue to to mitigate the cost issues and continue to sell a lot of mechanical meters. And if someone wants to walk up that ultrasonic, we’re happy to help them do that too.

Rob Mason, Analyst, Baird: Very good. Thanks, Ken.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Sure.

Conference Operator: Thank you. Our next question comes from Jeffrey Reeve with RBC. Please go ahead.

Jeffrey Reeve, Analyst, RBC: Thanks. Good morning. You mentioned you’re progressing as expected on Smart Cover integration. Could you remind us the cost synergy opportunity, where you are today in capturing it? And maybe how quickly you can expect to realize the remaining upside?

And is this mostly an SEA cost out opportunity?

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: So so, there I don’t I’m looking at Bob. I don’t believe we ever cited the cost out opportunity publicly.

Bob Rockledge, Chief Financial Officer, Badger Meter: Yeah. So I think let me just clarify. So certainly, when we talk about the most dramatic and impactful synergies of the SmartCover acquisition, it is all about commercial synergies, accelerating what was already great standalone organic revenue growth by advancing, the connectivity of the technology to our existing installed base, whether that’s direct at customers or through, distribution. So a number one priority from a synergies perspective is commercial synergies. As it relates to cost, the comment I made earlier was about leveraging an existing SEA cost base.

So private prior to Badger’s ownership, Smart Cover was private equity owned and they were in basically revenue growth mode. So they invested heavily in advancing the technology and software, having the right feet on the street for sales. And so they carried a higher leverage of lever level of SEA, coming into our acquisition. We’re not saying we’re reducing that. We’re saying we’re able to lever that as the incremental sales growth that we bring to the table through our great access to market and long tenured, customer relationships occur.

There are certain aspects of cost synergies when you start to look at the product side. Meaning, the product that SmartCover sells for smart, for sewer line monitoring has PCBAs and has batteries in it and our components that we’re familiar with buying. And while whereas we buy hundreds of thousands, if not millions of those parts and components, Smart Cover in history has only, you know, has only sold smaller amounts. And we believe that we can leverage certain of those components through our supply chain and otherwise, but that is absolutely secondary to the primary synergy, which is commercial synergies. And so a big part of taking this from EPS decretive in year one to EPS accretive in years two, three, and beyond is all about the top line revenue growth and then not having to invest in SCA at a rate commensurate with that great high organic above line average sales growth.

Jeffrey Reeve, Analyst, RBC: Got it. Thank you. And maybe just switching gears, there have been some discussions about potential cuts to the EPA budget. Do you have a sense of how that could impact demand for metering? Maybe at a high level, how would you break down customer project funding between muni budgets and federal support, like, state revolving fund?

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Yeah. So, so, Jeffrey, there’s a lot of ways that utilities have to to fund their their projects and and remembering again, as I said in the script that the the meter and AMI is effectively the cash register of the utility. So it remains a very high priority for them regardless of whatever funding may or may not be available. So, of course, there are state revolving funds, which may be reduced some in the new bill, but they still exist. And the WIPIA local cost interest loans are still out there and very supported by the government by federal government.

And then you’ve got until they have the ability to raise rates. They have the ability to issue municipal bonds. There there’s a myriad of ways that the funding happens, and this is where our direct sales model gives us an opportunity to talk directly with utilities on how they’re viewing their upcoming plans. And and as you can imagine, we always do that, but we’ve done that even more so in the last three months with all the noise around this and continue to to remain quite positive on the ability to grow high single digits through the cycle because utilities are still talking about investing, and and they have the means to do that for where we positioned ourselves in the water industry, which, you know, your question isn’t wrong for the water industry, but I feel like we’re pretty well, positioned to to not be affected by some of those cuts.

Scott Graham, Analyst, Seaport Research Partners: Alright. Thank you.

Ken Bockhorst, Chairman, President and Chief Executive Officer, Badger Meter: Thanks.

Conference Operator: We have no further questions in the queue. So I’ll hand back over to Barbara for any closing comments.

Barbara Novarini, Head of Investor Relations, Badger Meter: Thank you, operator, and thank you all for joining our call today. For your planning purposes, our third quarter twenty twenty five call is tentatively scheduled for October 21, and I’ll be around all day to take any follow-up questions you may have. Thanks, and have a great day.

Conference Operator: This concludes our call. Thank you very much for joining. You may now disconnect your line.

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