Badger Meter sales stall at $235.9 million; excluding UDlive they fell 2.3% year over year

Badger Meter reported third-quarter net sales of $235.9 million, barely above the $235.7 million booked a year earlier, while diluted earnings per share rose 4% to $1.24 from $1.19. Sales were 6.1% higher than the $222.3 million reported for the second quarter, and operating earnings of $47.7 million carried a 20.2% margin.

Flat sales, a 6% sequential step-up

The near-flat year-over-year comparison hides two different businesses. Base sales, the company's non-GAAP measure excluding UDlive Limited, the sewer-monitoring business acquired on May 1, 2026, were $230.3 million, or 2.3% below the prior-year quarter. Utility water sales were flat including $5.6 million of UDlive revenue; without the acquisition they were 3% lower than a year earlier and 5% higher than in the second quarter. Flow instrumentation sales rose 2% year over year, which the release credits to water-focused end markets against a difficult prior-year comparison.

Kenneth C. Bockhorst, chairman, president and chief executive officer, called the quarter "continued sequential sales and operating profit improvement" and said sales reflected the ramp of awarded utility water projects plus "solid underlying demand trends". The sequential gain is real, but it comes off a second quarter that was itself 7% below the prior year.

UDlive dilutes margins as the core margin widens

Gross margin rose 120 basis points to 41.9% from 40.7% a year earlier, a gain the release credits to higher sales and structural mix benefits. Inside that number, UDlive is a drag: the release reports that UDlive gross margins include the dilutive impact of inventory fair-value step-up amortization, $500,000 in the quarter. Selling, engineering and administration expense of $51.1 million was $1.3 million higher than a year earlier, with UDlive and related intangible amortization adding $2.3 million; Base SEA fell $900,000, or 2% year over year, to $48.8 million on spending controls and lower incentive compensation.

That combination produced operating earnings of $47.7 million at a 20.2% operating margin, against 19.6% a year earlier, or $48.0 million and 20.9% on the Base measure. The effective tax rate fell to 25.1% from 26.1% a year earlier, and net earnings were $35.9 million versus $35.08 million.

Nine-month sales are 5.1% lower as cash funds UDlive and buybacks

The year-to-date picture is weaker than the quarter. Nine-month net sales fell 5.1% to $660.54 million from $695.96 million, and net earnings dropped 14.0% to $92.96 million from $108.06 million, with diluted EPS at $3.19 against $3.65. The balance sheet shows where the cash went: cash and equivalents were $67.93 million on September 30 versus $226.02 million at December 31, 2025, after $94.38 million of acquisitions net of cash acquired and $119.01 million of share repurchases, including $55.55 million in the third quarter.

Capital returns continued alongside that spending. The board raised the annual dividend rate 10% to $1.76 a share, which the release describes as the 34th consecutive year of dividend growth.

No numeric guidance before the 11 a.m. Eastern call

Badger Meter gave no revenue or earnings range for the fourth quarter in the Form 8-K filed October 22, 2026. Bockhorst said the company continues to anticipate "both sequential and year-over-year Base revenue improvement, inclusive of the fewer operating days typical for the fourth fiscal quarter", and expects to carry that momentum into 2027. He also cited "ongoing material cost pressures related to broad electronics supply chain dynamics", a headwind the release flags without quantifying.

The release leaves three questions open: whether the sequential project ramp holds through a shorter fourth quarter, how long UDlive's inventory step-up keeps gross margin under pressure, and when utility water sales grow without acquisition help. Management discusses the quarter on a call at 11 a.m. Eastern today; the fourth-quarter and full-year 2026 release, still undated, is the next scheduled check.