BMI 10-K & 10-Q changes, risk factors and insider trading

We are affected by the availability and prices for raw materials and component parts, including purchased castings made of metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel andsteel, cast iron and bismuth), plastic resins, microprocessors and other electronic subassemblies, and components that are used in the manufacturing process. Further, supply chain disruptions and challenges may be caused by a number of factors affecting our suppliers, including, but not limited to, capacity constraints, port congestion, labor disputes or unrest, labor shortages and costs, economic downturns, availability of credit, a high interest rate environment, impaired financial condition, tariffs or other trade barriers, energy inflation/availability and geopolitical risks. The effects of climate change, including extreme weather events, may exacerbate these risks.

We may be affected by adjustments to economic and trade policies, such as taxation, changes to or withdrawal from international trade agreements, or the like, when countries where we produce or sell our products change leadership or economic policies. The cancelation or significant modification of the United States - Mexico - Canada Agreement (USMCA) could lead to an increase in tariff costs and other supply chain disruptions. These types of changes, as well as any related regulatory changes, could significantly increase our costs and adversely affect our profitability and financial condition.

Significant infrastructure investment needs, aging workforce, increasing regulations and a focus on climate-changeclimate change and sustainability are driving companies and utilities to better manage critical resources like water across the globe. Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to automate manufacturing. Other customers employ measurement to comply with government mandates and laws including those associated with process and discharge water quality monitoring. The Company provides flow measurement technology critical to providing baseline usage data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where it is most viable. With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and identified areas for process improvements.

As noted above, customers are increasingly looking for more frequent and diverse data to holistically manage their water networks. As a leading provider of water qualityquality, pressure management, sewer line and pressurelift managementstation monitoring solutions, we are able to meet these needs and enhance the scope of actionable data for customers to measure, conserve and protect water.

Our BlueEdge tailorable smart water solutions provide actionable information through data analytics derived from an interconnected and interoperable network of sensors and devices that enable people and organizations to efficiently use and conserve water. Badger Meter is well positioned to benefit from the adoption of smart water solutions. Our strong relationships with telecommunication providers such as AT&T and Verizon (among others), weallows us to stay abreast of emerging cellular technology changes to provide the premier infrastructure-free AMI solution.

As the water industry continues to evolve, the Company has been at the forefront of innovation across measurement hardware (metering, water quality, pressure sensors, sewer monitoring, etc.), radioand communication and software technologies in order to meet its customers’ increasing expectations for accurate and actionable data and insights. As technologies such as ORION Cellular and BEACON digital solutions have become more widely adopted, the Company’s revenue from Software as a Service (SaaS) has increased significantly,significantly and is margin accretive.

The Company also seeks opportunities for additional revenue enhancement. For instance, the Company has made inroads into select regional markets outside the USU.S. such as the Middle East, UKU.K. and others with our BlueEdge offering. The Company sometimes oversees and supervises field installation of its products and provideprovides training and other services for certain customers. Strategic mergers and acquisitions are another avenue for profitable sales growth.

Effective January 30, 2025, the Company acquired 100% of the outstanding stock of Hadronex, Inc, a Delaware Corporation d/b/a SmartCover® Systems ("SmartCover"), headquartered in EscondidoEscondido, California. SmartCover is a provider of sewer line and lift station monitoring solutions. The purchase consideration, net of cash acquired, was approximately $185 million in cash.

Effective January 1, 2024, the Company acquired select remote water monitoring hardware and software, inclusive of the Telog® product line and Unity Remote Monitoring software as a service (the "Telog/Unity Assets"). The total purchase consideration for the Telog/Unity Assets was $3.0 million in cash.

Net sales in 20242025 increased $123.0$90.1 million, or 17.5%,10.9%, to $916.7 million from $826.6 million from $703.6 million in 2023.2024. Sales into the utility water market were $725.5$816.1 million, an increase of 20.3%12.5% over the prior year’s $603.1$725.5 million. The increase in utility water sales reflected strongthe growthongoing acrosscustomer adoption of the Company's broad suite of digital smart water solutions, led by cellular AMI adoption, including mechanical and ultrasonic meters, ORION Cellular endpoints, water quality products and BEACON SaaSSaaS, revenues.as well as revenue associated with the acquisition of SmartCover of $39.7 million. Sales of products into the global flow instrumentation end markets were $101.1$100.6 million, 0.6%a higherdecrease thanof 0.5% from the prior year’s $100.5$101.1 million due to modest growth across the water-focused end markets, offset by slight declines in de-emphasized general industrial markets.applications.

Net sales in 20232024 increased $138.0$123.0 million, or 24.4%,17.5%, to $826.6 million from $703.6 million from $565.6 million in 2022.2023. Sales into the utility water market were $603.1$725.5 million, an increase of 27.8%20.3% over the prior year’s $471.8$603.1 million. The increase in utility water sales reflected strong growth across the Company's broad suite of smart water solutionssolutions, andled the continued robust adoption ofby cellular AMI solutions,adoption, specificallyincluding mechanical and ultrasonic meters, ORION Cellular endpointsendpoints, and BEACON SaaS revenues, as well as increased E-Series Ultrasonic meter volumes.SaaS. Sales of products into the global flow instrumentation end markets were $100.5$101.1 million, 7.2%0.6% higher than the prior year’s $93.8$100.5 million due to steadymodest order demandgrowth across the water-focused end markets, offset by modestslight declinedeclines in de-emphasized general industrial markets.

Operating earnings in 20232025 were $118.0$183.4 million, or 16.8%20.0% of sales, compared to $87.3$157.9 million, or 15.4%19.1% of sales, in 2022.2024. Gross margin dollars increased $56.5$52.9 million due to higher net sales, with gross margin as a percent of sales increasing from 38.9%39.8% in 20222024 to 39.3%41.7% in 2023.2025. The gross margin improvement was due to higherfavorable volumesproduct mix, driven by sales growth in ultrasonic meters, ORION Cellular radios, water quality products and favorable sales mix.SmartCover. Selling, engineering and administration (“SEA”) expenses were $158.4$198.6 million or 22.5%21.7% of sales in 2025 compared to $132.7$171.2 million or 23.5%20.7% of sales in the prior year. The increase in SEA expenses year-over-year wasincluded due$19.4 tomillion for SmartCover, including $5.8 million of acquired intangible asset amortization. Excluding the impact of SmartCover, SEA increased $8.0 million from higher personnel costs, including headcount, salaries and incentive compensation, as well as the acquisition of Syrinix and the associated intangible asset amortization.compensation.

Net interest income was $5.1 million in 2025, $8.6 million in 2024,2024 and $4.0 million in 20232023. andThe $0.6decrease in interest income in 2025 was due to the deployment of $184.0 million inof 2022.cash associated with the SmartCover acquisition. The increase in interest income in 2024, 20232024 and 20222023 was due to increasedincrease in cash balances.

There were no significant variations in the provision for income taxes as a percentage of earnings before income taxes which waswere 25.0%,24.9%, 25.0% and 24.1% and 24.2% for 2024,2025, 20232024 and 2022,2023, respectively.

We use primary working capital ("PWC") as a percentage of sales as a key metric for working capital efficiency. We define this metric as the sum of receivables and inventories less payables, divided by the last 12 months net sales. As of December 31, 2024, the Company classified the short term portion of deferred revenue as other current liabilities on the Consolidated Balance Sheet, whereas previously short term deferred revenue was included in payables. The following table shows the components of our PWC:

Overall, PWC increased $16.7$19.9 million compared to the previous year-end. Receivables at December 31, 20242025 were $84.3$112.4 million compared to $83.5$84.3 million at the end of 2023,2024, an increase of $0.8$28.0 million due to increasedthe sales,addition offsetof bySmartCover improvedand daystiming salesof outstanding.shipments within the fourth quarter. The Company believes its receivables balance is fully collectible. Inventories at December 31, 20242025 were $143.4$151.9 million compared to $153.7$143.4 million at the end of 2023.2024. Inventory decreasedincreased $10.2$8.5 million, due to effectiveincreased commodity costs, timing of inventory management.receipts and the acquisition of SmartCover. Payables at December 31, 20242025 were $55.7$72.3 million compared to $81.8$55.7 million at the end of 2023.2024. The decreaseincrease was due to the short term deferred revenue being classified in other current liabilities, lowerincreased inventory balance and the timing of payments relative to year end.

The Company had no short-term borrowings as of the end of 20242025 or 2023.2024. At the end of 2024,2025, the Company was in a net cash position of $295.3$226.0 million.

Our products carry warranties that generally range from one to twenty years and are based on terms that are generally accepted in the market. We provide for the estimated cost of product warranty at the time of sale. The product warranty provision is estimated based upon warranty loss experience using actual historical failure rates and estimated costs of product replacement. The variables used in the calculation of the provision are reviewed atthroughout leastthe annually.year. At times, warranty issues may arise which are beyond the scope of our historical experience. We provide for any such warranty issues as they become known and estimable. The introduction of additional technology, such as our ORION cellular radios, electronic meters and registration, have generally caused our annual warranty claims rates to increase over time. While our warranty costs have historically been within calculated estimates, it is possible that future warranty costs could differ significantly from those estimates. At December 31, 20242025 and 2023,2024, our reserve for product warranties was $16.7$21.6 million and $11.1$16.7 million, respectively.

The Company operates in numerous taxing jurisdictions and is subject to regular examinations by U.S. federal, state and non-U.S. taxing authorities. Our income tax provision for income taxes is based on the interpretation of applicable taxing laws in the jurisdictions in which we conduct business. Due to the ambiguity of tax laws within each jurisdiction, the judgment involved in evaluating and estimating certain tax positions, and how these estimates impact other taxing considerations, it is possible that our income tax positions could differ from actual payments made or benefits received. The Company annually reviews all uncertain tax positions, which represent tax positions taken that are subject to varied interpretations of applicable tax law. The gross accrued liability for unrecognized tax benefits was $1.2$1.3 million and $1.4$1.2 million, as of December 31, 20242025 and 2023,2024, respectively. Interest is accrued on all unrecognized tax benefits and recorded as interest expense and penalties are recorded as operating expenses in the Consolidated Statements of Operations. Accrued interest was approximately $0.2 million and $0.1 million atas bothof December 31, 20242025 and 20232024, respectively, and there were no penalties accrued in either year.

In the ordinary course of business, the Company is exposed to various market risks. The Company operates in an environment where competition varies from moderate to strong. The Company believes it currently provides the leading technology in water meters and radio systems for water utilities. A number of the Company's competitors in certain markets have greater financial resources. As the global water metering market continues to adopt static metering technology, the number of competitors in the North American market may increase. We believe new static metering market entrants lack brand recognition and product breadth and do not have the appropriate utility sales channels to meaningfully compete in the North American market. In addition, the market's level of acceptance of the Company's newer product offerings, including real-time water quality monitoring, sewer line monitoring and BEACON SaaS, may have a significant effect on the Company's results of operations. As a result of significant research and development activities, the Company enjoys favorable patent positions for several of its products.

Raw materials used in the manufacture of the Company's products include purchased castings made of metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel andsteel, cast iron and bismuth), plastic resins, glass, microprocessors and other electronic subassemblies, and components. The Company does not hold significant amounts of precious metals. The price and availability of raw materials is influenced by economic and industry conditions, including supply and demand factors that are difficult to anticipate and cannot be controlled by the Company. Commodity risk is managed by keeping abreast of economic conditions and locking in purchase prices for quantities that correspond to the Company's forecasted usage.

The ORION® family of endpoints offers water utilities a choice of industry-leading options for communicating meter reading and event data. ORION Cellular endpoints power our Network as a Service (NaaS) approach to AMI, eliminating the need for the utility to install and maintain infrastructure, enabling rapid or gradual deployment, and enhancing network reliability. ORION mobile read endpoints support customers looking to deploy an AMRAM R solution.

Current Business Trends – Tariffs

In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. In many cases, these tariffs resulted in reciprocal tariffs and other actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. We evaluate the impact of global tariffs and trade restrictions on our business and operations and leverage our manufacturing footprint, when possible, through the use of the USMCA trade agreement to minimize impact. Additionally, we have enacted certain price increases to offset tariff costs that we are not able to mitigate. In February 2026, a Supreme Court ruling invalidated certain tariffs previously imposed. The Company ishas currently reviewingreviewed and evaluating the opportunityapplied for potential tariff refunds.refunds, as applicable. As the global economic environment, trade and tariff negotiations continue to evolve, the Company will continue to evaluate the exposure and work to mitigate these costs.

Results of Operations - Three Months Ended MarchJune 31,30, 2026

The Company's net sales for the three months ended MarchJune 31,30, 2026 were $202.3$222.3 millionmillion, a decrease of 6.6% compared to $222.2$238.1 million during the same period in 2025. NetSales sales into theof utility water marketproducts were $178.4$195.0 million, a decrease of 9.6%8.1% from the prior year’s $197.3$212.2 millionmillion. dueThe toutility water decline reflects expected uneven AMI project timing dynamics of previously completed project deployments and customer short cycle order pacing, partially offset by increased BEACON SaaS,SaaS SmartCover, water qualityrevenue and networkother monitoringBlueEdge productbeyond revenue.the meter solution offerings, as well as revenue associated with the acquisition of UDlive of $2.0 million. Sales of products into the global flow instrumentation end marketsproducts were $23.9$27.3 million compared to the prior year’s $24.9$25.9 million, aan decreaseincrease of 4.1%,5.6%, with modest growth in water-relatedwater-focused marketsend more than offset by declines in de-emphasized applications.markets.

Total operating earnings for the three months ended MarchJune 31,30, 2026 were $35.2$39.4 million, or 17.4%17.7% of sales, compared to $49.4$44.9 million, or 22.2%18.8% of sales, in the comparable prior year quarter. Gross margin dollars decreased $11.1$7.0 million, with gross margin as a percent of sales of 41.7%,40.8%, a decrease from 42.9%41.1% in the prior year comparable quarter due to lower sales volumevolumes and less favorable product mix. Selling, engineering and administration (SEA) expenses were $49.2$51.4 million or 24.3%23.1% of sales in the first quarter of 2026 compared to $46.0$52.9 million or 20.7% of sales22.2% in the comparable prior year quarter. The increasedecrease in SEA expenses was mainly due to higherdecreased personnelincentive costs including higher salariescompensation and benefits,other acost fullcontainment quarter of SmartCover SEA expenses and $1.2 million of acquisition related costsactions, partially offset by lowerfinal managementtransaction-related incentivecosts costs.for the UDlive acquisition of $1.2 million. The inclusion of UDlive results for two months along with related intangible asset amortization combined added $1.8 million to year-over-year expenses.

The provision for income taxes as a percentage of earnings before income taxes for the quarter ended MarchJune 31,30, 2026 was 24.8%25.2% compared to 24.4%24.5% for the comparable prior year period. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits, allowancescredits and discrete items.allowances.

As a result of the above-mentioned items, net earnings for the three months ended MarchJune 31,30, 2026 were $27.3$29.7 million, or $0.93$1.02 per diluted share, compared to $38.4$34.6 million, or $1.30$1.17 per diluted share, for the same period in 2025.

Overall, PWC decreasedincreased $13.0$9.5 million compared to the previous year-end. Receivables at MarchJune 31,30, 2026 decreasedincreased $2.1$8.9 million due to timing of shipments and lower sales activity in the first quarter of 2026.shipments. The Company believes its receivables balance is fully collectible. Inventories increased $23.3$26.1 million due to the timing of inventory receipts relatedand tosales currentpacing quarterin shipments.the first half of 2026. Payables asat ofJune March 31,30, 2026 were $34.2$25.5 million higher than the prior year-end due to timing of payments and the increase inincreased inventory levels.

Cash provided by operations in the first threesix months of 2026 was $33.9$60.6 million compared to $33.0$77.6 million in the same period of 2025. Lower net earnings were offset by increased cash flow from primaryand working capital balancesdifferential inwere 2026the versuslargest 2025,contributors resultingto inthe minimal changedecrease in cash fromprovided operations.by operations compared to the same period in 2025.

Property, plant and equipment expenditures for the first threesix months of 2026 were $4.4$9.3 million compared to $3.0$6.9 million in the comparable prior year period.

Cash and cash equivalents at MarchJune 31,30, 2026 decreased to $205.5$95.7 million from $226.0 million at December 31, 2025, the result of the $33.9$60.6 million of cash provided by operations, offset by $94.4 million deployed for the UDlive acquisition, $63.5 million for the repurchase of Company common stock repurchasesand and$23.3 million for the payment of the quarterly dividend.dividends.

The Company's credit facility includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the Company's financial flexibility including an increase feature, acquisition holiday, and favorable financial covenants. On June 5, 2026, the Company amended and extended its credit facility, with an extended maturity date of July 8, 2031. The Company was in compliance with all covenants as of MarchJune 31,30, 2026. The Company believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company had $154.6 million of unused credit lines available at MarchJune 31,30, 2026.

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2025 and the first quartertwo quarters of 2026 were not material.