Ladies and gentlemen, welcome to the fourth quarter 2023 Badger Meter Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. To ask a question, please press Star followed by one on your telephone keypad. To withdraw your question, please press Star followed by two. As a reminder, today's conference is being recorded. It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer. Good morning, and thank you for joining the Badger Meter fourth quarter and full year 2023 earnings conference call. On the call with me today are Ken Bockhorst, Chairman, President, and Chief Executive Officer, and Bob Wrocklage, Chief Financial Officer. The earnings release and related slide presentation are available on our website. Quickly, I'll cover the safe harbor, reminding you that any forward-looking statements made during this call are subject to various risks and uncertainties, the most important of which are outlined in our press release and SEC filings. On today's call, we will refer to certain non-GAAP financial metrics. Our earnings slides provide a reconciliation of the GAAP to non-GAAP financial metrics used. With that, I'll turn the call over to Ken. Thanks, Karen, and thank you all for joining our call. We capped off a record year with strong fourth quarter results across sales, operating profit, earnings per share, and cash flow metrics. Demand trends remained robust, and our continued manufacturing conversion allowed us to again make modest headway into the order backlog. Shortly after year-end, we added to our suite of smart water offerings, acquiring the Telog and Unity network monitoring assets, as previously announced. I want to thank all of our employees for their efforts in delivering another fantastic year for Badger Meter. I'll talk more about the acquisition, provide a recap of the year, and discuss our outlook later in the call. For now, I'll turn it over to Bob to go through the details of the quarter. Thanks, Ken, and good morning, everyone. Turning to slide four, our total sales in the fourth quarter were in line with our expectations at $182.4 million, up 24% compared to $147.3 million in the same period last year. This brought our full year 2023 sales to a new milestone, exceeding $700 million, specifically $703.6 million, or 24% above 2022 sales of $565.6 million. Total utility water product line sales increased 28% year-over-year in the fourth quarter, and the same percentage on a full year basis. As we have noted all year, demand for our suite of utility smart water solutions continued to benefit from underlying secular growth drivers, coupled with the differentiated performance of our innovative offerings. In the quarter, we delivered on continuing strong cellular AMI demand, which translated into higher sales of ORION Cellular endpoints, E-Series Ultrasonic Meters, and BEACON software as a service revenue. Additionally, water quality and pressure monitoring sales contributed to the top-line growth. There were a few highlights within the full-year sales growth that I'd like to touch on. First, software as a service revenues exceeded $42 million in 2023, up 27% year-over-year. Our international utility revenue grew more than 30% year-over-year, albeit from a small base. Syrinix, which we acquired at the beginning of 2023, delivered pro forma sales growth of approximately 60%, also from a small base, a sign of both broader market adoption and our early integration efforts. While we again saw a slight increase in the penetration of ultrasonic meters as a percent of our metering units, mechanical meters continuing to command a leading position in the North American utility market for customers of all sizes for a variety of fundamental reasons. Turning to the flow instrumentation product line, sales grew modestly in the quarter and were up 7% on a full year basis, with solid demand experienced in water-related markets, partially offset by lower sales associated with the de-emphasized general industrial markets. Looking at margin performance, continued strong execution at both the gross margin and SCA lines contributed to the robust 230 basis point increase in operating margins in the fourth quarter, reaching a record 17.6% versus 15.3% in the comparable quarter last year. Gross profit dollars increased $14.5 million year-over-year, and as a percent of sales, increased 50 basis points to 39.2% versus 38.7% last year. The combination of higher volumes and favorable product mix led to the solid year-over-year improvement. We remain pleased with overall gross margins, demonstrating the gradual, yet durable structural mix benefit inherent within our Smart Water portfolio. SG&A expenses in the fourth quarter were $39.4 million, an increase of $4.9 million year-over-year, which included higher personnel-related costs such as headcount, salaries, and annual bonus incentives. The addition of Syrinix, with its related intangible asset amortization, also contributed to the dollar increase. Yet, as we have demonstrated all year, even with the higher spend levels to support growth, SG&A, as a percent of sales, declined 180 basis points to 21.6% in the fourth quarter from 23.4% in the comparable prior year period. Our effective income tax rate for the fourth quarter was a bit higher than the full year average at 26.1%. Incorporating that effective tax rate, as well as interest income on our cash balances, we delivered EPS of $0.84 compared to $0.60 in the prior quarter, representing a 40% improvement. Working capital as a percent of sales was 22.1%, consistent with the prior year end. While overall working capital increased in total dollars to support growth, we were pleased with the overall working capital efficiency, recognizing we have improvement opportunities in inventory as we move forward. Free cash flow for the fourth quarter was a record $35.9 million, and improved from a year ago, primarily on the higher earnings. For the full year, free cash flow was a record at $98.1 million, with free cash flow conversion of net earnings at 106%. With that, I'll turn the call back over to Ken. Thanks, Bob. Turning to slide five, I want to spend a few minutes on our recently announced tuck-in acquisition. The Telog brand of remote telemetry units, or RTUs, along with the Unity monitoring software, bring additional capabilities to our Smart Water offerings in the form of remote monitoring access across utility, wastewater, stormwater, and source water applications. It also brings talent with the expertise to assist our customers in applying these capabilities. For example, the acquired hardware portfolio adds certain complementary products, such as hydrant-mounted pressure devices and flexible RTUs for external sensor integrations. These products are cellular-enabled and add flexibility and edge computing for real-time monitoring. The devices connect seamlessly to a secure cloud software platform with a GIS-centric interface, robust device management, flexible dashboards, and a suite of analytical tools that enable data-driven decision-making. Application examples range from the monitoring of water depth at an aquifer or well in a water-stressed region utilizing a single sensor, to a full suite of instruments at a pumping station to monitor flow, level, pump health, water quality, pressure, and more. While overall modest in size, with sales and purchase price in the mid-single-digit range in $ millions, we believe these added solutions bolster our growing capabilities in full network monitoring and continue to competitively differentiate Badger Meter's suite of offerings in the market. Moving on to slide six, finishing out 2023 represents a bit of a milestone for me, five years as CEO of Badger, as the CEO of Badger Meter. During that time, the Badger Meter team has done a tremendous job evolving and advancing what was already a good business into a great one, through developing and executing on our growth strategy. First and foremost, I'd call out our evolution to a smart water management company, effectively leveraging our innovation, leadership, and targeted acquisitions to build on the suite of tailorable solutions ready to address the persistent macro challenges facing the water industry. We've executed a multi-year transition to more direct sales efforts, building out our team of experts across smart metering, advanced communication technologies, water quality, full water network monitoring and software. We've built on the trust earned over our nearly 119 years, becoming an even more valued partner to our customer base. We've advanced the culture of continuous improvement across not just operations, but working capital management, pricing excellence, talent management and development, and sustainability, really across all of our enterprise business processes, which have enabled our record results. The tangible outcome of these efforts are displayed here on slide seven. We've distinguished our performance by executing our strategies exceptionally well in the face of a multitude of macro challenges. For example, in the past five years, we've delivered over 13% compounded annual growth rate in total sales, now exceeding the $700 million milestone revenue run rate. We've grown our software revenues at a 28% CAGR to over $42 million. We've improved our margins, reaching 16% operating profit as a percent of sales in 2023, with 220 basis points of improvement over pre-COVID levels, despite inflation and supply chain challenges. We've reduced our working capital intensity and consistently generated free cash flow in excess of 100% of net earnings, enabling our ability to continue as the innovation leader in our market, return cash to shareholders in the form of dividends, achieving Dividend Aristocrat status with a track record of 31 years of consecutive annual dividend increases, and to execute value-accretive acquisitions to further enhance our portfolio of smart water solutions. I couldn't be more proud of the global team's achievements over the past 5 years. Finally, turning to our outlook, I'm even more excited about the next five years as I've been about the past 5. At a macro level, our solutions continue to see growing adoption as we address the variety of persistent macro water challenges customers face, enabling them to be more efficient, resilient, and sustainable with their water systems. Our durable business model is underpinned by replacement-driven demand, secular AMI adoption drivers, an expanding need for real-time water quality information, and a growing proportion of recurring SaaS revenues. Our strong backlog, along with constructive customer budgets and inventory levels, are supportive of future sales growth. Although, as we've consistently communicated, the rate of top-line growth is expected to moderate from recent levels and will not be linear in delivery. This rate of growth moderation is simply law of larger numbers math. Finally, while not anticipated to be meaningful, incremental opportunities associated with infrastructure funding could provide modest potential upside, and we're well positioned to capitalize on them. The continuation of positive structural sales mix and SG&A leverage drivers demonstrated in our business are expected to provide gradual margin improvement year-over-year. Finally, our cash flow generation and debt-free balance sheet provide us with ample capacity to execute our capital allocation priorities, including an attractive funnel of organic and inorganic strategic growth investments.... I want to again thank the entire Badger Meter team for their tremendous efforts and accomplishments in 2023, and I look forward to executing on the many opportunities ahead. With that, operator, please open the line for questions. Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. Our first question today comes from Nathan Jones from Stifel. Your line is now open. Please go ahead. Good morning, everyone. Morning, Nathan. I guess I'll just start off with a couple questions on the outlook. I mean, you guys have said long term, the business should kind of be in that mid-single to high single digit organic growth rate. You've clearly been running significantly ahead of that over the last few years. Is that kind of the range that we should expect for 2024? Or are there anything that you see in 2024 that would, you know, meaningfully deviate you from the long-term kind of average outlook? Yeah, thanks, Nathan. So, so we, you know, if-- as you pointed out, we used to say, you know, a few years back that we were in that mid-single digits throughout the strategic cycle. As you know, we don't provide guidance for quarters or years. We talk in strategic cycles, and for the past year or so, we've been talking, you know, pretty openly about being confident to be in the high single digits through the strategic mode, and we feel, certainly reinforcing that today, that our outlook is something that we're excited about. We still come into the year with a tremendous amount of positivity and tailwinds. I know everyone likes to talk about backlog, and, you know, we don't, we don't provide guidance on that either, but, an interesting point would be that coming into 2024, our backlog is still higher than it was coming into 2023. So, optimism still remains strong going forward. I guess the question, a follow-up question to that is the strategic cycle then. Can we start that from kind of 2023 and say your expectation is maybe high single digits over the next five years? Because, I mean, if I looked at it from, say, 2021, then it would be a different kind of outlook, because you considerably outperformed that over the last few years. Yeah, yeah, Nathan, that is safe to say we are talking about going forward, not including the double-digit performances of the past couple of years. Great. I think that's helpful. Maybe on incremental margins, maybe this one's for Bob. Kind of expectations as we go into 2024 or over the next strategic cycle, are there, you know, any increased incremental investments you need to make to support growth or, or anything like that, that might might impact the long-term outlook for incremental margins? And, and where does that fit today? Yeah. So I would say real, real no change from our historic position. We think about ourselves at both the OP and EBIT line, EBITDA line as being 25% incrementals. It just so happened that this Q4 that we're talking about was modestly ahead of that, but if you look at the full year, pretty much right in that zone, so no real change moving forward. Awesome. Thanks very much for taking the questions. I'll pass it on. Our next question today comes from Andrew Krill from Deutsche Bank. Your line is now open. Please go ahead. Hey, thanks. Good morning, everyone. I kind of wanted to follow up on the incrementals question, and, you know, related to that, the SCA cost, you know, I think as a% of sales, you know, dropped a lot year-over-year, which was impressive. Just wanted to ask, you know, any other color you can provide on kind of what helped you drive this? Was it simply holding costs steady while you grew your sales impressively? And do you think you can sustain kind of that below 22% of sales going forward? Yeah, so I mean, as in any case, a single quarter doesn't make a year, and a year does not make a strategic plan. I think the way I would think about it is, yes, clearly, Q4 had a lower rate of SG&A as a percent of sales. If you look at 2023 as a whole, our SG&A as a percent of sales was 22.5%. That's about a 100 basis point improvement over 2022. I would say, you know, we, we often talk about SG&A percent as, as an opportunity for leverage and as an opportunity to drive, EBITDA and operating profit expansion year-over-year. We're a continuous improvement-based business, and so I would continue to expect us to be able to accrete that, but sizing that is not something we will do. But, you know, again, 21.6% is an outlier. That helped us to get to 22.5% for the year, and I think as we would say, with many aspects of our business, we strive to make those improvements year-over-year. Okay, great. And then next, just I noticed in the press release, there was some new text about water quality and pressure monitoring contributing to your growth. So just can you size or kind of dimensionalize, you know, how big those businesses are now? Just maybe- Yeah, so- Be additive to your kind of growth rates going forward. So we won't size them. I mean, traditionally, you know, we talk about those businesses for the first year after acquisition, and then they sorta fold into the base, if you will. I think the purpose in that specific comment is to say, yes, they're growing. If you think about our high single digit growth that Ken spoke to, and again, all those businesses are reported as part of the utility water line of business. If we were to take that high single digit growth over the strategic cycle, we do think about those pieces maybe growing faster than high single digits, but again, they're starting from a much smaller base.... a base that we won't size. So in the high single digits? Yep, correct. Okay, great. Thanks so much. Our next question today comes from Rob Mason from Baird. Your line is now open. Yes, good morning. Ken, you made just in framing the outlook high single digits as well as you go forward, you did make a comment around, you know, some - it won't always be linear, which I understand as well, and, I mean, I suppose we saw that in the fourth quarter with fewer shipping days that you'd called out as well. I'm just curious, as we go forward, is there anything to think about here in the first quarter that's anomalous like that? Or, you know, just maybe how we should think about it from a linearity standpoint to start the year? Yeah. So I would think over the long term, I think everybody appreciates the nonlinearity piece. The only piece I'd highlight about the first quarter is, you know, obviously during 2022, as we delivered the roughly $704 million of sales, there was a ramp Q1 to Q2 to Q3. And so the only thing I'd call about Q1 2024 is it's against an easier comp, but that's one quarter within four. Yep. Okay, fair enough. Also, you know, for the year, you finished up with capital spending. It was up year-over-year like you had thought, but it, you know, at a level that's it was a good bit above recent history. I'm just curious how we should think about, you know, your level of investment as we enter '2024 around that number. You know, would it go down, sustain at that level? Yeah. So, Rob, while the number is up on a year-over-year basis, it's still pretty small. I think if you compare it to anyone else in the industry or just in general industry. So I think, we're at a period where we've had significant growth, and we've had to make some investments in capacity and certain product lines that, you know, I would suspect will continue at about the rate that we're at, but we're not certainly not looking at any significant increases from where we are today. Okay. Just last question. Ken, you, you touched on the new assets that you're bringing in from Trimble. Could you speak about the go-to-market capabilities there that come with that, what you're maybe able to overlay with that, and just in trying to think about, you know, opportunities for sales leverage or sales synergies with this business with you? Yeah, sure. So while it, you know, again, as I pointed out, it's relatively small. Having said that, it's really powerful. So this is just a really nice extension of how we built out the water quality, and then, as Bob mentioned before, we integrate that into our utility business and our sales channels. We followed that with Syrinix, with the pressure monitoring and pressure loggers and more software. And now Telog is just another example where RTUs have been on our strategic roadmap here for a couple of years, so we're really excited to bring in the RTUs to add more collection points throughout a distribution system or a wastewater facility. So the ability to integrate this won't be that difficult. So we've already begun working through it. Our distribution partners, our sales team, really understands what it takes to make this part of the business. We've been extremely happy with how we've integrated water quality in Syrinix. I think we have a model to do this, and I think we'll hit the ground running quickly with Telog. Very good. Thank you. Sure. Just a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. Our next question today comes from Ryan Connors from North Coast Research. Your line is now open. Please go ahead. Great, thanks for taking my question. First off, I wanted to congratulate you on your clean numbers again. It's really appreciated that you guys don't resort to a lot of the non-GAAP stuff, and I think your numbers are particularly impressive when you consider a lot of your peers are trying to adjust their way to success. So it's good to see the way you report cleanly. But my couple questions were, first off, with regard to going back to the prior question on kind of channels to market, has your approach to channel to market changed at all, Ken? I know that, you know, a few years ago, Badger was very aggressive on buying forward and vertically integrating down into the channel, and we've heard some talk recently that the company is actually going back to third-party distribution in certain targeted territories. Are those just one-off things, or has your perspective there changed and you're looking to go back to a broader third-party footprint? Yeah, you know, Ryan, one of the things I think you've come to know about us is we talk a lot about continuous improvement and regular cycles, where we review the business and we tweak as required. Our strategy hasn't changed at all. There are certain, you know, areas of the country where perhaps a, you know, picking up a distributor for a particular region might make sense. There's other cases where we take things direct because it makes more sense. So our overall mix of how much is sold direct versus how much is sold through distribution hasn't changed at all. These are just minor tweaks. Got it. Okay. And then my other question was just on the competitive environment, and obviously, it's been a very noisy time for the industry. I think Badger Meter performed exceptionally well in terms of your supply chain management relative to some of your peers. But now that that's normalized. That whole situation's normalized. I know there's some saying, well, maybe some of those peers will be tougher competitors going forward than they had been for a while when they were really struggling with that aspect of things. So I wonder if you can comment on that in terms of the competitive environment and also in terms of the new entry. I know Kamstrup's been getting a lot of press and, out there in a lot of the trade shows, making noise about what they're doing, and I'm curious whether you had any comment on just the competitive landscape and how it's evolving. So, two things. As again, I'm sure you know and expect, we spend a lot of time understanding every single competitor, how they're doing, what they offer, how that compares to us. And the one thing we've always been confident in is that we offer the most unique, broadest and best portfolio for our customers, whether that be mechanical meters plus ultrasonic, whether that's drive-by radios plus the lead in cellular for a decade, whether that's the best-in-class software to tie the whole thing together front to back. We absolutely have a portfolio advantage that we can and will continue to defend. And even as others continue to maybe get better with their supply chains, ours never slowed down, and it's in a continued position to keep going. Then, when you add to that our growing portfolio of being able to bundle solutions with water quality, pressure monitoring, RTUs, other people that try to come in, they just can't match our portfolio and our 119 years of selling in the region. So we respect every competitor, we respect every entrant. We feel uniquely positioned to continue to outperform. Yep. Well, it's evident in the results, so congrats on a great 2023. Best of luck. Thank you. That concludes the Q&A portion of today's call. I'll now hand back over to Karen Bauer for any final remarks. Great. Thank you. Thanks to everyone for joining our call. For your planning purposes, our first quarter 2024 call is tentatively scheduled for April 18th. I'll be around all day to take any follow-up questions you might have. Have a great weekend. Thank you for joining today's Badger Meter Q4 2023 earnings call. You may now disconnect your line.