Badger Meter, Inc. (NYSE: BMI) today reported results for the fourth quarter and full year ended December 31, 2021.
Fourth Quarter 2021 Highlights
- Record total sales of $135.7 million, an increase of 21% compared to $112.3 million in the comparable prior year quarter.
- Strong incremental profitability with a 170 basis point increase in operating profit margins.
- Diluted earnings per share (EPS) were $0.59, a 31% increase compared to $0.45 in the comparable prior year period.
- Robust $27.1 million of cash provided by operations.
- Strong order momentum continued, exited quarter with a record backlog.
Full Year 2021 Highlights
- Full year 2021 record sales of $505.2 million, 19% higher than $425.5 million in 2020.
- Operating profit margins increased year-over-year by 30 basis points despite widespread supply chain and inflation dynamics.
- EPS increased 23% to $2.08 compared to $1.69 in the comparable prior year period.
- $87.5 million of cash provided by operations.
“The fourth quarter was an excellent finish to an outstanding year, where we achieved record financial results and surpassed $500 million in annual revenues,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. “These results reflect the combination of strong demand and order momentum for our innovative smart water solutions, successful water quality acquisition integration activities, relentless execution in the face of acute supply-chain challenges and a world-class team committed to serving customers. We faced many challenges in 2021 and I am extremely proud of how our worldwide team rose to the occasion time and again.”
Fourth Quarter Operating Results
Utility water sales increased a robust 23.4% year-over-year, the result of strong order activity, backlog conversion and water quality acquisition-related sales. Excluding the year-over-year sales benefit from acquisitions of approximately $9 million, core utility water sales increased 14.4% over the prior year comparable quarter and established a new quarterly record. The growth was due to higher ORION Cellular endpoint sales as well as increased BEACON SaaS revenue. Backlog grew as continued strong order momentum more than offset recovering production output, as intermittent supply chain limitations continued to impact full conversion of utility water orders to net sales.
Sales of flow instrumentation products grew 8.9% year-over-year as improved demand and easier comparisons across the varied end markets was partially offset by the impact of supply chain disruptions that limited manufacturing output.
Gross margin increased $10.8 million year-over-year, with gross margin as a percent of sales of 40.4%, an increase of 120 basis points over the prior year comparable quarter. The Company executed well on pricing realization and manufacturing output optimization in the face of prevalent inflationary pressures and production volatility caused by restricted component availability. Gross margins benefitted from favorable product and acquisition mix, including higher SaaS revenues. The prior year included a non-recurring discrete network sunset provision benefitting the year-over-year comparison.
Selling, engineering and administration (“SEA”) expenses in the fourth quarter of 2021 were $32.0 million, or 23.6% as a percent of sales, compared to $27.1 million, and 24.1% in the comparable prior year quarter. The year-over-year increase in expenses is primarily the result of the addition of the water quality acquisitions, including the related intangible asset amortization as well as higher compensation expenses. Additionally, certain pandemic-impacted expenses such as travel, returned to more normalized levels.
As a result of the above, operating margin was 16.8%, a 170 basis point increase from the prior year’s 15.1%. The tax rate of 24.5% was higher than the prior year’s 22.6%.
Full Year Recap and Outlook
Bockhorst continued, “We achieved record sales and earnings in fiscal 2021, and I am proud of the way Badger Meter employees came together to generate these strong results while navigating supply chain complexities, inflation and continued challenges from the pandemic. We capitalized on strong customer demand trends for our leading water instrumentation and software offerings. Through disciplined execution, we were are able to differentiate our performance, enhance our competitive position, and deliver for our customers.”
”Badger Meter ended 2021 with strong demand for our smart water solutions, and we are well positioned to continue to capitalize on the opportunities in front of us. Our record backlog and order momentum continue to benefit from positive industry fundamentals, including customer requirements to enhance operational efficiency, security and awareness. Leveraging our industry-leading ORION Cellular endpoints and our BEACON digital platform, Badger Meter is transforming our engagement with customers, enabling their ability to address water-related challenges. We remain focused on growth by leveraging innovative technologies, driving higher recurring software revenues and investing in developing robust digital solutions across the water eco-system.”
“Looking ahead, sporadic supply chain disruptions and inflation headwinds are expected to continue in the near term. Our teams have demonstrated nimbleness in the face of these challenges in the past, and by sustaining this execution momentum, we expect to continue to deliver strong financial results.”
Bockhorst concluded, “I want to thank our employees for putting us in an admirable position for continued success as we start the new year. We have an excellent balance sheet, enabling us to execute our growth strategies including enhancing our digital solutions portfolio, and expanding our employee talent base to address the attractive long-term growth opportunities in our market. We remain excited about the road ahead as we work to preserve and protect the world’s most precious resource.”