Badger Meter(BMI)2025-02-14 18:34Financial Performance - Net sales in 2024 increased by 826.6 million from 725.5 million [141]. - Operating earnings in 2024 were 118.0 million, or 16.8% of sales in 2023, with gross margin as a percentage of sales increasing from 39.3% to 39.8% [143]. - Cash provided by operations in 2024 was 110.1 million in 2023, driven by increased operating earnings and effective working capital management [150]. - Earnings per share on a diluted basis increased to 3.14 in 2023, reflecting strong operational performance [147]. Acquisitions and Investments - The Company acquired 100% of SmartCover for approximately 3.0 million in cash effective January 1, 2024, expanding its remote water monitoring offerings [137]. Working Capital and Efficiency - Primary working capital as a percentage of sales was 20.8% as of December 31, 2024, compared to 22.1% in 2023, indicating improved efficiency [149]. - The Company had a net cash position of 154.1 million of unused credit lines available [153]. Warranty and Tax Liabilities - The reserve for product warranties increased from 16.7 million in 2024, reflecting a rise in warranty claims rates due to new technology introductions [156]. - The gross accrued liability for unrecognized tax benefits decreased from 1.2 million in 2024, with accrued interest remaining approximately 2.7 million in 2023 to $3.3 million in 2024, primarily related to foreign net operating loss carryforwards [159]. Market Position and Risks - The Company estimates that approximately 40% of water utility connections in the U.S. have converted to an AMI radio solution, positioning it well for future growth [130]. - The Company is exposed to market risks due to competition in the water metering market, with potential impacts from new entrants lacking brand recognition [164]. - The Company relies on single suppliers for certain components, which could disrupt operations if those suppliers are lost [166]. - The price and availability of raw materials are influenced by economic conditions, with commodity risk managed by locking in purchase prices [167]. - The Company believes foreign currency risk will not materially affect its financial position or results of operations [168]. - The Company does not hold or issue derivative instruments for trading purposes, adhering to a strict policy against such practices [169]. - The Company is subject to contingencies related to environmental laws, which could result in future costs if circumstances change [162]. Goodwill and Intangible Assets - The Company completed its impairment analysis for goodwill and intangible assets in Q4 2024, noting no impairment and no adjustments recorded [161]. Software and Margin Improvement - The Company’s revenue from Software as a Service (SaaS) has significantly increased, contributing to margin improvement [134].