Badger Meter: 3 Key Takeaways for Long-Term Investors
Key Points
Base sales grew 5% sequentially in the third quarter.
Base gross margin reached 42.1% in the third quarter.
Management repurchased $55 million of shares in the third quarter.
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On its third quarter of 2026 earnings call, held on Oct. 22, 2026, Badger Meter (NYSE:BMI) announced that its base sales, which exclude its May 2026 acquisition of water monitoring company UDlive, grew 5% sequentially over the second quarter. The utility water technology company maintained profitability near the top of its long-term target range despite electronic component supply constraints. Long-term investors should care because expanding high-margin software sales continue to raise the company's baseline profitability floor. Three things management said stand out.
1. High-Margin Software and Ultrasonic Meters Elevate Profit Limits
Badger Meter relies on its structural mix, the proportion of software-as-a-service recurring software subscriptions and ultrasonic meters relative to hardware, to protect its earnings. Base gross margin, which excludes inventory accounting adjustments from the UDlive deal, reached 42.1% in the quarter.
Base gross margin was 42.1% at the top end of our normalized range, indicative of the resiliency of our overall structural mix and pricing discipline.
-- Dan Weltzien, Chief Financial Officer and Treasurer
2. Pricing Power Offsets Rising Electronic Component Costs
Rapid artificial intelligence data center construction has tightened supply for electronic components, driving up circuit board costs across industrial manufacturing. Badger Meter leverages its essential position in municipal utility infrastructure to pass these cost increases on to customers without sacrificing sales volume.
Fortunately for us, our portfolio is highly valued by our customers. They understand what we do for them, and we are able to extract the value that we deserve.
-- Ken Bockhorst, Chairman, President, and Chief Executive Officer
3. OneNetwork Software Connects Disconnected Utility Data
Municipal water utilities often struggle to unify operational data across separate hardware and sensor systems. The company launched OneNetwork, a real-time software platform that combines advanced metering infrastructure, an automated two-way remote meter reading technology, with pressure and water quality analytics.
OneNetwork brings AMI, network monitoring, and water quality data together in one platform, enabling customers to identify issues sooner, coordinate responses faster, and make more informed operational decisions.
-- Bob Wrocklage, Executive Vice President of North America Municipal Utility
Looking Ahead
Utility project rollouts are accelerating, and leadership is clearly satisfied with current operational momentum. Growth rests on required infrastructure upgrades and pricing power, while management navigates electronic-component shortages.
We expect both year-over-year and sequential quarterly base sales growth in the fourth quarter of 2026, despite fewer total operating days given the holidays, which is a standard annual dynamic.
-- Ken Bockhorst, Chairman, President, and Chief Executive Officer
Cash generation supported a 10% dividend increase, extending a 34-year growth streak. Software expansion continues to deepen its market advantage.
We remain committed to the strategic formula that has driven our prolonged success, focusing on our customers, offering innovative and differentiated technologies, and driving operational excellence.
-- Ken Bockhorst, Chairman, President, and Chief Executive Officer
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