Badger Meter Inc (BMI) 2023 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the Third Quarter 2023 Badger Meter Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded.

女士們、先生們，歡迎參加 2023 年第三季 Badger Meter 收益電話會議。 （操作員指示）提醒一下，今天的會議正在錄製中。

It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer.

現在我很高興將會議交給投資者關係、企業策略和財務主管 Karen Bauer 副總裁主持。

Good morning, and thank you for joining the Badger Meter Third Quarter 2023 Earnings Conference Call.

早安，感謝您參加 Badger Meter 2023 年第三季財報電話會議。

On the call with me today are Ken Bockhorst, Chairman, President and Chief Executive Officer; and Bob Wrocklage, Chief Financial Officer.

今天與我通話的有董事長、總裁兼執行長肯‧博克霍斯特 (Ken Bockhorst)；和財務長 Bob Wrocklage。

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.

收益發布和相關幻燈片演示可在我們的網站上取得。很快，我將介紹安全港，提醒您，本次電話會議中所做的任何前瞻性陳述都受到各種風險和不確定性的影響，其中最重要的風險和不確定性已在我們的新聞稿和SEC 文件中概述。

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.

在今天的電話會議上，我們將提及某些非公認會計準則財務指標。我們的收益投影片提供了所使用的 GAAP 與非 GAAP 財務指標的調整表。

With that, I'll turn the call over to Ken.

這樣，我就把電話轉給肯。

Thanks, Karen, and thank you for joining our third quarter earnings call. The Badger Meter team delivered another record quarter with continued strong sales, operating profit and EPS growth year-over-year. Demand for our differentiated and tailorable digital smart water solutions remains robust and improving supply chain dynamics allowed us to make modest headway into the elevated backlog.

謝謝凱倫，也謝謝您參加我們第三季的財報電話會議。 Badger Meter 團隊再次創造了創紀錄的季度業績，銷售額、營業利潤和每股收益同比持續強勁增長。對我們差異化和可客製化的數位智慧水務解決方案的需求仍然強勁，供應鏈動態的改善使我們能夠在積壓的問題上取得一定進展。

I want to thank all of our employees for their focused efforts in serving our customers. I'll provide an update on the macro environment and market outlook later in the call.

我要感謝我們所有員工為服務客戶所付出的專注努力。我將在稍後的電話會議中提供有關宏觀環境和市場前景的最新資訊。

For now, I'll turn it over to Bob to go through the details of the quarter.

現在，我將把它交給鮑勃來查看本季度的詳細資訊。

Thanks, Ken, and good morning, everyone. Turning to Slide 4. Our total sales in the third quarter reached yet another record at $186.2 million, an increase of 26% compared to $148 million in the same period last year. This increase was on top of 15% year-over-year growth in Q3 last year and 13% in the prior year.

謝謝，肯，大家早安。轉向投影片 4。我們第三季的總銷售額再創新高，達到 1.862 億美元，比去年同期的 1.48 億美元成長了 26%。這一增長是在去年第三季度同比增長 15% 和上年同期增長 13% 的基礎上實現的。

To put our multiyear organic sales trend line into perspective, third quarter 2023 sales are more than 60% above pre-COVID-19 -- 2019 levels, which equates to about 13% compounded annual growth on an organic basis. Total utility water product line sales increased 31% year-over-year with broad-based growth across the portfolio of utility smart water solution offerings.

從我們的多年有機銷售趨勢線來看，2023 年第三季的銷售額比 COVID-19 之前的 2019 年水準高出 60% 以上，這相當於有機基礎上約 13% 的複合年增長率。公用供水產品線總銷售額年增 31%，公用事業智慧供水解決方案產品組合廣泛成長。

Continued robust order demand and normalization of supply chain conditions resulted in strong manufacturing output. Similar to last quarter, we delivered on meaningfully higher cellular AMI demand, including ORION Cellular endpoints, E-Series Ultrasonic meters and BEACON Software as a Service revenues.

持續強勁的訂單需求和供應鏈狀況的正常化導致製造業產出強勁。與上季類似，我們滿足了明顯更高的蜂窩 AMI 需求，包括 ORION 蜂窩端點、E 系列超音波儀表和 BEACON 軟體即服務收入。

Additionally, water quality and pressure monitoring sales contributed to the top line growth. Sales for the flow instrumentation product line increased 2% year-over-year with solid demand in water-related markets, partially offset by modestly lower sales associated with deemphasized general industrial applications.

此外，水質和壓力監測銷售也促進了收入成長。由於水相關市場的強勁需求，流量儀表產品線的銷售額年增 2%，但由於一般工業應用不再受到重視，銷售額略有下降，部分抵消了這一影響。

Turning to margins. Solid execution at both the gross margin and SEA lines contributed to the 80 basis point increase in operating margins in the quarter, reaching 16.9% versus 16.1% last year. Gross profit dollars increased $15.2 million year-over-year and as a percent of sales increased 20 basis points to 39.1% versus 38.9% last year with higher volumes and favorable product mix contributing to the improvement.

轉向邊緣。毛利率和東南亞業務的穩健執行使得本季營業利潤率成長了 80 個基點，達到 16.9%，而去年為 16.1%。毛利年增 1,520 萬美元，佔銷售額的百分比從去年的 38.9% 增加了 20 個基點，達到 39.1%，銷量的增加和有利的產品組合促成了這一改善。

We were pleased with overall gross margins again in the upper half of our normalized range. SEA expenses in the third quarter were $41.3 million, an increase of $7.6 million year-over-year, which included higher personnel-related costs such as headcount, salaries and variable compensation as well as R&D expenses.

我們對整體毛利率再次達到正常範圍的上半部感到滿意。第三季的策略性環境評估支出為 4,130 萬美元，年增 760 萬美元，其中包括較高的人事相關成本，如員工人數、工資和可變薪酬以及研發費用。

The addition of Syrinix with its related intangible asset amortization also contributed to the dollar increase. Despite the higher spend levels to support growth, SEA as a percent of sales declined 50 basis points to 22.2% from 22.7% in the comparable prior year quarter.

Syrinix 的加入及其相關無形資產攤銷也促進了美元的上漲。儘管支持成長的支出水準較高，但東南亞銷售額佔銷售額的百分比從去年同期的 22.7% 下降了 50 個基點至 22.2%。

While operating income grew 31%, we increased EPS an exceptional 44% to $0.88 in the third quarter compared to $0.61 in the prior year quarter. The delta includes the benefit from interest income earned on our increasing cash balance. And in addition, the quarter's 20.3% income tax rate benefited from discrete equity compensation transactions occurring in the quarter. We continue to expect our normalized effective income tax rate to be plus or minus 25%.

雖然營業收入成長了 31%，但第三季每股收益大幅成長 44%，達到 0.88 美元，去年同期為 0.61 美元。增量包括我們不斷增加的現金餘額所賺取的利息收入的收益。此外，本季 20.3% 的所得稅率受益於本季發生的離散股權補償交易。我們仍預期正常化有效所得稅率為正負 25%。

Working capital as a percent of sales was 22.7% compared sequentially to 23.4% last quarter end. While overall working capital, including inventory, has increased in total dollars to support growth, we did see an improvement in inventory as a percent of sales and continue to expect modest inventory reductions as we move forward.

營運資本佔銷售額的百分比為 22.7%，而上季末為 23.4%。雖然包括庫存在內的整體營運資金總額有所增加以支持成長，但我們確實看到庫存佔銷售額的百分比有所改善，並繼續預計隨著我們的前進，庫存將適度減少。

Free cash flow of $28.4 million improved from a year ago, primarily on higher earnings. We remain on track for 100% plus free cash flow conversion of net earnings for the full year.

自由現金流較上年同期增加 2,840 萬美元，主要得益於收益的增加。我們仍有望實現全年淨利潤 100% 以上的自由現金流轉換。

With that, I'll turn the call back over to Ken.

這樣，我會將電話轉回肯恩。

Thanks, Bob. Turning to Slide 5. As Bob mentioned earlier, we've delivered meaningful growth over the past several years, leveraging our expanding portfolio of digital water -- digital smart water solutions to solve our customers' evolving water challenges. While the word meter is a part of the Badger Meter name and remains a prominent element of our offering, the growth that we've had and will continue to deliver goes far beyond the meter.

謝謝，鮑伯。轉向幻燈片5。正如鮑勃之前提到的，我們在過去幾年中實現了有意義的增長，利用我們不斷擴大的數位水產品組合（數位智慧水解決方案）來解決客戶不斷變化的水挑戰。雖然「meter」一詞是 Badger Meter 名稱的一部分，並且仍然是我們產品的一個突出元素，但我們已經並將繼續實現的成長遠遠超出了「meter」的範圍。

As the macro challenges of labor shortages, aging infrastructure, water conservation and climate events continue to drive much needed investment into critical water systems, Badger Meter's broad portfolio of customizable solutions, spanning metering, sensors, instruments, communication, software and support offerings is uniquely positioned to serve the evolving needs of our utility and other customers.

隨著勞動力短缺、基礎設施老化、節水和氣候事件等宏觀挑戰繼續推動關鍵供水系統急需的投資，Badger Meter 廣泛的可自訂解決方案組合（涵蓋計量、感測器、儀器、通訊、軟體和支援產品）具有獨特的優勢。旨在滿足我們的公用事業和其他客戶不斷變化的需求。

The total available market globally is valued at approximately $20 billion, giving Badger Meter ample opportunity to continue to grow and expand these offerings in the U.S. and other select regional markets. It also gives us ample opportunity to add to our portfolio of solutions and other sensors and hardware-enabled software via organic and disciplined M&A investments. We've demonstrated our ability to capitalize on these growth opportunities and we remain well positioned to further build on our track record of value creation.

全球可用市場總額約為 200 億美元，這為 Badger Meter 提供了充分的機會繼續在美國和其他選定區域市場發展和擴展這些產品。它還為我們提供了充足的機會，透過有機和嚴格的併購投資來添加我們的解決方案和其他感測器以及硬體支援的軟體組合。我們已經證明了我們利用這些成長機會的能力，並且我們仍然處於有利地位，可以進一步鞏固我們創造價值的記錄。

Looking ahead, we have a constructive outlook for the remainder of the year and see a solid foundation for profitable growth in 2024. As noted in the release, as we close out 2023, we continue to expect solid year-over-year sales growth, taking into account the fewer operating days in the fourth quarter with U.S. holidays.

展望未來，我們對今年剩餘時間抱持建設性的前景，並看到2024 年盈利增長的堅實基礎。正如新聞稿中指出的，隨著2023 年的結束，我們繼續預計銷售額將實現穩健的同比成長，考慮到第四季因美國假期而營業日數減少。

As supply chain dynamics improved, we've been able to begin improving lead times. These improving dynamics have also aided manufacturing efficiencies, benefiting the gradual margin expansion we've consistently discussed.

隨著供應鏈動態的改善，我們已經能夠開始縮短交貨時間。這些不斷改善的動態也有助於提高製造效率，有利於我們一直討論的逐步擴大利潤率。

One additional item to note, we're monitoring the evolving conflict in the Middle East and its potential impact related to partners in the region. Awards, orders and bid funnel activity remains strong, supported by the well-understood macro drivers facing the water industry. The replacement-driven underlying demand activity as well as our ability to leverage our water-related hardware and communication offerings to accelerate software and data analytics across the water ecosystem position us well for future growth.

需要注意的另一件事是，我們正在監測中東不斷演變的衝突及其對該地區合作夥伴的潛在影響。在水產業面臨的眾所周知的宏觀驅動因素的支持下，授標、訂單和投標通路活動依然強勁。替代驅動的潛在需求活動以及我們利用與水相關的硬體和通訊產品來加速整個水生態系統的軟體和數據分析的能力，使我們為未來的成長做好了準備。

With that, operator, please open the line for questions.

那麼，接線員，請開通提問線路。

(Operator Instructions) Our first question today comes from Rob Mason from Baird.

（操作員說明）今天我們的第一個問題來自 Baird 的 Rob Mason。

It sounded like you made the comment, you were able to work backlog down a little bit, but you characterize as it's still elevated. I'm just curious within that higher backlog, is there any portion of that, that you would think is in the delinquent category or there's an accelerated need to work the backlog down?

聽起來你發表了評論，你能夠稍微減少積壓工作，但你認為它仍然很高。我只是好奇在較高的積壓中，您是否認為其中有任何部分屬於拖欠類別，或者是否需要加速減少積壓？

Yes. So Rob, as we've discussed before, so when we talk about backlog, what we're talking about is what we have [POs] for that customers are interested in getting right now. So in our backlog, we don't talk about the 2-, 3-, 5-year longer-term AMI deployments that we book.

是的。所以，Rob，正如我們之前討論過的，所以當我們談論積壓時，我們談論的是我們為客戶現在有興趣獲得的[PO]。因此，在我們的積壓工作中，我們不會談論我們預訂的 2 年、3 年、5 年長期 AMI 部署。

So as we think about backlog, I don't think about it in past due. I just think about this, these are things that customers are looking for us to provide. So as we start to improve lead times and eat into that actionable right in front of us today backlog, that's actually a good thing for customers. And if we continue to improve lead times and eat that down a bit, I would feel happy about that. Overall, we're extremely excited about order rates. So that optimism has not changed on that time.

因此，當我們考慮積壓時，我不會考慮逾期的情況。我只是想，這些都是客戶希望我們提供的東西。因此，當我們開始縮短交貨時間並消化今天擺在我們面前的積壓訂單時，這對客戶來說實際上是一件好事。如果我們繼續縮短交貨時間並減少一點，我會對此感到高興。總的來說，我們對訂單率感到非常興奮。所以當時的樂觀情緒並沒有改變。

Understood. Understood. Ken, could you just characterize what the pricing environment looks like now that some of the supply chain headwinds that had been out there and commodity costs as well have settled down. Just give us maybe a framework for what you're seeing, either on list prices or in particular, just how the RFP and bidding process is playing out with respect to pricing?

明白了。明白了。肯，您能否描述一下現在的定價環境是什麼樣的，因為供應鏈中存在的一些不利因素和商品成本也已經穩定下來。請給我們一個您所看到的框架，無論是標價還是特別是 RFP 和投標流程在定價方面的表現如何？

Yes. It's remaining largely unchanged from what we've talked about in the other quarters. While some things are moderating, inflation is still real. There are parts of the economy that still certainly aren't great as we talked about inflation and interest rates and other things that are out there. But for the most part, the work that we did 3 years ago and really embarking on a value creation, value pricing model has certainly paid dividends for us throughout a difficult operating environment, but largely pricing dynamics haven't changed.

是的。與我們在其他季度討論的內容相比，它基本上沒有變化。儘管有些事情正在緩和，但通貨膨脹仍然存在。當我們談論通貨膨脹、利率和其他問題時，經濟的某些部分肯定仍然不太好。但在很大程度上，我們三年前所做的工作，以及真正開始價值創造、價值定價模型的工作，在困難的營運環境中確實為我們帶來了紅利，但定價動態基本上沒有改變。

If I could just sneak one last one in. This is just a comment on the slide presentation, which is certainly appreciated. I did notice in the slide deck where you referenced ASPs around some of your solutions, broad ASPs, I understand. But just on the manual meter side, around $70 pricing. If I'm not mistaken, that was back in January, that was at a $50 to $60 range. Can you just speak to what the dynamic is pushing that up, whether that's all price? Or does that include some blended mix between mechanical and e-meters or just kind of the underlying movement in that number.

如果我能偷偷地放進去最後一張就好了。這只是對幻燈片簡報的評論，這當然值得讚賞。我確實在幻燈片中註意到您圍繞一些解決方案引用了 ASP，我理解是廣泛的 ASP。但僅在手動儀表方面，定價約為 70 美元。如果我沒記錯的話，那是一月份的事，當時價格在 50 美元到 60 美元之間。您能談談推動這項成長的動力是什麼嗎？是否都是價格因素？或者這是否包括機械儀表和電子儀表之間的某種混合，或者只是該數字中的潛在運動。

Yes. So I would say, again, I don't know how great we are at keeping those numbers current, but there's probably a bit of price increase that's occurred over multiple time frames between those being updated. I think also, likewise, you've got kind of core meter [bare] meter plus registration being included in that. So I think if that's your specific question, that reflects kind of whatever was in the market at that point in time.

是的。所以我想說，我不知道我們在保持這些數字最新方面有多出色，但在更新的多個時間範圍內可能會出現一些價格上漲。我認為同樣，您也有某種核心儀表[裸]儀表加上其中包含的註冊。所以我認為，如果這是你的具體問題，那就反映了當時市場上的情況。

The next question comes from Nathan Jones from Stifel.

下一個問題來自 Stifel 的 Nathan Jones。

This is Adam Farley on for Nathan. A quick one on the fewer selling days in 4Q. Should we be expecting a sequential decline in 4Q revenue?

我是亞當法利 (Adam Farley) 替補內森 (Nathan)。第四季銷售天數較少，快速介紹一下。我們是否應該預期第四季營收會季減？

Yes. So we don't give guidance, but I think you're walking away with an obvious takeaway, which is with fewer working days, likelihood that that's a potential. That's, I think, effectively what we're saying.

是的。所以我們不提供指導，但我認為你會得到一個明顯的結論，那就是工作日更少，這很可能是一個潛力。我認為這實際上就是我們所說的。

All right. Okay. Fair enough. And then shifting gears, could you talk about strategic investments and how we should think about that driving revenue growth?

好的。好的。很公平。然後換個角度，您能談談策略性投資以及我們應該如何考慮推動收入成長嗎？

Yes. So I think if you just look at our history in totality, the strategic investments are what have brought us to the point that we're at, whether that was being first in our market with ultrasonic meters or first in our market with cellular radios or bringing the water quality portfolio and developing our own software.

是的。因此，我認為，如果您從整體上看我們的歷史，您會發現戰略投資使我們達到了現在的水平，無論是在我們的超音波儀表市場中率先，還是在我們的蜂窩無線電市場中率先，或帶來水質產品組合併開發我們自己的軟體。

In many cases, it's continuing to invest in keeping and advancing our lead in cellular, keeping or advancing our lead in Software as a Service, our software offering, continuing to integrate water quality and Syrinix into the broader portfolio on cross-selling. So the long answer is yes. The short answer is yes.

在許多情況下，它將繼續投資以保持和推進我們在蜂窩領域的領先地位，保持或推進我們在軟體即服務（我們的軟體產品）方面的領先地位，繼續將水質和Syrinix 整合到更廣泛的交叉銷售產品組合中。所以長的答案是肯定的。簡短的回答是肯定的。

I mean we continue to follow our capital allocation priorities of number one, R&D investment and priding ourselves and keeping our innovation leader status, increasing dividends annually in line with earnings and disciplined M&A. So that hasn't changed. That's the same as it back.

我的意思是，我們繼續遵循我們的第一資本配置優先事項，即研發投資，並保持我們的創新領導者地位，每年根據收益增加股息，並進行嚴格的併購。所以這並沒有改變。和回來的時候是一樣的。

I think I just -- I'd [augment] kind of that first capital allocation priority of organic investment in the business. Everyone always thinks of innovation as being R&D, but we equally think of innovation in the space of operational efficiency and capacity expansion. And so we've been investing over the last several years to be able to drive higher capacity and output, which, of course, allows us to then deliver on those higher order rates and higher growth numbers that you're asking about.

我想我只是－我會[增強]企業有機投資的第一資本分配優先權。大家總是認為創新是研發，但我們同樣認為創新是在營運效率和產能擴張方面。因此，我們在過去幾年中一直在投資，以便能夠提高產能和產量，這當然使我們能夠實現您所要求的更高的訂單率和更高的成長率。

So it's equal parts -- I don't know the equal parts, but it's contributory from innovation as well as operational efficiency focus and capital investment to support capacity.

所以這是平等的部分——我不知道平等的部分，但它是來自創新、營運效率關注和支持能力的資本投資的貢獻。

The next question comes from Andrew Krill from Deutsche Bank.

下一個問題來自德意志銀行的安德魯·克里爾。

I ask first, sales have been very strong for several quarters in a row. And I think you're on track for strong double-digit growth in 2023, and that's on top of basically double-digit growth on prior 2 years. So I am just wondering, is the kind of historical like mid- to high single-digit growth rate for this industry. Is that -- do you think it's structurally moved higher? Or should we expect to kind of go back towards that range again?

我首先問，銷售連續幾季非常強勁。我認為，到 2023 年，您將有望實現強勁的兩位數成長，而且這是在前兩年基本兩位數成長的基礎上實現的。所以我只是想知道，這個行業是否具有歷史性的中高個位數成長率。你認為它在結構上是否走高了？或者我們應該期望再次回到這個範圍嗎？

Yes. So if you went -- if you rewound a couple of years ago, we used to refer to it as mid-single digit. So we have changed into that high single-digit mode. And as you know, we don't provide guidance in the quarter or the annual basis. Things can tend to be uneven at times, but for the most part, through the strategic cycle, we're really comfortable thinking in the high single-digit range year-over-year.

是的。因此，如果你回顧幾年前，我們過去常常稱之為中個位數。所以我們已經變成高個位數模式了。如您所知，我們不提供季度或年度指導。有時情況可能會不平衡，但在大多數情況下，在整個戰略週期中，我們確實很樂意在同比的高個位數範圍內進行思考。

And so when we say high single digit over the strategic cycle, we're talking 5 or 10-year cycle. So to get a compounded annual growth rate of high single digit, there may be years that are up 15%, 16% and there may be years that are only up 5%. So we're simply talking about that kind of trend line over a CAGR style.

因此，當我們說戰略週期中的高個位數時，我們指的是 5 年或 10 年周期。因此，要獲得高個位數的複合年增長率，可能有些年份成長15%、16%，有些年份可能只會成長5%。因此，我們只是在討論複合年增長率風格的趨勢線。

So I do think, again, we don't guide obviously, but I think the ability to sustain double-digit growth even in this market, it's not doable, repeatable every year annually over that strategic cycle.

因此，我確實認為，我們沒有明顯的指導，但我認為即使在這個市場上維持兩位數成長的能力也是不可行的，在該策略週期中每年都可以重複。

Makes sense. And just next, just on like capital allocation, any update on how you're thinking about your approach there just as your cash balance continues to grow and maybe an update on like the deal pipeline or anything you're looking at?

說得通。接下來，就像資本配置一樣，隨著您的現金餘額持續增長，您如何考慮您的方法，也許還有交易管道或您正在關注的任何內容的更新？

Sure. Yes. So the deal pipeline remains strong. We have -- as we've always maintained over the last several years, a really healthy target-rich environment of companies that are in this water quality space, we'd be certainly interested in building that out more software side, anything that has global footprints in the select regional markets that we're looking at, similar to what [ATi] and Syrinix have brought to us.

當然。是的。因此，交易管道仍然強勁。正如我們在過去幾年中一直保持的那樣，我們為水質領域的公司提供了一個真正健康、目標豐富的環境，我們當然有興趣構建更多的軟體方面，任何具有我們正在關注的選定區域市場的全球足跡，類似[ATi] 和Syrinix 帶給我們的。

So good funnel. We remain disciplined. We think we have a really good idea of where value does get driven within our industry, and that's where we'll continue to look for value creation opportunities in M&A.

這麼好的漏斗。我們仍然遵守紀律。我們認為我們非常清楚我們產業中價值的驅動力，這就是我們將繼續在併購中尋找價值創造機會的地方。

Okay. Great. And if I could sneak one last quick one. I think last quarter, you noted that book-to-bill was over 1. Can you give an update on that for the third quarter?

好的。偉大的。如果我能快一點偷偷溜走最後一張就好了。我想上個季度，您注意到訂單出貨比超過 1。您能否提供第三季的最新情況？

Well, yes, so as I talked about with that improving lead time situation, we had a really strong order period that we're really proud of. We just had an exceptionally strong shipment period that was slightly better and I do mean slightly.

嗯，是的，正如我談到的交貨時間情況的改善，我們有一個非常強勁的訂單期，我們對此感到非常自豪。我們剛剛經歷了一個異常強勁的發貨期，稍微好一點，我的意思是稍微好一點。

(Operator Instructions) The next question comes from Tate Sullivan from Maxim Group.

（操作員說明）下一個問題來自 Maxim Group 的 Tate Sullivan。

A couple of things, I mean, impressive expense control. I mean your revenue growth exceeded my expectations that expenses were under. Can you just talk about maybe the composition in selling and administration expenses? I mean is R&D at higher levels than historically to enter more water quality -- real water quality markets and any integration expenses? I mean it's just -- I continue to expect you to have more expenses, but it seems like you managed it quite well.

我的意思是有幾件事，令人印象深刻的費用控制。我的意思是，你們的收入成長超出了我對支出的預期。能談談銷售費用和管理費用的組成嗎？我的意思是，研發水平是否高於歷史水平，以進入更多的水質——真正的水質市場以及任何整合費用？我的意思是，我仍然希望你有更多的開支，但看起來你管理得很好。

Yes. I certainly won't dissect the $41 million of SEA, but I think the way to think about that, Tate, is exactly what we've been saying for the last 4 years is that SEA leverage because of our -- I'm going to say a term I hate to say, growth algorithm, because of our growth algorithm, we believe, while still being an innovator and doing the things that you talked about, R&D, integrating new businesses that we've acquired, et cetera. We can still do all those great things but grow SEA at a rate slower than sales, and that creates automatic SEA leverage.

是的。我當然不會剖析 4100 萬美元的 SEA，但泰特，我認為思考這個問題的方式正是我們過去 4 年一直在說的，SEA 的槓桿作用是因為我們——我要說一個我討厭說的術語，成長演算法，因為我們的成長演算法，我們相信，同時仍然是一個創新者，做你談到的事情，研發，整合我們收購的新業務等等。我們仍然可以做所有這些偉大的事情，但以低於銷售額的速度成長 SEA，這會自動創建 SEA 槓桿。

I mean we're not more than 3 years removed from a time when we were running at 25%, 26% SEA as a percent of sales. And we just closed the quarter at 22.2%. And I think for the full year, we're in that kind of high 22% range.

我的意思是，我們距離 SEA 佔銷售額的 25%、26% 的時期已經過了不到 3 年。本季結束時，成長率為 22.2%。我認為全年成長率都處於 22% 的高區間。

So the story of SEA leverage is real improvement over the last 3 years, and we believe to continue that while being steadfast and being invested in organic investment as our capital allocation priority #1. We continue to gain that leverage as a point of operating and EBITDA margin expansion. So there's nothing unique in the third quarter. It's more the continuation of that trend that we've been talking about over the last 3 years.

因此，SEA 槓桿率在過去 3 年裡得到了真正的改善，我們相信，在堅定不移的同時，將投資於有機投資作為我們資本配置的第一要務，我們相信會繼續這一進步。我們將繼續獲得這種槓桿作用，作為營運和 EBITDA 利潤率擴張的一個點。所以第三季沒有什麼特別的。這更多的是我們過去三年一直在談論的這一趨勢的延續。

Great. And then the addressable market slide, thank you for including it. I mean -- and I want to understand the meter market part of that, I mean I would -- if it's fair to categorize mostly the replacement market, how much of the $20 billion -- remaining $20 billion market, I mean, I thought maybe you're creating, so to speak, I mean, are you creating some of the real-time water quality markets and the software markets? Are you replacing existing solutions? Can you talk more about the pie chart in there?

偉大的。然後是可尋址市場幻燈片，感謝您將其納入。我的意思是——我想了解其中的電錶市場部分，我的意思是——如果對大部分替換市場進行公平分類，那麼200億美元的市場中有多少——剩餘的200億美元市場，我的意思是，我想也許你正在創建，可以這麼說，我的意思是，你正在創建一些即時水質市場和軟體市場嗎？您要替換現有的解決方案嗎？能詳細談談其中的餅圖嗎？

Yes. What's exciting to us, and I know sometimes the acquisitions that we've done can appear small, but given our brand name, our 118-year history, things we've done in the water market, when we add these companies like ATi, [s::can] and Syrinix, it opens up these much larger markets to us. And as we continue to integrate and develop software, it opens up these other markets to us.

是的。讓我們興奮的是，我知道有時我們所做的收購可能看起來很小，但考慮到我們的品牌名稱、我們118 年的歷史、我們在水市場所做的事情，當我們添加像ATi 這樣的公司時， [s::can] 和 Syrinix，它為我們打開了這些更大的市場。隨著我們不斷整合和開發軟體，它為我們打開了這些其他市場。

We do tend to enjoy and look for niche opportunities within these spaces. We're not looking to follow some of the giants in some of these spaces that have established markets that are more difficult to get into, we're -- for example, in water quality. (inaudible) is a really strong, great business and there's -- but there's room for several other technologies and everyone to be successful in a wonderfully large growth market.

我們確實傾向於享受並在這些空間中尋找利基機會。我們並不打算追隨某些領域的巨頭，這些領域已經建立了更難以進入的市場，例如，在水質方面。 （聽不清楚）是一項非常強大、偉大的業務，而且還有其他幾種技術和每個人在一個非常大的成長市場中取得成功的空間。

(Operator Instructions) As we have no further questions, I'll hand the call back to Karen Bauer for any concluding remarks.

（操作員說明）由於我們沒有其他問題，我會將電話轉給凱倫·鮑爾 (Karen Bauer) 以供其進行總結發言。

Thank you, operator. Thanks, everyone, for joining our call today. For your planning purposes, our year-end call is tentatively scheduled for January 26, 2024. I'll be around all day to take any follow-up questions you have. Have a great day.

謝謝你，接線生。感謝大家今天加入我們的電話會議。出於您的規劃目的，我們的年終電話會議暫定於 2024 年 1 月 26 日進行。我將全天待命，解答您的任何後續問題。祝你有美好的一天。

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

今天的電話會議到此結束。非常感謝您的出席。現在您可以斷開線路。