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    BMI
    Earnings call· Jun 2026(Q2 FY26)

    BADGER METER INC BMI

    Jul 22, 2026 Source

    Executive summary

    Badger Meter Q2 FY26 — AMI Project Ramps Drive Sequential Revenue Improvement

    Badger Meter delivered sequential revenue improvement in Q2 FY26, driven by the initial ramp-up of previously awarded AMI projects and a modest increase in short-term orders. While year-over-year sales and operating earnings declined, the company reaffirmed its flattish organic revenue outlook for FY26, anticipating further sequential growth in the second half. Management highlighted ongoing challenges with electronic component costs and availability but expressed confidence in long-term growth drivers and disciplined execution.

    Highlights

    5

    • Base sales increased 9% sequentially from Q1 FY26, driven by initial ramping of AMI projects.

    • Flow instrumentation sales grew 6% year-over-year, supported by broad-based water application demand.

    • Gross margin remained strong at 40.8%, indicative of structural mix and pricing discipline.

    • Successfully renewed a $150 million credit facility for 5 years, maintaining financial flexibility.

    • Repurchased 204,000 shares for $25.3 million in Q2 FY26, contributing to $80 million in buybacks over the past 3 quarters.

    Concerns

    5

    • Total sales declined 7% year-over-year to $222.3 million.

    • Utility water sales decreased 8% year-over-year (9% excluding UDlive acquisition).

    • Operating earnings fell 12% year-over-year, with margins down 110 basis points to 17.7%.

    • Free cash flow was $21.9 million, down from $40.6 million in the prior year.

    • Noted increasing electronic component cost and availability pressures impacting the industry.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full year 2026 organic revenue
    roughly flattish with 2025 levels
    high materiality
    High
    Base quarterly revenue
    sequential improvement
    medium materiality
    High
    Full year cash flow conversion
    in excess of 100% of net earnings
    high materiality
    High
    UDlive intangible asset amortization
    approximately $5 million annually
    medium materiality
    Medium
    Q4 FY26 base sales growth rate
    heavily weighted to Q4
    medium materiality
    Medium
    Q3 FY26 sequential growth
    sequential growth again in Q3 over Q2
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Utility water
    Sales declined 8% year-over-year (9% excluding the UDlive acquisition), reflecting project pacing dynamics. Lower AMI-related product revenue was partially offset by higher software and beyond the meter growth.
    Organic sequential growth: +8%
    		—-8%——
    Flow instrumentation
    Sales were up 6% year-over-year due to broad-based water application demand. Specific products like clamp-on meters and MAG meters performed well in data centers, though the segment's long-term growth is expected to be GDP-like.
    		—+6%——

    Operational metrics

    18
    Total sales
    $222.3 million-7% YoY
    Q2 FY26

    Total sales for the second quarter.

    Base sales
    $220.3 million-7.5% YoY
    Q2 FY26

    Base sales were 9% higher than first quarter levels, with initial ramp of awarded projects.

    Operating earnings growth
    -12%YoY
    Q2 FY26

    Resulted in improved operating leverage versus Q1 due to sequentially higher sales and cost actions.

    Operating margin
    17.7%-110 bps YoY
    Q2 FY26

    Overall operating margin.

    Base operating profit margin
    18.4%-40 bps YoY
    Q2 FY26

    Operating profit margin excluding the impact of UDlive.

    Gross margin
    40.8%-30 bps YoY
    Q2 FY26

    Primarily reflecting lower sales volumes and project mix. Remained solidly in the upper half of normalized range.

    Selling, Engineering and Administrative (SE&A) expenses
    $51.4 million$1.6 million lower YoY
    Q2 FY26

    Due to benefit of spending controls, lower incentive compensation, and specific cost containment actions. Offset by $1.8 million from UDlive and $1.2 million in transaction-related costs.

    UDlive SE&A contribution
    $1.8 million
    Q2 FY26

    Addition of UDlive for 2 months, including related intangible asset amortization.

    Transaction-related costs
    $1.2 million
    Q2 FY26

    Final transaction-related costs.

    Effective income tax rate
    25.2%compared to 24.5% last year
    Q2 FY26

    Effective income tax rate for the quarter.

    Diluted EPS
    $1.02-13% YoY
    Q2 FY26

    Down from $1.17 in the prior year period.

    Primary working capital as percentage of sales
    22.9%up from 20.0% at prior quarter end
    Q2 FY26

    Receivable increase relates to revenue timing; above-average inventory levels expected to work down in H2 FY26.

    Shares repurchased
    204,000 shares
    Q2 FY26

    Shares repurchased in the second quarter.

    Share repurchases (past 3 quarters)
    $80 million
    Past 3 quarters

    Total amount deployed in share repurchases over the past three quarters.

    Remaining share repurchase authorization
    $90 million
    As of Q2 FY26

    Amount remaining on current share repurchase authorization.

    Credit facility
    $150 million
    As of Q2 FY26

    Provides ample financial flexibility under attractive terms, including expansion feature.

    Short-term order rates
    modest increasehigher daily turn rate than Q1
    Q2 FY26

    Contributed to sequential revenue improvement, more 'normal-ish' than Q1.

    Electronic component cost and availability
    increasing level of pressure
    Q2 FY26

    A byproduct of AI and data center build-out demand. Adequately mitigated to date, but challenges are not easing.

    Industry KPIs

    10
    MetricValueDetails
    M a contribution$2 millionUSD
    Orders book to billmodest increase
    Long term agreementsability to pass along escalations
    Segment revenue growthUtility water sales declined 8% year-over-year%
    Design wins product cycle rampsa number of our previously awarded AMI projects began initial ramping of shipments
    Order visibility backlog policyunevenness in project ramping and short-term order patterns
    Recurring software services mixhigher software as well as collective beyond the meter growth
    Supply demand imbalance lead timesincreasing level of electronic component cost and availability pressures
    End market revenue mix organic growthUtility water sales declined 8% year-over-year%
    Operating margin incremental leverage18.4%%

    Deals & partnerships

    2
    UDliveAcquisition of a company

    Acquired May 1, 2026. Included $1.8 million in SE&A expenses for 2 months, including intangible asset amortization.

    Undisclosed banksRenewal of credit facility$150 million5 years

    5-year renewal of the credit facility, which was due to expire in July. Includes an expansion feature.

    Risks & headwinds

    3
    Electronic component cost and availability pressuresOngoing

    Increasing level of pressure

    Mitigation: Adequately mitigated to date; managing through both cost and availability. Leveraging innovation edge and flexible cellular offerings.

    Project pacing dynamics and unevennessThroughout the year and beyond

    Implementations will continue to be uneven

    Mitigation: Large cohort of awarded projects provides 'air cover' to deal with unevenness. Robust funnel of near-term projects.

    PRASA project legal challengesOngoing

    Public challenges and appeals

    Mitigation: Management's view on the project is unchanged; confident in fair process and win. Common in government bidding.

    What to watch in Q3 FY26

    5

    Sequential base quarterly revenue growth

    Q3 FY26
    Current9% sequential growth in Q2 FY26
    TargetContinued sequential growth in Q3 FY26

    Why it matters

    Confirms the company's guidance for improving top-line results in the second half of the year.

    I will tell you, though, we do expect sequential growth again in Q3 over Q2.

    Q&A highlights

    6

    How has visibility into the second half ramp changed, and are any projects at risk of slipping into 2027?

    Visibility has improved, with PRASA and other projects having begun. While unevenness is possible, the total cohort of 9 projects feels solid.

    “So as you know, we talked about PRASA has begun and a few of the other projects have begun. We'll always note that there can be possible unevenness, but the total cohort of 9 projects feels like it's pretty solid at this point.”

    asked by Jeff Reive · answered by Kenneth Bockhorst

    2 min read5 chapters

    Detailed Narrative

    01

    Project Ramp-Up Dynamics

    Badger Meter reported that a number of previously awarded AMI projects, including the PRASA project, have begun initial ramping of shipments. This activity contributed to the sequential improvement in Q2 base sales. Management acknowledged that implementations will continue to be uneven due to various external factors inherent in the industry, but expressed confidence in the overall cohort of 9 key projects.

    02

    Electronic Component Pressures

    The company highlighted increasing cost and availability pressures for electronic components, attributing these challenges to the high demand from AI and data center build-outs. While Badger Meter has managed to mitigate these impacts to date, they noted that the challenges are not easing. Management emphasized their experience in navigating similar supply chain issues in the past, leveraging their innovation edge and flexible cellular offerings.

    03

    AWWA ACE Trade Show Insights

    At the AWWA ACE 2026 trade show, customer and consultant feedback reinforced Badger Meter's leadership in Network as a Service (NaaS) solutions. There was strong interest in advancements like dynamic multi-carrier E-SIM technology, ORION Lens endpoint solutions, and software offerings such as EyeOnWater Premium, BEACON Field app, and Cobalt AI functionality. Discussions confirmed the industry's shift from cellular vs. fixed network to Badger Meter's comprehensive NaaS capabilities as an industry standard.

    04

    Capital Allocation Strategy

    Badger Meter reiterated its balanced approach to capital allocation. Priorities include continued investment in R&D innovation for growth, returning cash to shareholders through dividends and share repurchases, and pursuing strategic M&A opportunities. The company noted its recent share repurchase activity and the renewal of its credit facility as examples of its financial flexibility.

    05

    Sustainability Efforts

    The company recently published its 2025 sustainability report, which details progress across its solutions, operations, and people pillars. Management emphasized that integrating sustainability as a business process enables them to provide industry-leading water solutions, grow the business, and reduce their environmental footprint simultaneously.

    AI-generated summary of the company’s earnings call. Not investment advice.