Badger Meter Q2 Earnings Call Highlights
Key Points
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- Badger Meter’s Q2 sales and earnings fell year over year, with total sales down 7% to $222.3 million and diluted EPS down to $1.02 from $1.17. Management said the quarter was still in line with expectations and sequentially improved as previously awarded AMI projects began shipping.
- Utility water sales declined, but flow instrumentation grew. Utility sales were hurt by project pacing and lower AMI revenue, while flow instrumentation rose 6% on broad-based demand, including data center-related orders for cooling and flow monitoring.
- The company reaffirmed its full-year outlook for sequential revenue improvement and “flat-ish” organic revenue versus 2025, while also continuing share buybacks and focusing on cash flow recovery as inventory normalizes.
Badger Meter (NYSE:BMI) reported lower second-quarter 2026 sales and earnings from the prior year, but management said revenue improved sequentially as previously awarded advanced metering infrastructure projects began shipping and reaffirmed its expectation for improving quarterly revenue through the rest of the year.
Chief Financial Officer and Treasurer Dan Weltzin said total sales for the quarter were $222.3 million, down 7% year-over-year. Excluding about $2 million in sales from UDlive, which Badger Meter acquired on May 1, base sales declined 7.5% from the prior-year period. However, base sales rose 9% from the first quarter, which management said reflected initial shipment ramps on several awarded projects.
Chairman, President and Chief Executive Officer Ken Bockhorst said the results were in line with expectations. “As expected, we delivered sequentially improved sales in the second quarter as a number of our previously awarded AMI projects began initial ramping of shipments,” he said. He added that the company saw “a modest increase” in short-term order rates and in flow instrumentation.
Utility Water Sales Decline, Flow Instrumentation Grows
Weltzin said utility water sales declined 8% year-over-year, or 9% excluding the acquisition, due to the project pacing dynamics the company has been discussing. Lower AMI-related product revenue was partially offset by higher software and growth in what the company calls beyond-the-meter offerings. On an organic basis, utility sales increased 8% sequentially.
Flow instrumentation sales rose 6% from a year earlier, supported by broad-based water application demand. In the question-and-answer session, Bockhorst said the company benefited from orders tied to data center applications, including clamp-on meters and magnetic meters used for cooling towers and flow monitoring. However, he cautioned that the business should still be viewed as having “GDP-like” growth over the company’s five-year strategic horizon.
The company also confirmed that product shipments for the PRASA project have begun. Bockhorst said several other awarded projects have also started, and that the overall cohort of nine previously discussed awarded projects “feels like it’s pretty solid at this point.” Management declined to provide individual project-level details.
Margins Hold Within Range Despite Lower Volumes
Operating earnings declined 12% year-over-year, and operating margin fell 110 basis points to 17.7%. Excluding UDlive, base operating margin was 18.4%, down 40 basis points from the year-ago quarter.
Gross margin was 40.8%, down 30 basis points from the second quarter of 2025. Weltzin attributed the decline primarily to lower sales volumes and project mix, but said gross margins remained in the upper half of the company’s normalized range, reflecting “the resiliency of our overall structural mix and pricing discipline.”
Selling, engineering and administrative expenses totaled $51.4 million, down $1.6 million from the prior year. Weltzin said spending controls, lower incentive compensation and cost containment actions more than offset about $3 million of year-over-year spending tied to UDlive and transaction-related costs. The company expects UDlive intangible asset amortization of approximately $5 million annually.
Diluted earnings per share were $1.02, down from $1.17 a year earlier. The effective tax rate was 25.2%, compared with 24.5% in the prior-year quarter.
Cash Flow Lower; Buybacks Continue
Free cash flow was $21.9 million, down from $40.6 million in the prior-year quarter. Weltzin cited lower earnings and temporary increases in working capital. Primary working capital as a percentage of sales rose to 22.9% from 20.0% at the end of the prior quarter.
Weltzin said the increase in receivables was related to revenue timing, while inventory levels were above average due to revenue pacing dynamics. He said the company expects to work down inventory through the fiscal year and remains focused on full-year cash flow conversion in excess of 100% of net earnings.
During the quarter, Badger Meter repurchased 204,000 shares for $25.3 million. Weltzin said the company has about $90 million remaining under its current share repurchase authorization and has deployed roughly $80 million in buybacks over the past three quarters. The company also renewed a five-year, $150 million credit facility, which remains undrawn.
Management Reaffirms Full-Year Organic Revenue Outlook
Management reaffirmed its outlook for sequential improvement in base quarterly revenue for the balance of 2026. Excluding UDlive, Badger Meter continues to expect full-year organic revenue to be “flat-ish” with 2025 levels.
Bockhorst emphasized that the outlook should not be interpreted as perfectly flat, citing variability in project ramping and short-term order patterns. He said year-over-year base sales growth is expected to be heavily weighted toward the fourth quarter because it represents the company’s easiest comparison.
On short-cycle demand, Bockhorst said the first quarter was an outlier and that second-quarter order rates were “more normal-ish” and typical of the operating environment. He said a higher daily turn rate of orders in the second quarter, combined with project activity, supports the company’s full-year stance.
Management also discussed electronic component cost and availability pressures driven by demand from artificial intelligence and data center build-outs. Weltzin said the company has been able to mitigate the impacts to date, but the pressures are not easing. Bockhorst said Badger Meter has managed similar supply chain challenges before and remains positioned to work through them.
Customer Interest Remains Focused on AMI and Software
Bob Wrocklage, Executive Vice President of North America Municipal Utility, said feedback from the AWWA ACE 2026 trade show in Washington, D.C., remained constructive. He said utilities continue to prioritize modernization, efficiency and visibility across water and wastewater networks.
Wrocklage said discussions with consultants and customers focused on both hardware and software components of the company’s Network as a Service offerings, including network resiliency, dynamic multi-carrier SIM technology and the ORION Lens endpoint solution for metal pit lids. He also cited interest in EyeOnWater Premium, the BEACON Field app and Badger Meter’s embedded AI functionality, Cobalt.
Management said the company is continuing to educate utilities on stormwater and sewer line applications through SmartCover and UDlive. Bockhorst said the company’s confidence in the long-term outlook remains intact, supported by replacement demand, AMI adoption, recurring software, beyond-the-meter technologies and acquisitions.
About Badger Meter (NYSE:BMI)
Badger Meter, founded in 1905 and headquartered in Milwaukee, Wisconsin, is a global leader in flow measurement and control solutions. The company's core business centers on the design, manufacture and sale of water meters, control valves and related accessories for municipal and industrial water utilities. Over its more than a century of operation, Badger Meter has built a reputation for precision engineering, durability and compliance with international regulatory standards.
The company's product portfolio includes mechanical and ultrasonic water meters, electromagnetic flow meters for industrial applications, and a range of control valves that help utilities manage pressure and flow in distribution networks.
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