Badger Meter Inc (BMI) 2025 Q2 法說會逐字稿

Ladies and gentlemen, welcome to the second-quarter 2025 Badger Meter earnings conference call. (Operator Instructions)

女士們，先生們，歡迎參加 2025 年第二季 Badger Meter 收益電話會議。（操作員指示）

It's now my pleasure to turn the conference over to Barbara Noverini, Head of Investor Relations. Please go ahead.

現在我很高興將會議交給投資者關係主管 Barbara Noverini。請繼續。

Thank you. Good morning and thank you for joining the Badger Meter second-quarter 2025 earnings conference call. I'd like to introduce myself as the new Head of Investor Relations. With me on the call today are Ken Bockhorst, Chairman, President and Chief Executive Officer; and Bob Wrocklage, Chief Financial Officer.

謝謝。早安，感謝您參加 Badger Meter 2025 年第二季財報電話會議。我想介紹一下自己，我是新任投資人關係主管。今天與我一起參加電話會議的還有董事長、總裁兼執行長 Ken Bockhorst 和財務長 Bob Wrocklage。

The earnings release and related slide presentation were made available this morning 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.

收益報告和相關幻燈片簡報已於今天上午在我們的網站上發布。很快，我將介紹安全港，提醒您，本次電話會議中做出的任何前瞻性陳述都可能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美國證券交易委員會文件中概述。在今天的電話會議上，我們將參考某些非公認會計準則財務指標。我們的收益幻燈片提供了所使用的 GAAP 與非 GAAP 財務指標的對帳。

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

說完這些，我會把電話轉給肯。

Thanks, Barb. Welcome to our second quarter 2025 earnings call. I'm pleased to report another quarter of record sales and solid financial results that demonstrated disciplined execution and the durability of the drivers that supports technology adoption across the water industry.

謝謝，芭布。歡迎參加我們的 2025 年第二季財報電話會議。我很高興地報告，本季的銷售額和財務業績再創紀錄，證明了嚴格的執行力和支持整個水產業採用技術的驅動力的持久性。

Against difficult comps in the prior year quarter, sales grew 10% year over year or 5%, excluding the SmartCover acquisition. Despite trade-related cost headwinds, gross margins continued to trend above our normalized range of 38% to 40%, and we generated robust free cash flow in the quarter. Halfway through the year, I remain encouraged by the resilience of our business as we face ongoing macroeconomic trade and policy uncertainty. Our proven history of differentiated operational execution combined with ongoing customer demand and momentum in technology adoption trends positions us to successfully navigate this near-term uncertainty while supporting the long-term goals of our customers.

與去年同期的艱難業績相比，銷售額年增 10%，若不計 SmartCover 收購，則成長 5%。儘管面臨貿易相關的成本阻力，毛利率仍繼續保持在 38% 至 40% 的正常範圍之上，並且我們在本季度產生了強勁的自由現金流。今年已過半，儘管我們面臨持續的宏觀經濟貿易和政策不確定性，但我們業務的韌性仍然令我感到鼓舞。我們經過驗證的差異化營運執行歷史，加上持續的客戶需求和技術採用趨勢的強勁勢頭，使我們能夠成功應對這種短期不確定性，同時支援客戶的長期目標。

Bob will review the details of the quarter, and then I'll be back to provide some thoughts on BlueEdge and our outlook. Go ahead, Bob.

鮑伯將回顧本季的細節，然後我會回來就 BlueEdge 和我們的前景提供一些想法。繼續吧，鮑伯。

Thanks, Ken, and good morning, everyone. Turning to slide 3. Total sales of $238 million in the second quarter of 2025, represented an increase of 10% year over year or 5% sales growth when excluding just over $10 million in sales from SmartCover in its first full quarter under our ownership. Total utility water product line sales increased 11% year over year or 6% excluding SmartCover. As expected, moderating core sales growth from recent double-digit levels was primarily a function of the difficult second quarter sales comparison, which was the high watermark for the prior year.

謝謝，肯，大家早安。翻到幻燈片 3。2025 年第二季的總銷售額為 2.38 億美元，年增 10%，如果不包括我們擁有期間 SmartCover 第一個完整季度的 1000 多萬美元銷售額，銷售額則增長 5%。公用事業水產品線總銷售額年增 11%，不包括 SmartCover 則成長 6%。正如預期的那樣，核心銷售額增幅從近期兩位數水準回落，主要是因為第二季銷售額與去年同期相比成長困難。

In the quarter, we delivered higher sales of meters, BEACON Software as a Service, water quality, and remote monitoring solutions. Sales for the flow instrumentation product line were essentially flat year over year as lower demand in the deemphasized array of market applications offset modest growth in water-related end markets.

本季度，我們的儀表、BEACON 軟體即服務、水質和遠端監控解決方案的銷售額均有所成長。流量儀表產品線的銷售額與去年同期基本持平，因為市場應用領域需求的下降抵消了與水相關的終端市場的溫和成長。

Turning to profitability. Operating earnings increased 8% year over year to $44.9 million with operating margins down 40 basis points to 18.8% from the prior year's 19.2%. The structural mix benefit of technology adoption by our customers continues to benefit gross margins, which expanded 170 basis points to 41.1% in the second quarter from 39.4% in the prior year quarter. As expected, this did represent a sequential decline from 42.9% in the first quarter of the year, which you'll recall was the result of favorable customer and product mix that quarter that did not repeat this quarter.

轉向盈利能力。營業利潤年增 8% 至 4,490 萬美元，營業利潤率從上年的 19.2% 下降 40 個基點至 18.8%。客戶採用技術的結構性組合優勢持續有利於毛利率，第二季毛利率從去年同期的 39.4% 擴大 170 個基點至 41.1%。正如預期的那樣，這確實比今年第一季的 42.9% 出現了連續下降，您可能還記得，這是由於當季客戶和產品組合良好，而本季並未出現這種情況。

Gross margin in the second quarter of 2025 also continued to benefit from ongoing operational excellence initiatives, while recently implemented price increases partially mitigated certain tariff-related cost pressures in the quarter. Year-to-date, we have adeptly managed the controllable aspects of the known tariff landscape. However, the trade environment remains fluid. As an example, copper prices recently spiked on copper-specific tariff concerns. Although we primarily use recycled brass in our ingot recipe, secondary markets like these do experience ripple effects when the primary commodity is impacted.

2025 年第二季的毛利率也繼續受益於持續的卓越營運舉措，而最近實施的價格上漲部分緩解了本季度某些與關稅相關的成本壓力。今年迄今為止，我們已經熟練地管理了已知關稅格局的可控方面。然而，貿易環境依然不穩定。例如，由於對銅關稅的擔憂，銅價近期飆升。儘管我們在鑄錠配方中主要使用再生黃銅，但當主要商品受到影響時，像這樣的二級市場確實會產生連鎖反應。

Last quarter, we walked you through the manufacturing and supply chain footprint supporting our US sales, along with the tariff-related exposures and mitigation efforts. While announced and rumored tariff rates by country and commodity continue to evolve, our underlying tariff-related exposures and mitigation actions remain the same. Most importantly, we continue to see the competitive playing field as level in terms of both exposures and planned mitigation actions, including any potential targeted pricing actions. That said, the ongoing trade uncertainty and lag impact of mitigation actions, once again, prompts us to leave our normalized gross margin range of 38% to 40%, unchanged for now despite another quarter of gross margin performance above 40%.

上個季度，我們向您介紹了支持我們美國銷售的製造和供應鏈足跡，以及與關稅相關的風險和緩解措施。雖然各國和商品公佈和傳聞的關稅稅率不斷變化，但我們與關稅相關的潛在風險和緩解措施保持不變。最重要的是，我們繼續認為，無論是在風險敞口方面，還是在計劃的緩解行動方面，包括任何潛在的有針對性的定價行動，競爭環境都是公平的。儘管如此，持續的貿易不確定性和緩解措施的滯後影響再次促使我們將正常化的毛利率範圍維持在 38% 至 40% 之間，儘管另一個季度的毛利率超過了 40%，但目前仍保持不變。

SEA expenses in the second quarter were $52.9 million, an increase of approximately $9.1 million year over year, due primarily to the addition of SmartCover including $1.6 million of intangible asset amortization. Excluding the acquisition, SEA expenses increased $3.3 million, the result of higher personnel costs to support growth and approximately $1 million of deferred compensation expense resulting from the year-over-year change in stock price that is unique to this quarter.

第二季 SEA 支出為 5,290 萬美元，較去年同期增加約 910 萬美元，主要由於增加了 SmartCover，其中包括 160 萬美元的無形資產攤銷。除收購外，SEA 費用增加了 330 萬美元，這是由於支持增長的人員成本增加，以及由於本季度獨有的股價同比變化導致的約 100 萬美元的遞延薪酬費用。

The income tax provision in the second quarter of 2025 was 24.5% modestly above the prior year's 23.8%. Consolidated EPS was $1.17 versus $1.12 in the prior year quarter. Primary working capital as a percent of sales at June 30, 2025, was 21.8%, consistent with the prior quarter end and about 200 basis points better than a year ago. Free cash flow increased 19% year over year to $40.6 million largely due to higher earnings and working capital differential between years.

2025 年第二季的所得稅準備金為 24.5%，略高於去年的 23.8%。合併每股收益為 1.17 美元，而去年同期為 1.12 美元。截至 2025 年 6 月 30 日，主要營運資本佔銷售額的百分比為 21.8%，與上一季末持平，比去年同期高出約 200 個基點。自由現金流年增 19% 至 4,060 萬美元，這主要歸因於年度間收益和營運資本差異的增加。

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

說完這些，我就把電話轉回給肯。

Thanks, Bob. Next, I'd like to talk about the progress we've made since the launch of BlueEdge last year. As a reminder, BlueEdge is the brand that unifies the comprehensive suite of products and solutions that enable our customers to manage their water and wastewater systems beyond the meter.

謝謝，鮑伯。接下來我想談談自去年推出 BlueEdge 以來我們的進展。提醒一下，BlueEdge 是一個統一綜合產品和解決方案套件的品牌，使我們的客戶能夠管理儀表以外的水和廢水系統。

In June, our booth at the ACE tradeshow in Denver, which is our industry's biggest event of the year, highlighted the various use cases of our extensible solutions and included SmartCover for the first time. We also featured our new Field App, which brings the power of our BEACON software to utility field personnel, and we introduced Cobalt, which leverages machine learning for advanced insights within our BEACON platform. Our booth was the physical representation of our evolution behind the meter.

6 月份，我們在丹佛 ACE 貿易展（這是我們行業年度最大的盛會）上的展位重點展示了我們可擴展解決方案的各種用例，並首次包含了 SmartCover。我們還推出了新的 Field App，它將 BEACON 軟體的強大功能帶給公用事業現場人員，並且我們還推出了 Cobalt，它利用機器學習在我們的 BEACON 平台內獲得高級洞察。我們的展位是儀表背後演變的具體體現。

Today, our BlueEdge portfolio of water management solutions provides tremendous value to customers, and it was exciting to see the energy in our booth as well as the enthusiasm that both long-standing and soon to be new customers have for our solutions. While it's only been years since we've launched this concept, we've already seen meaningful momentum in our efforts to inform utilities of the advantages of our BlueEdge solutions.

今天，我們的 BlueEdge 水管理解決方案組合為客戶提供了巨大的價值，看到我們展位上的活力以及長期客戶和即將成為新客戶對我們解決方案的熱情，我們感到非常興奮。雖然我們推出這個概念才幾年時間，但我們已經看到，在向公用事業公司宣傳我們的 BlueEdge 解決方案的優勢方面，我們取得了顯著的進展。

Furthermore, we've elevated our already strong reputation as a trusted partner. A long-term relationship with us means that we'll be there to enable our customers as they evolve and plan for the future. We're seeing increasing numbers of RFPs that ask for solutions beyond the meter and are offering elevates our standing in the bid process while providing tangible reasons for us to continue our partnership with customers post sale even after their AMI projects are complete. In summary, we're very pleased with a strong start to this evolving aspect of our long-term strategy.

此外，我們作為值得信賴的合作夥伴的良好聲譽得到了進一步提升。與我們建立長期的合作關係意味著我們將在客戶發展和規劃未來時為他們提供支援。我們看到越來越多的 RFP 要求提供超出電錶範圍的解決方案，這不僅提升了我們在投標過程中的地位，也為我們在 AMI 項目完成後繼續與客戶保持售後合作關係提供了切實的理由。總而言之，我們對我們長期策略的這一發展方面有一個良好的開端感到非常高興。

Finally, turning to the outlook. We routinely highlight that our business can be uneven quarter to quarter and year to year. It is simply the nature of the business, given utility replacement cycles, project deployment schedules, project phase in, phase outs, et cetera. The difficult second quarter comparison from a year ago that Bob discussed earlier is just one example of phenomenon.

最後，談談展望。我們經常強調，我們的業務每個季度和每年都可能不平衡。這只是業務的本質，考慮到公用設施更換週期、專案部署時間表、專案分階段實施、分階段淘汰等等。鮑伯之前討論過的與一年前第二季的艱難對比只是現象的一個例子。

Another example is that we did have a number of AMI projects wrap up in the second quarter. While we already have new AMI projects in hand to replace them, the timing of the start of those projects is such that we expect absolute sales to decline sequentially in the third quarter of 2025. Despite the moderation in sales, we still expect sales growth year over year, excluding SmartCover.

另一個例子是，我們確實在第二季度完成了一些 AMI 專案。雖然我們手頭上已經有新的 AMI 計畫來取代它們，但這些計畫的啟動時間使得我們預計 2025 年第三季的絕對銷售額將環比下降。儘管銷售額有所放緩，但我們仍預期銷售額（不包括 SmartCover）將年增。

Nevertheless, despite the macroeconomic trade and policy uncertainties we've experienced year-to-date, the multiple long-term secular trends fueling growth where we are positioned in the water industry remains strong. Our core products and solutions are critical to the operations of the water utility, commercial and industrial customers.

儘管如此，儘管今年迄今為止我們經歷了宏觀經濟貿易和政策的不確定性，但推動我們在水產業成長的多種長期趨勢仍然強勁。我們的核心產品和解決方案對水務公司、商業和工業客戶的營運至關重要。

As a reminder, the meter is the cash register of the utility and remains a priority for investment. Thus, our ongoing conviction and high single-digit revenue growth over the long term is underpinned by these enduring favorable industry fundamentals, along with customer order and demand trends, project awards pending in future RFP activity, and the competitive positioning of our broad portfolio of solutions to best address water challenges.

提醒一下，電錶是公用事業的收銀機，仍然是投資的重點。因此，我們持續的信念和長期的高個位數收入增長是由這些持久的有利行業基本面、客戶訂單和需求趨勢、未來 RFP 活動中待定的項目獎勵以及我們廣泛的解決方案組合的競爭地位所支撐的，以最好地應對水資源挑戰。

We continue to generate strong cash flow and retain a balance sheet with significant financial flexibility to withstand macroeconomic pressure while pursuing both organic and strategically relevant inorganic investments, all while paying a dividend that has grown in line with earnings for over three decades.

我們繼續產生強勁的現金流，並保持具有高度財務靈活性的資產負債表，以抵禦宏觀經濟壓力，同時進行有機投資和戰略相關的無機投資，同時支付三十多年來與收益同步增長的股息。

After nearly six months of integration, we remain on track to deliver the anticipated sales and cost synergies associated with the SmartCover acquisition. We've made tangible progress in leveraging Badger Meter resources across SmartCover business, continue to identify go-to-market opportunities for SmartCover as part of our BlueEdge suite of solutions.

經過近六個月的整合，我們仍有望實現與 SmartCover 收購相關的預期銷售和成本綜效。我們在利用 Badger Meter 資源開展 SmartCover 業務方面取得了切實進展，並繼續為 SmartCover 尋找上市機會，將其作為我們 BlueEdge 解決方案套件的一部分。

Finally, I'd like to call out our recently published 2024 sustainability report. I'm proud that the collective efforts of our team allowed us to exceed and raise our targets for greenhouse gas intensity production. while also delivering record 2024 financial results. Our continuous improvement philosophy towards sustainability efforts continues to produce favorable outcomes as it has across the entire business.

最後，我想提一下我們最近發布的2024年永續發展報告。我很自豪，我們團隊的共同努力使我們能夠超越並提高溫室氣體強度生產的目標，同時也實現了創紀錄的 2024 年財務業績。我們對永續發展努力的持續改進理念繼續產生良好的成果，就像它在整個業務中一樣。

In summary, we're carefully managing through uncertainty in the broader environment by focusing on what we can control in the near term while diligently executing against the long-term strategic plan that we're confident will continue to create value for both our customers and our shareholders.

總而言之，我們正謹慎地應對更廣泛環境中的不確定性，專注於我們能夠控制的短期因素，同時認真執行長期戰略計劃，我們相信該計劃將繼續為我們的客戶和股東創造價值。

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

接線員，請打開熱線來回答問題。

(Operator Instructions) Nathan Jones, Stifel.

（操作員指示）Nathan Jones，Stifel。

Good morning, everyone. I guess my question is going to be on the SG&A expense line. Just looking at it sequentially, it's kind of gone up about $7 million, which was I think, more than people were looking for. You've got an extra quarter of SmartCover in there and that onetime deferred comp number in that. Can you talk about the other investments that have been made there to support future growth, I guess, ex the $1 million write-up of deferred comp.

大家早安。我想我的問題是關於銷售、一般和行政費用。如果按順序來看，它已經上漲了約 700 萬美元，我認為這比人們預期的要多。您在那裡獲得了額外的四分之一的 SmartCover 和一次性遞延補償號碼。您能否談談為支持未來成長而進行的其他投資，例如 100 萬美元的遞延補償金增值。

Is just kind of $52 million, a new level of SG&A that we should be expecting going forward?

5,200 萬美元是我們未來應該預期的銷售、一般和行政費用的新水準嗎？

Yeah. I think you picked up on, I think, the two main pieces that are relevant to the quarter, Nathan. Certainly, yes, a full three months of SmartCover's SEA run rate, which, of course, we mentioned that acquisition is above line average organically. And then when you add the intangible amortization to that, which, again, we've sized for the year and the quarter, that's certainly an element of that uptick sequentially.

是的。內森，我認為你已經掌握了與本季相關的兩個主要內容。當然，是的，SmartCover 的 SEA 運行率整整三個月，當然，我們提到收購率高於平均水平。然後，當你將無形攤銷添加到其中時，我們再次對年度和季度進行了調整，這肯定是連續上升的一個因素。

You've also picked up on the very unique item to the quarter, that being the deferred comp expense to the tune of about $1 million. So absent those items, essentially SEA growth year over year is up $2 million to $3 million. And it's ongoing investment to support the wonderful things that we're doing in the marketplace in terms of continuing to evolve our software offering to keep it leading best-in-class, continue to bring innovative product development to market that differentiates not only our meter-to-cash products but are around the meter technologies and continue to drive adoption of those technologies, which remain very early stage in terms of US and North American water utility adoption.

您還注意到本季非常獨特的項目，約 100 萬美元的遞延補償費用。因此，除去這些項目，SEA 的年增長率基本上是 200 萬到 300 萬美元。這是持續的投資，以支持我們在市場上所做的出色工作，包括繼續改進我們的軟體產品以保持其在同類產品中的領先地位，繼續將創新產品開發推向市場，不僅使我們的計量表到現金產品與眾不同，而且圍繞計量表技術，並繼續推動這些技術的採用，這些技術在美國和北美水務公司的採用方面仍處於非常早期的階段。

And so yeah, I mean, those are pieces of it. Obviously, we don't guide, but you've picked up on the outliers that would help to inform your outlook moving forward.

是的，我的意思是，這些都是其中的一部分。顯然，我們不會提供指導，但您已經發現了有助於您了解未來前景的異常值。

I guess the $1.6 million of intangible amortization, is any of that like inventory step-up or something that goes away? Or is that what you expect the continuing level of amortization to be?

我猜 160 萬美元的無形資產攤銷是類似庫存增加還是會消失？或者這就是您期望的持續攤銷水平？

Yeah, that is entirely the intangible asset amortization. The inventory step-up that was a small amount in association with the acquisition passed out in the first quarter. So essentially, that's the continuing run rate for the life of those varying lived intangibles that we disclosed in the financials.

是的，這完全是無形資產攤銷。與收購相關的少量庫存增加已在第一季消散。因此，從本質上講，這就是我們在財務報表中揭露的各種無形資產的持續運作率。

Okay. So there's no reason to expect it to be less than $52 million in the SG&A line going forward?

好的。那麼，沒有理由預期未來銷售、一般及行政費用會低於 5,200 萬美元嗎？

Yeah, we'll leave that to you to figure out. But ultimately, you picked up on the two unique pieces. Yeah.

是的，我們會讓你自己去解決。但最終，你還是注意到了這兩件獨特的作品。是的。

Fair enough. I guess then maybe you could provide a little bit more color. I mean, you ran through a few of the things there, Bob. But just on what kind of capabilities, let's not call them expenses, you call them capabilities have been added to the business to support future growth.

很公平。我想也許你可以提供更多一些顏色。我的意思是，鮑勃，你已經完成了其中的一些事情。但就什麼樣的能力而言，我們不能稱其為費用，而應該稱其為已添加到業務中以支持未來成長的能力。

Yeah. So Nathan, as you reflect on the past five years, I think it's probably not fair to think about it because Q2 2020 was the COVID quarter, but we're up 165% revenue over that five-year period. So some of it is just the random things of continuing to increase capacity on some of the product lines that we continue to invest in, and some of it is investing and, of course, people. And as we go through our five-year strategic plan every year, and we look forward on what the new skills and new offerings are. We're going to have sometimes that drives investing in different kinds of skills that we currently have today, continuing to invest in our software business that we're totally excited about.

是的。所以，內森，當你回顧過去五年時，我認為這樣想可能不太公平，因為 2020 年第二季度是新冠疫情季度，但我們在這五年期間的收入增長了 165%。因此，有些只是隨機的事情，例如繼續增加我們繼續投資的某些產品線的產能，而有些則是投資，當然還有人員。我們每年都會制定五年策略計劃，並期待新的技能和新的產品。有時，我們會推動對目前擁有的不同技能進行投資，並繼續投資我們非常興奮的軟體業務。

So all the things that we've told you over the years that we're investing in to grow. It's just a matter of continuing to do that. And frankly, we still feel taking the SmartCover piece aside, our ability to grow at a rate faster than our investment in SEA, is still -- that still is impact.

所以，這些年來我們一直告訴你們，我們正在投資實現成長的所有事情。這只是繼續這樣做的問題。坦白說，我們仍然覺得，除了 SmartCover 部分之外，我們的成長速度仍然快於我們在東南亞的投資，這仍然具有影響力。

I think that's the key there is that there's nothing unique about the rate -- there's nothing unique about the rate of investment in this quarter. Is anything different than what we've been doing for the last four or five years in terms of our primary cash capital allocation priority of organic investment in the business. It's just the way I think it's sequencing on a year-over-year basis and in concert with those two unique items that you mentioned to start your question.

我認為關鍵在於，本季的投資率並沒有什麼獨特之處。就我們主要的現金資本配置重點（即業務的有機投資）而言，這與我們過去四、五年來的做法有什麼不同嗎？我認為，這只是按年復一年的順序排列的，並且與您在開始提問時提到的兩個獨特項目相一致。

Scott Graham, Seaport Research Partners.

斯科特·格雷厄姆，海港研究合作夥伴。

Yes. I have a similar question to Nathan. I just want to maybe come at it a little bit differently. You were -- I thought it pretty clear in your bullet points here on the SEA that the $1.6 million stays but the $1 million of variable deferred comp is unique to the quarter. So am I to infer that, that means that, that goes away next quarter?

是的。我和 Nathan 有類似的問題。我只是想以稍微不同的方式來看待它。您是 - 我認為您在 SEA 上的要點已經非常清楚了，160 萬美元保持不變，但 100 萬美元的可變遞延薪酬是本季度獨有的。那麼我是否可以推斷，這意味著下個季度這種情況就會消失？

Not in its entirety, but when you experience a quarter where the stock price goes up over $50 from beginning to end and you have liabilities associated that track that there's going to be an oversized impact that is absolutely unique to the second quarter.

不是全部，但是當你經歷一個季度，股價從頭到尾上漲超過 50 美元，並且你還有相關的負債，那麼就會產生巨大的影響，這絕對是第二季度獨有的。

Understood. Got it, that's clear. Thank you. But one other question though around this, Bob. You also, I think, indicated that if you strip those out, there was a $3 million core increase. Now if my calculations are right here, that $3 million core increase on a year-over-year basis is about the same as your sales number, sales increase in total, which would suggest that maybe there was a little bit -- because you typically get leverage off of that line would suggest maybe a little bit more investment in this quarter, although you just said that was not the case.

明白了。明白了，很清楚。謝謝。但是關於這一點，還有一個問題，鮑伯。我認為，您也表示，如果去掉這些，核心成長將達到 300 萬美元。現在，如果我的計算正確的話，核心銷售額同比增長 300 萬美元與你們的銷售額、總銷售額的增長大致相同，這表明可能有一點點——因為你通常會從這條線上獲得槓桿，這表明本季度的投資可能會多一點，儘管你剛才說事實並非如此。

So maybe you can connect those dots for me.

所以也許你可以幫我把這些點連結起來。

So I think the simplest way to say this is that we're comparing to a quarter of SEA as a percent of sales at 20.2% which is abnormally low. Stripping out all the noise in the quarter, so in essence, stripping out SmartCover for all intents and purposes, we'd have been at 20.7%. So yes, there is a 50 basis point increase but that is a -- no in any way different than where we've been historically or in recent quarters and is still indicative of our ability to leverage SEA over time, just not quarter to quarter.

所以我認為最簡單的說法就是，我們將東南亞的四分之一銷售額百分比設為 20.2%，這個數字異常低。剔除本季的所有噪音，因此從本質上講，剔除 SmartCover 的所有意圖和目的，我們的比率將達到 20.7%。所以是的，確實增加了 50 個基點，但這與我們過去或最近幾個季度的情況沒有任何不同，並且仍然表明我們有能力隨著時間的推移利用 SEA，只是不是逐季度增加。

Yeah. I mean we (inaudible) have done --

是的。我的意思是我們（聽不清楚）已經做了--

Thank you for that clarity.

感謝您的澄清。

Yeah.

是的。

Thank you for that clarity. Okay. So then let me just ask this one last question, if I may. The third bullet point says that strategic price increases mitigated certain tariff impacts, which suggests to me that you were maybe price/cost negative in the quarter? And then if that's the correct assumption, should you essentially be price/cost neutral for the rest of the year?

感謝您的澄清。好的。那麼，如果可以的話，我只想問最後一個問題。第三點說，策略性價格上漲減輕了某些關稅的影響，這在我看來意味著本季你們的價格/成本可能為負值？那麼，如果這是正確的假設，那麼在今年剩餘時間內，您是否應該保持價格/成本中立？

So I think you're picking up on the right dynamic. Certainly, our book of business here is -- varies in terms of go to market. Sometimes we're direct, other times, we're through distribution. Sometimes we have PO to PO pricing. Other times, we have long-term contracts, right? The pricing actions implemented in the quarter were implemented in, call it, mid-April. And by default, they won't be effective on everything that we shipped in the quarter.

所以我認為你掌握了正確的動態。當然，我們這裡的業務範圍在進入市場方面有所不同。有時我們是直接的，有時我們是透過分銷。有時我們有採購訂單到採購訂單的定價。其他時候，我們有長期合同，對嗎？本季實施的定價措施是在四月中旬實施的。預設情況下，它們不會對我們本季發貨的所有產品有效。

To the extent tariff cost pressures remained static, which I don't think anyone is saying, those to be the case. You're exactly right in your diagnosis of how we've characterized the second quarter results. I think what remains to be seen and the main priority reason why we're not redrawing a gross margin line or normalized gross margin range in this quarter despite, again, once again, having 41.1% gross margins is the uncertainty associated with tariff costs.

就關稅成本壓力保持不變的程度而言，我認為沒有人會這麼說。您對我們如何描述第二季業績的診斷是完全正確的。我認為還有待觀察，儘管我們的毛利率再次達到 41.1%，但我們本季沒有重新繪製毛利率線或正常化毛利率範圍的主要原因是與關稅成本相關的不確定性。

So the last part of your question is difficult to answer, not knowing exactly what the forthcoming reciprocal tariff impacts are as well as then the tariff around copper, which at this time is just a rumored statement, nothing that's been firmly implemented. And so that's the overall hesitancy to tell you that were going to be cost neutral moving forward because the cost side can change while equally the price side can change as well.

因此，您問題的最後一部分很難回答，因為我們不知道即將實施的互惠關稅的具體影響是什麼，以及銅關稅的影響是什麼，目前這只是一個傳聞，並未得到切實實施。因此，我們總體上不願意告訴您，我們未來將保持成本中性，因為成本方面可能會發生變化，而價格方面同樣也會發生變化。

Andrew Krill, Deutsche Bank.

德意志銀行的安德魯·克里爾。

I wanted to follow up on the comments about the AMI projects in the funnel and it being a little unclear when they might start. So just is this like a change where they've been deferred or pushed out a little bit? Or is this more normal course of business? And can you maybe also just generally comment on like muni activity in general because I think there have been some fears maybe of like a little bit of softness there.

我想跟進有關頻道中的 AMI 項目的評論，但目前還不清楚它們何時會開始。那麼這是否就像是一種被推遲或稍微推遲的變化？還是這是更正常的業務流程？您能否對市政債券活動的整體情況進行一般性評論，因為我認為人們可能擔心那裡會出現一些疲軟的情況。

Yeah. So Andrew, yeah, so as we talk about all the time in this business, it can be uneven from quarter to quarter. So we're just basically letting you know it's not a stack bar where you add one quarter to the next, and it can be the same. So just trying to be transparent here that some projects have rolled off, but we certainly are excited about the projects that we'll be rolling out that our funnel remains as robust as ever. So not a concern for the long term in any way.

是的。安德魯，是的，正如我們一直在談論的，這個行業各個季度的情況可能會不均衡。所以我們只是想讓你知道，它不是一個將一個季度添加到下一個季度的堆疊條，它可以是相同的。因此，我們只是想在這裡透明地表明一些項目已經完成，但我們對即將推出的項目感到非常興奮，我們的管道仍然像以往一樣強勁。因此從長遠來看，這根本不是問題。

It doesn't change our view on high single digits through the cycle. Just pointing out that we still expect to grow next quarter and into the future, but it's just not a stack bar from sequential.

這不會改變我們對整個週期中高個位數的看法。只是指出，我們仍然預計下個季度及未來會成長，但這並不是連續的成長。

In terms of total just market demand, like we always have, we continue to spend a lot of time talking to customers in several pieces of the cycle on who's working with consulting firms on AMI projects that we'll see in three to five years, how we're doing on RFPs that are currently in motion, things that are currently being rolled out orders, backlog. We're every bit as bullish as we've ever been. So customer demand side in terms of people acquiring what new projects are moving forward with projects remains largely unchanged.

就整體市場需求而言，就像我們一直以來所做的那樣，我們繼續花費大量時間與週期中多個部分的客戶交談，了解誰在與諮詢公司合作開展我們將在三到五年內看到的 AMI 項目，我們如何執行目前正在進行的 RFP，目前正在推出的訂單和積壓訂單。我們一如既往地樂觀。因此，就人們獲取新專案以及推進哪些專案而言，客戶需求方面基本上保持不變。

Okay. Great. That's very helpful. And then a quick clarification on the comments about sales being down quarter over quarter into 3Q. Just was that a total sales comment or more core sales. So in other words, like kind of strip out SmartCover and your core dollars are down as well. Thanks.

好的。偉大的。這非常有幫助。然後快速澄清一下關於第三季銷售額環比下降的評論。這只是一個總銷售額評論或更多的核心銷售額。換句話說，如果去掉 SmartCover，您的核心收入也會下降。謝謝。

Yeah, Andrew, that's a core comment.

是的，安德魯，這是核心評論。

Yeah. So the script specifically clarified excluding SmartCover. So essentially, core growth within, obviously, the noncomparability of SmartCover in Q3 '25 not being in Q24.

是的。因此腳本特別澄清了排除 SmartCover。因此，從本質上講，核心成長顯然與 2025 年第三季的 SmartCover 不可比，而 2024 年季度則不然。

Rob Mason, Baird.

羅布梅森，貝爾德。

Ken, Bob, maybe I'll just pick up real quick around SmartCover. So the sales in the quarter looked like they were -- and this is I guess the first full quarter we're seeing a SmartCover. Above the run rate of sales that they reported last calendar year. So I'm just curious, is that reflective of seasonality in the business? Is that kind of underlying organic growth?

肯、鮑勃，也許我很快就會了解 SmartCover。因此本季的銷售情況看起來是這樣的——我想這是我們看到 SmartCover 的第一個完整季度。高於他們去年報告的銷售運行率。所以我很好奇，這是否反映了業務的季節性？這是否是一種潛在的有機成長？

Just how we should be thinking about $10 million contribution this quarter anyway of SmartCover cover sales and how the maybe quarter-to-quarter pattern should look there?

無論如何，我們應該如何看待本季 SmartCover 封面銷售額的 1000 萬美元貢獻以及可能的季度環比模式應該如何？

Yeah. So I'll make a general comment, then I'll keep Bob on the line to jump into. So let me just talk in general about how excited we are about the SmartCover acquisition. So we've added about five months now. I mentioned the great reaction that we had at ACE, a lot of the feedback that we're getting within the market. So getting a lot of positive momentum from both markets and just through the integration that we've had thus far. I think we couldn't be more pleased with the results that we've had thus far and the team that's on board.

是的。因此，我將發表一個總體評論，然後讓鮑勃繼續討論。那麼，讓我來概括地談談我們對 SmartCover 收購的興奮之情。所以我們現在已經增加了大約五個月。我提到了我們在 ACE 獲得的熱烈反響，以及我們在市場上收到的大量回饋。因此，我們從兩個市場以及迄今為止的整合中獲得了很多積極的動力。我認為我們對迄今為止的成果以及我們的團隊感到非常滿意。

So I feel great about the long-term fundamentals there. I think Bob was going to make a point on the sales, so I'll turn it to him. But I just wanted to be clear that everything that we think that we've -- everything that we thought we knew about SmartCover's has proven to be true very early on.

因此，我對那裡的長期基本面感到十分樂觀。我認為鮑伯將對銷售提出一點看法，所以我會把話題轉向他。但我只是想明確一點，我們認為的關於 SmartCover 的一切——我們認為的關於 SmartCover 的一切，很早就被證明是正確的。

Yeah. I mean you hit the main point, which is, of course, I know everybody's immediate concern is quarter to quarter, but our long-term growth outlook for SmartCover is multiyear, if not multi-decade, again, referencing back to the sewer line monitoring portion of this business is virtually greenfield with very low digital adoption in the less than one-half of 1%. So essentially, we believe not only in the revenue growth in the short term, but the long term.

是的。我的意思是，您說到點子上了，當然，我知道大家最關心的是季度增長，但我們對 SmartCover 的長期增長前景是多年的，甚至幾十年的，再次回顧一下下水道監控部分，該業務實際上是一片綠地，數字化採用率非常低，不到 1% 的一半。因此，從本質上講，我們不僅相信短期收入成長，也相信長期收入成長。

I would say this is little to do with seasonality and entirely to do with advancing our positioning as a leader in the market and helping utilities solve primarily four main use cases and what generally tends to be out of sight, out of mind. In fact, underground infrastructure that is blind spots for those utilities. And so yes, we're pleased with the revenue growth thus far, but certainly I have high aspirations as we move forward as well.

我想說的是，這與季節性關係不大，而完全是為了提升我們作為市場領導者的地位，並幫助公用事業公司解決四個主要用例以及通常被忽視的問題。事實上，地下基礎設施就是這些公用設施的盲點。是的，我們對目前的收入成長感到滿意，但我對未來的發展也抱有很高的期望。

And Bob, my quick math around the contribution from SmartCover at the EPS level. I know this is a GAAP number, of course. Would have been in the neighborhood of kind of $0.06, $0.07 dilutive in the quarter year over year?

鮑勃，我對 SmartCover 在 EPS 層面的貢獻進行了快速計算。我當然知道這是一個 GAAP 數字。與去年同期相比，本季的稀釋利潤大概在 0.06 美元、0.07 美元左右？

Yeah, you're not too far off. As I'll remind everyone, we said at acquisition, EPS accretive in year one and certainly a path to EPS contributions shortly thereafter primarily in year two. So as you can imagine, a lot of that is about market adoption and the great sales opportunities and sales growth that we mentioned, while also leveraging what at the current time is an above-line average SEA business. But that we think, over time, provides well above line average incrementals, both through the combination of software attachment rate and then leveraging the cost base.

是的，你離得併不遠。我要提醒大家的是，我們在收購時說過，每股盈餘在第一年就會增加，並且肯定會在第二年左右實現每股盈餘的貢獻。因此，你可以想像，這在很大程度上與市場採用以及我們提到的巨大銷售機會和銷售成長有關，同時也利用了目前高於平均水平的 SEA 業務。但我們認為，隨著時間的推移，透過結合軟體附加率並利用成本基礎，可以提供遠高於平均水平的增量。

Yeah. If I could sneak in one more real quick. Just again, we'll have to see how the tariff around copper ultimately play out. But if you think that there could be some added cost to copper and that ultimately flows through to scrap brass. Do you think that could have any influence on the adoption rate between mechanical and solid-state meters? I mean, does the pricing differential that exists today, does that narrow? Does it make the value proposition for solid-state stronger relatively?

是的。如果我能再偷偷溜進去一次就好了。再次強調，我們必須看看銅關稅最終將如何發揮作用。但如果您認為銅可能會增加一些成本，而這些成本最終會流向廢黃銅。您認為這會對機械電錶和固態電錶的採用率產生影響嗎？我的意思是，目前存在的價格差異是否縮小了？這是否會使固態的價值主張相對更強？

Well, yeah. So the first thing I'd remind everyone, Rob, and I know you know this, is we have a great ultrasonic line. So even if that were to happen, we think that wouldn't -- that certainly would not be a negative event. We just bought people up from mechanical to ultrasonic within our portfolio. Secondly, people -- I know there's this myth about mechanical meters.

嗯，是的。因此，我要提醒大家的第一件事是，羅布，我知道你知道這一點，我們有一條很棒的超音波生產線。因此，即使發生這種情況，我們認為也不會——這肯定不會是一個負面事件。我們剛剛從我們的投資組合中引進了機械行業到超音波行業的人才。其次，各位－我知道關於機械儀表有一個誤解。

And clearly, we fully understand a mechanical meter could be smart, too, with the communications and software. And there are tangible reasons why a lot of utilities still want to buy mechanical meter. So along the way, we feel that we have a strong ability to continue to mitigate the cost issues and continue to sell a lot of mechanical meters. And if someone wants to walk up that ultrasonic, we're happy to help them do that too.

顯然，我們完全理解，透過通訊和軟體，機械儀表也可以變得智慧。並且，許多公用事業公司仍然希望購買機械電錶，這有實際的理由。因此一路走來，我們感覺我們有強大的能力繼續緩解成本問題，並繼續銷售大量機械電錶。如果有人想使用超音波，我們也很樂意幫助他們。

Jeffrey Reive, RBC.

傑弗裡·里夫（Jeffrey Reive），加拿大皇家銀行。

You mentioned you're progressing as expected on SmartCover integration. Could you remind us the cost synergy opportunity, where you are today and capturing it? And maybe how quickly you can expect to realize the remaining upside? And is this mostly an SEA cost-out opportunity?

您提到 SmartCover 整合的進展如預期。您能否提醒我們成本協同機會，您目前處於什麼位置以及如何抓住它？您預計多快能夠實現剩餘的上升空間？這主要是 SEA 成本削減機會嗎？

So I don't -- I'm looking above. I don't believe we ever sized the cost-out opportunity publicly.

所以我不知道——我正在看上面。我認為我們從未公開評估過成本削減機會。

Yeah. So I think let me just clarify. So certainly, when we talk about the most dramatic and impactful synergies of the SmartCover acquisition, it is all about commercial synergies, accelerating what was already great stand-alone organic revenue growth by advancing the connectivity of the technology to our existing installed base, whether that's direct at customers or through distribution.

是的。所以我想讓我澄清一下。因此，當我們談論 SmartCover 收購最顯著、最具影響力的協同效應時，當然是指商業協同效應，透過加強技術與我們現有安裝基礎的連接性（無論是直接面向客戶還是透過分銷），加速已經很棒的獨立有機收入成長。

So a number one priority from a synergy's perspective is commercial synergies. As it relates to cost, the comment I made earlier was about leveraging an existing SEA cost base. So prior to Badger's ownership, SmartCover was private equity owned, and they were in basically revenue growth mode. They invested heavily in advancing the technology and software, having the right feet on the street for sales. And so they carried a higher level of SEA coming into our acquisition.

因此，從綜效的角度來看，首要任務是商業綜效。至於成本，我之前的評論是關於利用現有的 SEA 成本基礎。因此，在被 Badger 收購之前，SmartCover 為私募股權所有，基本上處於收入成長模式。他們投入大量資金改進技術和軟體，在街頭銷售方面擁有合適的立足點。因此，他們在我們收購時採取了更高水準的 SEA 策略。

We're not saying we're reducing that. We're saying we're able to lever that as the incremental sales growth that we bring to the table through our great access to market and long-tenured customer relationships occur.

我們並不是說我們要減少這一點。我們說，我們能夠利用這一點，因為我們透過良好的市場准入和長期的客戶關係帶來了增量銷售成長。

There are certain aspects of cost synergies when you start to look at the product side, meaning the product that SmartCover sells for sewer line monitoring, has PCBAs and has batteries in it and are competents that we're familiar with buying. And whereas we buy hundreds of thousands, if not millions of those parts and components, SmartCover in history has only sold smaller amounts. And we believe we can leverage certain of those components through our supply chain and otherwise, but that is absolutely secondary to the primary synergy, which is commercial synergies. And so a big part of taking this from EPS accretive in year one to EPS accretive in years two, three and beyond is all about the top line revenue growth and then not having to invest in SEA at a rate commensurate with that great high organic above-line average sales growth.

當你開始關注產品方面時，你會發現存在某些成本協同效應，這意味著 SmartCover 銷售的用於下水道管線監控的產品具有 PCBA 和電池，並且是我們熟悉購買的產品。儘管我們每年都會購買數十萬甚至數百萬個此類零件，但 SmartCover 歷史上的銷量卻相對較小。我們相信，我們可以透過我們的供應鏈和其他方式利用其中的某些組件，但這絕對是主要協同效應，即商業協同效應的次要因素。因此，從第一年的 EPS 成長到第二年、第三年及以後的 EPS 成長，很大程度上取決於營收成長，而不必以與高有機平均銷售額成長率相稱的速度在東南亞進行投資。

Got it. Thank you. And maybe just switching gears. There has been some discussions about potential cuts to the EPA budget. Do you have a sense of how that could impact demand for metering? And maybe at a high level, how would you break down customer project funding between just muni budgets and federal support like state revolving funds?

知道了。謝謝。或許只是換個方式。關於削減環保署預算的問題已經有一些討論。您是否知道這會對計量需求產生什麼影響？也許從高層次來看，您如何將客戶專案資金在市政預算和聯邦支持（如州循環基金）之間進行劃分？

Yeah. So Jeffrey, there's a lot of ways that utilities have to fund their projects. And remembering, again, as I said in the script, that the meter and AMI is effectively the cash register to the utility. So it remains a very high priority for them regardless of whatever funding may or may not be available. So of course, there are state revolving funds, which maybe reduce some of the new build, but they still exist in the [WIPIA] local cost interest loans are still out there and very supported by the government -- by the federal government.

是的。傑弗裡，公用事業公司有很多方法可以為其項目提供資金。再次記住，正如我在腳本中所說的那樣，電錶和 AMI 實際上是公用事業的收銀機。因此，無論是否有資金可用，這仍然是他們的首要任務。當然，有州循環基金，這可能會減少一些新建項目，但它們仍然存在於 [WIPIA] 地方成本利息貸款中，並且受到政府 - 聯邦政府的大力支持。

And then you've got utilities have the ability to raise rates. They have the ability to issue municipal bonds. There's a myriad of ways that the funding happens, and this is where our direct sales model gives us an opportunity to talk directly with utilities on how they're viewing their upcoming plans.

然後你就擁有了公用事業提高費率的能力。他們有能力發行市政債券。融資的方式多種多樣，而我們的直銷模式讓我們有機會直接與公用事業公司溝通，了解他們如何看待即將實施的計劃。

And as you can imagine, we always do that, but we've done that even more so in the last three months with all the noise around this and continue to remain quite positive on the ability to grow high single digits through the cycle because utilities are still talking about investing and they have the means to do that for where we positioned ourselves in the water industry, which your question isn't wrong for the water industry, but I feel like we're pretty well positioned to not be affected by some of those cuts.

正如您所想像的，我們一直都是這樣做的，但在過去三個月裡，儘管周圍有很多噪音，我們還是做得更多了，並且繼續對在整個週期內實現高個位數增長的能力保持相當樂觀的態度，因為公用事業公司仍在談論投資，而且他們有能力做到這一點，就我們在水務行業的定位而言，您的問題對於水務行業來說並沒有錯，但我覺得我們不會受到相當大的位置

(Operator Instructions) We have no further questions in the queue. So I'll hand back over to you Barbara for any closing comments.

（操作員指示）我們沒有其他問題了。因此我將把時間交還給芭芭拉，請她做最後的總結發言。

Thank you, operator, and thank you all for joining our call today. For your planning purposes, our third quarter 2025 call is tentatively scheduled for October 21, and I'll be around all day to take any follow-up questions you may have. Thanks, and have a great day.

謝謝接線員，也謝謝大家今天參加我們的電話會議。為了您的計劃目的，我們的 2025 年第三季電話會議暫定於 10 月 21 日舉行，我將全天解答您可能遇到的任何後續問題。謝謝，祝您有愉快的一天。

This concludes our call. Thank you very much for joining. You may now disconnect your lines.

我們的通話到此結束。非常感謝您的加入。現在您可以斷開線路了。