Gentlemen, welcome to the Third Quarter 2024 Badger Meter Earnings Conference Call. After the prepared remarks, there'll be an opportunity to ask questions. If you'd like to ask a question during the Q&A, you can do so by pressing Star followed by one on your telephone keypad. It's 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 third quarter twenty twenty-four earnings conference call. On the call with me today are Ken Bockhorst, Chairman, President, and Chief Executive Officer, and Bob Wrocklage, Chief Financial Officer. Also joining our call today is Barb Novarini, our new Senior Director of Investor Relations. I have made the decision to retire after our annual shareholder meeting in the spring of twenty twenty-five. Barb and I will be working together over the next six months to seamlessly transition investor relations, sustainability, and strategy activities, and I know she will be a great resource to the company and to you all in the years ahead. Let the countdown to my last earnings call begin with two to go after today. Moving on, 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 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. We will definitely miss your expert safe harbor reading skills, but all joking aside, we recognize the importance of a professional IR function and consider ourselves very fortunate to have had Karen's expertise as Bob and I began our first public company CEO and CFO roles, about six years ago now. It's also why we believe in well-planned transitions, and we're happy to have Barb on board to work alongside Karen. Turning to the third quarter, I'm very pleased with our financial results, which reflect continued strong performance across a broad array of metrics, including delivering 12% year-over-year top-line sales growth against increasingly difficult comparisons. We reported record operating margins of 19.5%, with both year-over-year gross margin expansion and SG&A leverage contributing. We delivered strong EPS improvement, even with a higher tax rate, and last but not least, we generated robust year-over-year cash flow growth. In summary, our team continues to do a tremendous job in executing against our strategic priorities in support of our customers. I'll hand the call over to Bob to go through the details of the quarter, and I'll come back to talk about market, market conditions and the outlook. Thanks, Ken, and good morning, everyone. Turning to slide four, as we have been anticipating and communicating to you, our top-line sales growth rate did indeed moderate to a still strong 12% growth in the third quarter. As a reminder, this 12% growth was on top of a 26% increase in the prior year comparable quarter. Total utility water product line sales increased 14% year over year, as we continued to deliver on solid demand for our Blue Edge suite of utility Smart Water solutions. Year-over-year growth was broad-based, including flow measurement, water quality, pressure, and related communication solutions. Notably, software-as-a-service revenues increased approximately 35% in the quarter, reflecting the increasing customer re-reliance on insights and analytics delivered from our industry-leading BEACON digital solution. Sales for the flow instrumentation product line were flat in the quarter, with solid order trends globally within our focused water-related applications, offsetting modest declines across the array of de-emphasized end markets. As noted in the release, as we move into the fourth quarter, we do expect the typical pattern of fewer customer operating days given the heavy U.S. holiday season. In addition, hurricane-related recovery activities have the potential to temporarily delay certain southeastern U.S. utility projects in the near term. It is still too early to quantify any possible impact. Turning to margins, we were very pleased with the operating margin expansion of two hundred and sixty basis points in the quarter, reaching a record high of 19.5%. Gross profit dollars increased 15% year over year, and as a percent of sales, gross margins were 40.2%, a 110 basis point improvement from 39.1% in the prior year comparable quarter. For those ready to ask me if we are set to declare a new gross margin normalized range, the answer is no. While we were pleased with the outcome this quarter, one quarter is not a trend, and although we remain confident in the long-term gross margin improvement trend line, driven predominantly by positive structural mix, which was evident this quarter, we are also confident in saying that the mix can and will be uneven quarter to quarter. The overall higher volumes, along with solid price cost management, also contributed to the year-over-year gross margin improvement. SG&A expenses in the third quarter were $43.3 million, an increase of approximately $2 million year over year. The spending increase was due primarily to personnel-related costs, including higher headcount and salaries. Despite this increase in growth spending, SG&A, as a percent of sales, declined 140 basis points to 20.8% from 22.2% in the comparable prior year quarter on the higher sales. The income tax provision in the third quarter of 2024 was 25.3%, compared to 20.3% in the comparable prior year period, which benefited from a discrete tax benefit from equity compensation transactions. We continue to expect an ongoing effective income tax rate in the plus or minus 25% range, assuming no change in overall corporate income tax rates. In summary, consolidated EPS was $1.08 in the third quarter of 2024, a 23% improvement from $0.88 in the prior year comparable quarter. Primary working capital as a percent of sales was 21.7%, consistent with the prior quarter end and 40 basis points of improvement from 22.1% at calendar year end. We continue to carefully manage working capital investments to support growth. Record quarterly free cash flow of $42 million was 48% higher than the prior year's $28 million, largely the result of higher earnings and the effective working capital management. With that, I'll turn the call back over to Ken. Thanks, Bob. Turning to slide five, you may recall that last quarter we introduced you to Blue Edge. In short, Blue Edge is the overarching name we've given to our tailorable suite of solutions that solve critical water challenges across the entire water cycle. It's a way to simplify for our customers, including both utility and commercial and industrial users, the breadth of offerings available to best meet their needs and preferences today and as they advance and change in the future. In June, we demonstrated the elements and connectivity of Blue Edge to our utility customers at ACE. Last week, we did the same for our wastewater and industrial customers at WEFTEC. We showcased a literal representation of Blue Edge, highlighting the various hardware and communication technologies that relay data to both our proprietary software solutions and to traditional SCADA or building management systems. By taking that actionable data and providing true insights, we aid customers in making more informed decisions for efficient water management. Customer interest and technical discussions at the show were robust, with concrete examples of our solutions, improving water efficiency, resiliency, and sustainability. And speaking of resilience, I wanted to highlight recent customer feedback we've received as it relates to the hard-hit hurricane regions in the Southeastern United States. Most importantly, the tragic loss of life and devastation from these storms is truly heartbreaking. Yet during these events, as well as Hurricane Beryl in Texas in July, our customers have confirmed that our solutions continued communicating information critical to maintaining clean water availability and to prioritize identified leaks and other fix and repair activities for countless end users, even when utilities were without power. This is only possible with a resilient cellular network. It demonstrates again that our differentiated solutions resulted in differentiated performance when it counted most. Finally, turning to the outlook, the structural macro drivers that underpin technology adoption in the water industry are becoming more pronounced, as evidenced by these extreme weather events and exacerbated by aging infrastructure and labor availability challenges. We continue to operate with an encouraging opportunity funnel, bid pipeline, and order book, which bodes well for continued sales and earnings growth, with our focus on high single-digit sales growth rates over the strategic cycle. As we noted in the press release and Bob's earlier comments, as we close out the year, we expect that the fourth quarter will include fewer customer operating days, given the various U.S. holidays. Additionally, we anticipate customers in the hurricane-impacted regions could potentially delay certain projects in the near term. It's still too early to quantify any potential impact, and this type of situation serves as a reminder of the unevenness inherent in the industry. We remain steadfast in our commitment to existing capital allocation priorities, and we have the balance sheet and cash flow generation profile to further invest in both organic and highly strategic inorganic growth, while we also provide an attractive dividend. In summary, we remain excited about the opportunities ahead, and our team remains engaged in driving continued exceptional results. With that, operator, please open the line for questions. Thank you. Please press star followed by the number one if you'd like to ask a question, and ensure your device is unmuted locally when it's your turn to speak. If you change your mind or your question's already been answered, you can withdraw from the queue by pressing star followed by two. Our first question today comes from Scott Graham with Seaport Research Partners. Please go ahead. Your line is open. Yes, hi, good morning. And Karen, you know, I start coverage. I hope I didn't. You are one of the great ones out there, and I'm very happy for you. Sad for me, but I know that you certainly will be helping the transition. But, good luck to you, Karen. Thanks, Scott. Obviously, we'll be speaking some more going forward. So the one question I have, then I have a short follow-up, is, you know, I know you guys talk about, you know, sort of high single-digit growth through a cycle, and you know, I know you're careful not to measure that too specifically or what have you, but is the implication there for 2025, since you're coming off three really strong years, including this one, that that might be sort of like a low- to mid-single-digit sales growth? Or is the measurement period a little bit different than what I'm thinking? Can you give us any thinking on what 2025 means given that context? Hi, Scott. Welcome to coverage. It's interesting that question that you asked about the high single digits through the cycle going forward, because we were asked exactly that same question last year at about this time about this year. As we look forward and we think about the five-year strategic cycle and the market dynamics that we have, the advantages that we have with our portfolio, the way that I think we've been able to deliver best-in-class execution, you know, from year to year, as we always say and remind people, it can be uneven or from quarter to quarter. But we feel strong coming into twenty twenty-five, so it isn't like we're trying to signal that you should be expecting some sort of weakness coming into the next year. Okay. I think based on my reading of your transcripts, I think that's all I'm gonna get out of you, so that's fine. Karen, Karen has trained us well, Scott. Understood. I'm glad to say that you're not seeing weakness, which for you guys would be, I guess, just defined as lesser growth. And you know, look, you guys are doing a phenomenal job on the top line. When it comes to margins, there was a real nice pop there as well, and I believe mix, you cited as the primary driver there. But your volumes were up as well, I assume, and that drove some leverage, and price cost was positive, is what you're saying? Is that sort of the ranking of the margin drivers? Yeah. So we typically don't get into kind of the sequential sizing or ranking, but you're exactly right. The top-line growth is not a function of, you know, just mix or pricing. It's, it's absolutely unit volumes increasing. It's actually absolutely an element of ASP, and customer mix, and project mix, and product mix. And then you did hear our specific call-out to price cost benefiting margins. So those, those are the three elements contributing. Thank you. Appreciate, your answers. Our next question comes from Andrew Krill with Deutsche Bank. Your line is open. Hi. Thanks. Good morning, everyone, and so my congrats to Karen as well. Thank you for your help. So I wanted to ask one more on the twenty twenty-five sales outlook. Just, I know, I think we're not going to get an explicit opinion, but would an outcome as low as, like, flat or even down sales be very surprising to you, just given, you know, how the industry is so replacement driven and the positive mix up story over time? Yes, a down year would be surprising to us. If you looked at our history, even in the COVID year when everyone else was down considerably, our utility business even grew 4% in the COVID year. It even grew 9% in the supply chain year. So regardless of any of these other factors or events, the macro drivers in the industry are still very strong. It just can have varying effects that, you know, one year might be 12%, another year might be 5%, but we certainly don't expect down years. Okay, great. That makes sense. And then on the hurricanes impact and the Southeast, you said you can't quantify it right now, but, like, do you have any, maybe directionally, like, can you size, you know, what% of the business, like, the Southeast is for Badger Meter? Just so we can kinda, you know, try to get some sense of, you know, how big it could be. Yeah. So no, but let me take a couple of things. So, one, I just want to point out on a couple of factors as we look at, you know, into Q4 and into next year. So this is the sixth year Bob and I have done this call, and it's the sixth year that we've pointed out that there are holidays in Q4, so that's not new for anybody who's followed our story. Second, with the hurricane impact, I think it's important to remember that 75% of our utility revenue is sold direct to end users. So we have really great communicative, open communication relationships directly with our customers. The distributors that we have that cover the other 25% are outstanding, but our sales model, which we've been doing now for six-ish years with the change in adoption of technology, gives us insights into how people are operating. When you're thinking about installing meters and other sensors throughout a network, that requires people to go out and do work. When power lines are down and other issues are happening, this can have an impact. The way that we've always operated is that we are here for customers when and where they need us. There's no specific sizing, there's no specific issue. I would remind you that if you go back to twenty twenty, when COVID was hitting, we had a pretty good take on what was gonna happen because we talked directly to most of our customers, and we didn't lay people off, and we roared right back in Q3. The first quarter of twenty twenty-one, we were the first to signal that there was potential supply chain challenges. We still grew 9% that year. So all that we do is we try to point out to you the things that could potentially be the causes of unevenness. What I can assure everyone is that we are extremely good at controlling what we can control and still delivering really good results. So I know that was a long-winded answer that didn't specifically tell you, but I hope you got the point of what we mean here. Okay. And if I could fit one quick last one in. Just if there were some, you know, delays, is it fair to think those should hit in the first quarter of twenty twenty-five? Or, you know, there's no chance they just get canceled outright, correct? I would say for sure that they would be delays, not cancellations, but I can't promise they would be the first quarter. Okay, great. Thanks so much. You bet. The next question comes from Rob Mason with Baird. Your line is open. Hi, good morning. Thanks for taking the question. You talked about normalizing backlog. I think you've been commenting around that, you know, as we've gone through this year. Again, maybe emphasis on the word normalizing, not normalized. So just can you give us any sense as to where maybe your backlog level is relative to what you would consider more of a steady state? Assuming it's higher than that, if that's correct. Yeah. So Rob, so, you know, prior to a extremely building backlog, prior to last quarter, where we called out that we ate into it a bit more, you know, we've never sized the backlog, but we didn't call it out this quarter because there was no meaningful change within it. So it still remains very positive. All the areas of the market that we look at from, you know, customers in the engineering phase, to what's in the bid phase, to what's in our backlog, to what we're shipping, remains as solid as it's ever been. Sure, sure. I also wanted to ask about, you noted the growth rate in your SaaS revenues, which was, again, really strong. Can you, you know, maybe tear that down a little bit? Just, you know, should we think that that is solely a kind of a unit-driven growth rate? Or, you know, as you've offered, new services, the leak detection, just a number of things obviously under Blue Edge now, you know, what is the contribution, you know, besides unit growth, to that from other services that are rolling into that SaaS component? Yeah. So I think you've picked up on the first clue. Again, we always talk about, you know, our AMI, our software as a service being a function of 100% attachment rate to hardware sales. So the leading indicator is when we talk about more ORION cellular radios sold, the lagging indicator is, of course, then SaaS uptake because of a 100% attachment rate on a per-meter, per-month basis. That is the lion's share of the recurring revenue stream, SaaS. That doesn't mean on the fringes there aren't additional impacts from those factors that you mentioned, additional water quality devices, leak detection devices, et cetera. But where we stand today, you know, 99% of the revenue stream is related to meter to cash surrounding Beacon and AMI. And so the driver today is absolutely additional hardware units in the field, bringing with it the additional insights and intelligence that we talked about in the script, and that the benefits that that offers to customers. I see. That's helpful. If I could squeeze, you know, one last one in, just, maybe again, going back to the hurricane impacts. You know, the emphasis or, you know, the implications maybe that, you know, could be an interruption headwind in the business, but the leak detection business is a newer business for Badger. So, is that a business that can see actually some incremental demand, you know, as those units are deployed out into the field to try to inspect for potential disruptions when you have instances like that? I just don't know, you know, the history, nature of that business as well. Yeah, Rob. So as we've built out our portfolio of adding new sensors and software, that's one of the reasons that we're so excited about some of the pressure monitoring, leak detection capabilities that we've added. Events like this just make people realize how much more necessary those products and services are. And you know, so we were excited about it before. We're just as excited about it now. A hurricane doesn't make us feel better about it, but it surely shows the benefits that utilities have. And then on top of that, just as I called out in the script, the fact that our customers in the hardest-hit parts of the storm, not just this storm, but the others, continue to communicate throughout. So when they can have our battery-powered cellular communications telling them where their issues are throughout their system, it's a heck of a lot more efficient than guys driving around looking for problems, and it's a lot safer than sending people out looking through areas where perhaps there's down power lines. So the combination of the whole portfolio coming together is really truly seen at unfortunate times like this. Yes. Yeah. Thank you. Appreciate it. As a reminder, if you want to ask a question today, it's star followed by one on your telephone keypad. We'll move next to Nathan Jones with Stifel. Please go ahead. Good morning, this is Adam Farley on for Nathan. My first question I wanted to ask around Blue Edge, and the way that you frame it. Are you seeing any acceleration in selling more bundled offerings to customers? I know it's still kind of early, but I imagine your expectation eventually is to gain wallet share with customers. Yeah. What's really exciting about how we've built this is it allows us to approach any customer anywhere at wherever they are in their technological journey. So they could be a water quality customer that then we expand their reach through Badger Meter, through the Blue Edge, into metering or lift station monitoring. Or if someone's on the metering side, we can bring them in with water quality stations and the like. So it's back and forth both ways. Some customers also look at it as the full portfolio upfront. Some look at it as, it's great to know that you have all this. I'm gonna do my AMI first, then I'm gonna roll the water quality after, then I'm gonna, you know, in whatever order that they see. When we use the word tailorable, what we mean by that is a customer can tap into the Blue Edge portfolio and pick whatever standard solutions they need based on whatever their current concerns are. Not to be confused with customizable, which would imply highly engineered, different products and services. That strategy is not new. I mean, Blue Edge, absolutely, and how we talk about it and position it with customers is new. But the idea of cross-selling and bundling and being able to take metering customers and sell them water quality and vice versa, that's been the thesis and the behavior since acquisition, you know, starting back in 2020. So I just wanna make sure that it's not like that this is some brand-new strategy. It's absolutely a better way and a more understandable way and a more tangible way to bring that tailorable solution set to market. But the strategy itself, the underpinning is not new. Yeah, understood, and that's a very helpful color. I guess, you know, shifting gears to capital allocation, you recently raised your dividend by 26% annually. Balance sheet is still very healthy, net cash position. You know, what are the main priorities? Maybe talk about a little bit about the M&A funnel, anything that would be helpful. Thank you. Yeah, so, capital allocation priorities remain constant with how we viewed this for several years now. So, you know, first and foremost, we've been the R&D leader when it came to cellular AMI and software and ultrasonics in the market. Now expanding that also into leadership in remote water quality monitoring, pressure, and so forth. Second, yeah, thirty-two consecutive years of increasing dividends is something that is certainly important to the capital allocation priorities. And then third, yeah, M&A. So we're really proud of the four deals we've done in the last three and a half years, and we keep a pretty strong funnel, you know, around this sensor area that can continue to plug into Blue Edge, whether that's more water quality, more pressure, more software, interesting global footprint, all those things come into play. So, you know, it hasn't changed. We continue to remain disciplined and look for value where we know it translates into customer satisfaction. All right. Thank you for taking my questions. Sure. Our next question comes from Tate Sullivan with Maxim Group. Please go ahead. Thank you. Thank you for your help over the years, Karen. Ken, can you talk about the international markets a bit? Have you allocated more sales there? Is there still a water quality monitoring opportunity international? Can you address that market, please? Yeah. So some of the things that have occurred over the past couple of years already, we've certainly seen the growth of the acquisitions that had larger footprint with, with long-standing customer relationships. So particularly, s::can having, an installed base in over fifty countries, ATI having, extremely long-lasting, strong relationships in the U.K. and U.S., Syrinix long-lasting U.K., relationship. So we've been able to, leverage those to have these Blue Edge-type conversations like Bob talked about, even before Blue Edge was, announced to the world. We've been having those types of discussions and making, certain improvements there. We've been growing globally. It's just, it gets a little bit muted by the fact that our North American growth has been so outstanding that the, the global growth has gotten a little bit lost in it. We're happy with what we're seeing in terms of growth, and we're really excited about what we're seeing in expanded relationships for Blue Edge globally. Any particular areas or... I mean, I know the growth has been a bit higher in Europe historically, but still broad-based international approach. I'll just give you one example. We could certainly talk more, but you know, if you hear a lot about AMP Cycle 8 in the U.K., and we talk a lot about the relationships that ATI has. We talk a lot about the relationships Syrinix had, has, still just part of us. We've been able to have high-level discussions with several of those utilities about how to help them meet their needs for AMP 8, whether that be potential in smart metering and software, whether that be around river monitoring, whether that be around leak detection, customer satisfaction. A lot of the pieces that we've been able to provide here in the U.S. are the same that they're looking for there. Then there's other regions of the world, too, but just one specific example that we've been cracking into. Great example. Thank you very much. Yeah, thank you. Thank you. We have no further questions, so I'll turn the call back over to you, Karen. Great. Thank you all for joining our call today. For your planning purposes, our fourth quarter call is tentatively scheduled for January twenty-ninth. Please don't hesitate to reach out with any follow-up questions you might have. Have a great day.