Ladies and gentlemen, welcome to the first quarter 2024 Badger Meter Earnings Conference Call. My name is Carla, and I'll be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, press star followed by two. It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy, and Treasurer. Please go ahead, Ms. Bauer. Good morning, and thank you for joining the Badger Meter first quarter 2024 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 will 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 for joining our first quarter earnings call. We began 2024 extending our 2023 track record of solid execution and differentiated financial performance, delivering record revenue, operating profit, and EPS results for the first quarter. Early in the quarter, we completed the Telog and Unity Network Monitoring acquisition, adding to our suite of Smart Water offerings, along with onboarding their talented team. Early discussions with customers reinforced their trust in Badger Meter to bring them complementary hardware-enabled software solutions. I'll come back to discuss a few common investor topics and our outlook later in the call, but 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 first quarter were $196 million, an increase of 23% compared to $159 million in the same period last year, representing another all-time record sales quarter for Badger Meter. Total utility water product line sales increased 29% year-over-year, which, as we've noted, represents the easiest comp of the prior year. We continued to experience strong demand for our suite of utility Smart Water Solutions, which benefited from ongoing favorable water industry fundamentals, coupled with increased adoption of our innovative offerings. Strong cellular AMI demand, including higher sales of ORION cellular endpoints, E-Series Ultrasonic meters, and BEACON software as a service, continued. Additionally, water quality, pressure, and network monitoring sales contributed to the top-line growth. Sales for the flow instrumentation product line declined 3% on a difficult prior year comparison, namely the 20,22% growth last year that benefited from supply chain easing and related backlog conversion. Flow instrumentation sales were up 13% sequentially, and order trends remained solid within water-related applications. While we don't provide guidance, I will remind you that in fiscal 2023, revenue increased sequentially 11% from Q1 to Q2, partially benefiting from the easing of supply chain constraints, which will not reoccur in 2024. Turning to margins, we were very pleased with the operating margin expansion of 290 basis points in the quarter, reaching a record high of 18.6%. Gross profit dollars increased $14.4 million year-over-year, and as a percent of sales, remained in the upper half of our normalized range at 39.3%. SEA expenses in the first quarter were $40.6 million, an increase of approximately $3 million year-over-year, and up just over $1 million from the fourth quarter, due primarily to personnel-related costs, including higher headcount, salaries, sales commission, and R&D spend. Despite this increase in growth spending, SEA, as a percent of sales, declined 300 basis points to 20.7% from 23.7% in the comparable prior year quarter. We would expect absolute SEA spending to increase as we progress throughout the year with additional growth and, growth investment and spending. The income tax provision in the first quarter of 2024 was 23.5%, modestly below the prior year's 24.3%. In summary, consolidated EPS was $0.99 in the first quarter of 2024, a 50% improvement from $0.66 in the prior year comparable quarter. Primary working capital as a percent of sales was 21.9%, a 20 basis point improvement from 22.1% at calendar year-end. We continue to carefully manage working capital investments to support growth. Free cash flow of $18.8 million was higher than the prior year's $13.7 million. As always, the first quarter reflected typical seasonality, with incentive compensation and retirement plan contributions earned in 2023 that were then made in the first quarter. With that, I'll turn the call back over to Ken. Thanks, Bob. I want to take the opportunity to expand on a few of the more common investor topics, starting with perhaps a simple one, but actually a common misunderstanding. An ultrasonic or static meter and smart metering are two different things. Meter technology choices, for example, mechanical or ultrasonic, are distinct from meter reading technology choices, such as manual read, drive-by, or AMI. Smart metering includes a radio endpoint attached to a meter, which communicates data from the meter back to the utility or homeowner. A mechanical meter can be smart when connected to a radio endpoint, and conversely, an ultrasonic or static meter could also be manually read. Second, a common topic with investors is our growth algorithm and our endorsement of high single-digit utility water growth over a strategic cycle. Firstly, when we say strategic cycle, we typically mean a five-year period. We used to talk about a mid-single-digit growth rate for the company as a whole, and even after the strong performance of the past several years, we have increased that strategic cycle rate of growth to high single digits. We have confidence that our expanding suite of offerings, competitive positioning, customer relationships, strategy, and our team continue to position us well to grow sales and earnings at this higher rate. We have resilient industry fundamentals, but the reality is, while our anticipated growth growth rate has increased, it will likely continue to be uneven in its realization from quarter to quarter and year to year. It's the nature of the industry and the impact of dollar changes on our rate of growth. For example, if we grew sales the same dollar amount in 2024 as we did in 2023, that rate of growth would be a full 500 basis points lower by simple law of larger numbers. So while some may question why our growth would slow, we would say over a cycle it has increased. The third topic we often get asked about is whether we are seeing any federal infrastructure funds being made available for our solutions. The answer is nothing meaningful at this point. We have long stated that we didn't anticipate or count on much in the way of infrastructure or other government funding to drive growth, and that is still the case. We do have certain Buy America compliant products. We recently provided a comment letter to the EPA in response to their market-wide request for information on various requirements. We did that in coordination with WWEMA, the industry trade association, representing nearly all of the meter providers in North America. The goal of providing this comment letter was simply to advocate for our customers, to support them if they were to decide to utilize infrastructure funds by easing the administrative burden and cost of project-by-project waivers for certain electronic components that simply cannot meet BABA requirements across the industry. Another question we often get asked is about gross margins. Most of you have heard Bob reference the Led Zeppelin classic, "Stairway to Heaven" in response to this question. We have several long-term structural sales mix, gross margin tailwinds with growth in AMI, ultrasonic meters, water quality, and software. At the same time, while rational, we have competitors. We have customers who request that we oversee turnkey project installations, and as we move up the technology curve in our products, the complexity of those solutions naturally carry higher support costs. As such, there is not a gross margin stairway to heaven. We are extremely proud of our profit margin improvement trajectory over time, with both gross margin and SEA leverage contributing. Finally, we're often asked to describe how we win in the market. There are many aspects of our business model and strategy that collectively have proven successful for our growth. In the interest of time, I'll highlight just two. First, our Choice Matters broad portfolio of solutions. With 50,000 utilities of differing sizes, needs, and challenges, and a variety of wastewater and other industrial customers, providing them tailorable and customizable solutions that best meet their needs and preferences is highly valued. The second is innovation and the breadth of complementary solutions beyond metering and AMI. For example, water quality and network monitoring, pressure and leak detection, and robust in-house developed software. Specific to our innovative and infrastructure-free cellular AMI, while others may be attempting to imitate, we have a decade head start and millions of endpoints installed with an array of customer reference accounts that routinely attest to its delivered benefits. Hopefully, these insights help shed additional color on topics of interest for our shareholders. Finally, turning to the outlook and then onto your questions. We continue to see robust order pacing and a strong bid pipeline that positions us well for continued sales and earnings growth. As Bob noted, but it bears repeating, our year-over-year sales and earnings comparisons become more difficult as the year progresses. Our cash on hand, overall strong ability to generate free cash flow, and debt-free balance sheet provide us with ample capacity to further invest in both organic and inorganic growth. Finally, we were proud to again be named a Barron's list of 100 most sustainable companies and as a USA top workplace. These types of recognition demonstrate that our holistic approach to corporate responsibility positions us well to deliver long-term shareholder value. With that, operator, please open the line for questions. Thank you. If you'd 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. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Andrew Krill from Deutsche Bank. Hey, thanks. Good morning, everyone. Wanted to ask on the SG&A costs and, you know, the incrementals this quarter were very impressive, you know, a bit over 30%. SG&A costs, the percent of sales were all the way down to 20.7%. I think if I look, this is, you know, one of the lowest percentages you've had since all the way back to 2008. So the question is just: Is this level sustainable? I think it's now been two quarters in a row where it's been kind of lower than the recent trend, more in this 22%,23% area. So is that sustainable? And maybe, like, what's changed that, you know, you're tracking in this lower area now? Thanks. Yeah. Good morning, Andrew. Thanks for the question. Just, you know, this has been a consistent theme that we've been talking about now for a few years, which is that, you know, with our portfolio and the selling more into AMI and the higher valued areas that we expect, and frankly, to customers that we've had for a very long time... that we could continue to grow top line at a rate, you know, certainly faster than the SG&A line. So from a continuous improvement point of view, we have always expected it to get better year-over-year. In terms of planting a flag in the ground at a particular percent or a number, you know us well enough that we won't do that. We certainly expect to continue to see, you know, positive leverage at the SG&A line. Yeah, I would say that, you know, the- Great. The mainstay in this is, you know, the reason why we've been successful in the market and we're positioned where we are, is we've been an innovator, and so we will continue to do that. But while still doing that, as Ken alluded to, the hypothesis that we've long put forth is SG&A leverage is possible, given our growth drivers, if you will. I would just remind you, consistent with what we said in the script, we do expect our absolute dollar spend to increase as the year progresses, consistent with ongoing growth investments. I think a little bit of what you're seeing here in the first quarter is just a timing alignment of sales growth versus that investment. Okay, great. Makes sense. And then as a follow-up, you know, I think it may not be directly applicable for Badger Meter, but, you know, with the EPA's recent final ruling on PFAS, just wondering, as a company, can you participate in like this in any way, you know, whether it's for testing? Like, I don't think you have that capability right now, but is that something, you know, maybe through M&A you could gain? Just anything there would be helpful. Yeah. So, Andrew, I'll, I'll take that from a very high-level, general point of view. You know, we're constantly, through our strategic planning process, looking at all of the areas of, of value to customers that we could participate throughout the cycle. And just frankly, so far, given some of the requirements and guidelines around PFAS and where we are, we've, we've chosen not to participate in that at this time, and we'll continue to monitor the situation. And if and when we see a place where we can provide value to customers and provide value to shareholders at the same time, then we would get in, but there's nothing on our horizon for that right now. Great. Thank you. Our next question comes from Rob Mason from Baird. Hi, good morning. Thanks. I just wanted to first address, there was commentary, I think, just around the inflationary pressures. And, Bob, I'm just curious if you could kind of walk through, maybe some—what are some of the puts and takes on that side, if there's anything in particular, that you would call out? And, just maybe relatedly, I know we talked a while back as we were going through higher inflationary periods and more aggressively trying to address with price, you know, there's a natural contracting cycle that needs to occur there. Has that largely been complete through all your customers, where you've been able to address pricing, more completely to your satisfaction? Yeah, Rob, so, you started your question, and then you started to answer it at the end. So that's where I was gonna start with this. You know, it's been four really good years now since we put in our value-based pricing model, which is, you know, really trying to understand all of the benefits for customers, all the competitive angles, and really finding a way to price at the point that we provide on the promise that our customers expect, and we get all the value that we deserve for the offering that we put out there. So we feel really good about our balance on how we're able to handle that through pricing in the market. I'll turn it to Bob to talk about if there's anything more specific, but, but we do feel good about, even if there's short-term shocks, our ability to manage this through the cycle. Rob, the first thing I would say is pricing, and when we say pricing, it's the kit, you know, the start and finish of tactical pricing and value-based pricing. That exercise never ends. And so I don't wanna suggest that we're done with that because it's an ongoing effort. We're always gonna have leading and lagging effects to that, but it's something that we do every day, not just once a year or not just with a list price increase. So that's the first comment. Second comment, you know, really the commentary in the prepared remarks surrounding inflation is really a twofold purpose. Of course, everybody in the world is laser-focused on inflation, and while it's moderating, there's still inflation in the system in categories of cost, like transportation. I'll highlight one, and albeit we've always talked about how the impact of copper to us is lesser than it was, say, five or 10 years ago, just because of the shift in our product. If you look at copper in the last 45 days, it's increased commodity pricing by almost 15% or 20%. So that's not necessarily resident in the quarter, but a reflection of something that we're watching very closely and we'll continue to monitor. But I would say there's not really many puts and takes in the quarter per se. It's just the concept that inflation is not gone, and certainly one potential driver of future pressure is evident. I would say the other thing I would highlight is that, again, from a quality perspective, we're extremely pleased with our product and our product quality focus. But as we continue to accelerate the growth into more technology-oriented products, just by default, having nothing to do with the underlying performance of the product, but just by default, there are higher carrying costs or support costs, if you will, associated with electronic products or more technical products than when you're just dealing with selling mechanical meters. So I would say that's, that's an item to factor into the equation as well. Okay, that's very helpful. Just as a follow-up, on the flow instrumentation side, I know we don't talk about that as much, but the revenue in the quarter did appear to- ... maybe pop back up from where it had been trending the last two or three quarters. Is -- have you seen any shift in the business momentum in that area? I know you call that the water-related products, but just from a perhaps a cyclical or industrial perspective, that maybe presents more of a growth perspective in that business this year? Yeah, so, so in the water-related areas like wastewater or, you know, the HVAC building sustainability, we continue to see extremely positive trends that we're excited about. When you really parse out the rest of flow instrumentation, all of the different pieces that we have in industrial or auto or all those pieces, we don't really, I think, have a large enough slice in any of those to give you any type of clarity across the market. You know, they're small in nature, so it can be uneven, as we say about the business in general, but water-related markets, really excited about. The rest, probably don't know enough to help you with that question. Yeah, and we're certainly not looking at our dashboards and reading through to other any parts of the industry, just given the small scale. I mean, flow instrumentation now is 15% of our revenue book. And to Ken's point, the non-water markets are highly fragmented and not all that sizable. Fair enough. Okay, thanks much. As a reminder, to ask a question, press star followed by one on your telephone keypad. Our next question comes from Nathan Jones from Stifel. Good morning, this is Adam Farley on for Nathan. Could you provide- Morning, Adam Hey, good morning. Can you provide an update on the water quality products and network monitoring solutions portion of the portfolio? Are there cross-selling opportunities from recent acquisitions, maybe driving increased wallet share from customers? Yeah, so we have been, you know, over the past four years now with adding s::can and ATI on the water quality side, following that with Syrinix for pressure monitoring, now adding Telog with remote monitoring and RTUs. You know, the water industry moves slowly. We, as Badger Meter, with our 119-year history and brand, I think we're able to affect that a little faster than other people. But, yeah, we're thrilled with the feedback that we've got in the field and some of the tangible results that we've had in share of wallet by bringing these other pieces into the portfolio and selling the whole value. And that was everything we expected it to be from the start of initially looking at some of those acquisitions early on. That was the strategy, and I think, of course, there's always the ability to go faster, right? But, we're seeing the fruits of what we anticipated to see in terms of how those more comprehensive offering helps us to more completely respond to RFPs, as well as how the influence of decision-makers and the ultimate buyers are very closely related, and it's not hard for us to reach them. Okay, and then, you know, I wanna take a stab at the forward outlook. You know, understand that there's tougher comparisons for the remainder of 2024, you know, but how should we think about growth for the year, balancing the, the tougher comparisons coupled with, you know, your resilient end market trends? Yeah. Well, I think you prefaced your question perfectly. Take a stab at it. But given that we don't provide guidance, we'll, we'll probably not get close to where you want to get to. I, I guess I would just come back to some of the prepared remarks, which is over our strategic planning cycle, which again, we define as five forward-looking years, we believe we can grow the business high single digits in the aggregate. That doesn't mean that it's gonna be high single digits every year. Some years it's gonna be mid-teens, and other years it might be mid-single digits. So the point of signaling the tougher comps is that we just put up 23% growth against the easiest comp. The rate of growth is likely to moderate from that as we move forward, but yeah, we can't certainly, and we won't certainly size that or, or put that percent on a piece of paper or even in the commentary here. Yeah, I just think the thing that I would add is that what we didn't have in the quarter was significant one-offs. So what we're excited about is it's been a broad-based, you know, demand profile that we feel good about. All right. Fair enough. Thank you for taking my questions. Our next question comes from Nathan Jones from Stifel. The other one. likely- Good morning, everyone. Good morning, Nathan. Hey, Nathan. Wow, you threw your voice on that first call. I'm go first. I let Adam go first. He's smarter than me. A couple questions on the SG&A line. You guys talked about expecting that to drift up a little bit as we go through the year. Can you talk about what the growth investments are targeted at? And then, you know, increasing SG&A a little bit here, but it doesn't sound like you think there's more SG&A expense needed just to support the base business and how it's going. So if you can just confirm that and just talk about where the growth investments are targeted at. Yeah, I would say first and foremost, you know, with a growing business as ours, that you know, just a few short years ago was in the $400 million-$500 million range and is now where we stand today on a trailing twelve-month basis. Inevitably, that brings with it growth, investments in people, investments in engineering resources to remain an innovator, investments in software and software development to keep our BEACON radar and other SaaS platforms, not only current, but cutting-edge and best-in-class. So, you know, they're the exact, what I would say, forward-looking, customer-facing areas that you'd expect as we continue to be an innovator, which remains our number one capital allocation priority. And then I guess just one follow-up on the mix of what you guys are shipping these days. Still shipping radios that don't have - sorry, meters that don't have radios, meters that have AMI radios, meters that have AMI radios. Can you talk about how the mix of the two or three years and maybe where you think the penetration of AMI technology is in the market today? Yeah. So, you know, certainly our growth, which we've been very public about, and how we think we build that average sale price of going from a meter plus a radio plus software as a service, you know, a 100% attachment rate to AMI. Clearly, a huge portion of the growth has been AMI adoption and our ability to capitalize on selling that full value. So, you know, we haven't publicly stated, and we won't, a penetration number, but you can certainly... I think you certainly can understand it's much higher than it was. In terms of AMI in the market, I mean, the great news is, it is widely accepted that AMI is the way to go, and we're seeing, you know, whether it's part, you know, particularly medium and large, but even many of the small utilities are going toward AMI. But there's a long way to go. I mean, still, roughly 35% of the market is only AMI implemented, so really long, tremendous amount of excitement. Penetration of radio is much higher, long runway of growth still in AMI, and frankly, by the time we get done with AMI getting implemented, we'll already be into the replacement cycle. So it's... That's why we feel so great about, you know, the long-term health of where we're going. Maybe the closest we would get to sort of giving a percentage, you know, if you rewound the clock four or five years ago, you know, we always talk about the market had adopted some form of communication technology at around the 65% of the installed base. At that point in time, our specific Badger Meter specific ratio of radios to meters sold was very much in line with the installed base. I would say, as we sit here in 2024, on our current sales, that penetration rate is now well above kind of the market installed base, which, of course, has grown from 65% four or five years ago, but that mix is higher than that. Thanks very much for taking my questions. Yeah, thanks. We currently have no further questions. I will hand back to Karen Bauer to conclude. Thank you, and thanks, everyone, for joining our call today. For your planning purposes, our second quarter 2024 call is tentatively scheduled for July 19th. I will be around all day to take any follow-up questions you have. Have a great day. Thanks. This concludes today's call. Thank you for joining. You may now disconnect your line.