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| Statement |
|---|
| As supply chain dynamics improved, we’ve been able to begin improving lead times |
| Impressive expense control |
| The Badger Meter team delivered another record quarter with continued strong sales, operating profit and EPS growth year-over-year |
| For example, our water quality, Hach is a really strong, great business, but there is room for several other technologies and everyone to be successful in a wonderfully large growth market |
| Awards, orders, and bid funnel activity remain strong, supported by the well-understood macro drivers facing the water industry |
| So, as I talked about with that improving lead time situation, we had a really strong order period that we’re really proud of |
| We just had an exceptionally strong shipment period that was slightly better, and I do mean slightly |
| Total utility water product line sales increased 31% year-over-year with broad-based growth across the portfolio of utility smart water solution offerings |
| Continued robust order demand and normalization of supply chain conditions resulted in strong manufacturing output |
| Overall, we are extremely excited about order rate |
| So, as we start to improve lead times and eat into that actionable right in front of us today backlog, that’s actually a good thing for customers |
| The replacement-driven underlying demand activity as well as our ability to leverage our water-related hardware and communication offerings, to accelerate software and data analytics across the water ecosystem position us well for future growth |
| Turning to margins, solid execution at both the gross margin and SEA lines contributed to the 80 basis-point increase in operating margins in the quarter, reaching 16.9% versus 16.1% last year |
| Demand for our differentiated and tailorable digital smart water solutions remains robust and improving supply chain dynamics allowed us to make modest headway into the elevated backlog |
| We were pleased with overall gross margins, again in the upper half of our normalized range |
| These improving dynamics have also aided manufacturing efficiencies, benefiting the gradual margin expansion we’ve consistently discussed |
| While operating income grew 31%, we increased EPS an exceptional 44% to $0.88 in the third quarter compared to $0.61 in the prior year quarter |
| We continue to gain that leverage as a point of operating and EBITDA margin expansion |
| So, the story of SEA leverage is real improvement over the last three years, and we believe to continue that while being steadfast and being invested in organic investment as our capital allocation priority number one |
| As noted in the release, as we close out 2023, we continue to expect solid year-over-year sales growth, taking into account the fewer operating days in fourth quarter with U.S |
| Looking ahead, we have the constructive outlook for the remainder of the year and see a solid foundation for profitable growth in 2024 |
| We’ve demonstrated our ability to capitalize on these growth opportunities and we remain well positioned to further build on our track record of value creation |
| As Bob mentioned earlier, we’ve delivered meaningful growth over the past several years leveraging our expanding portfolio of digital smart water solutions to solve our customers’ evolving water challenges |
| It also gives us ample opportunity to add to our portfolio of solutions and other sensors and hardware enabled software via organic and disciplined M&A investments |
| The total available market globally is valued at approximately $20 billion, giving Badger Meter ample opportunity to continue to grow and expand these offerings in the U.S |
| As the macro challenges of labor shortages, aging infrastructure, water conservation, and climate events continue to drive much needed investment into critical water systems, Badger Meter’s broad portfolio of customizable solutions spanning metering, sensors, instruments, communication, software and support offerings is uniquely positioned to serve the evolving needs of our utility and other customers |
| We have, as we’ve always maintained over the last several years, a really healthy target rich environment of companies that are in this water quality space |
| Free cash flow of $28.4 million improved from a year ago, primarily on higher earnings |
| Gross profit dollars increased $15.2 million year-over-year and as a percent of sales increased 20 basis points to 39.1% versus 38.9% last year with higher volumes and favorable product mix contributing to the improvement |
| So, I do think -- again, we don’t guide obviously, but I think the ability to sustain double-digit growth even in this market, it’s not doable, repeatable every year, annually over that strategic cycle |
| Statement |
|---|
| Should we be expecting a sequential decline in 4Q revenue? Bob Wrocklage So we don’t give guidance, but I think you’re walking away with an obvious takeaway, which is with fewer working days, likelihood that that’s a potential |
| Because of our growth algorithm, we believe while still being an innovator and doing the things that you talked about, R&D, integrating new businesses that we’ve acquired, et cetera, we can still do all those great things, but grow SEA at a rate slower than sales |
| While some things are moderating, inflation is still real |
| Despite the higher spend levels to support growth, SEA as a percent of sales declined 50 basis points to 22.2% from 22.7% in the comparable prior year quarter |
| It sounded like -- you made the comment, you were able to work backlog down a little bit, but you characterized that it is still elevated |
| So, that optimism has not changed on that front |
| A quick one on the fewer selling days in 4Q |
| There are parts of the economy that still certainly aren’t great as we talked about inflation and interest rates and other things that are out there |
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