Badger Meter Inc

We recently initiated a position in Badger Meter (BMI), a pure-play water technology company. Badger holds a leading position in smart water meters and cellular advanced metering infrastructure technology. It sells into an oligopoly market with high switching costs and municipal utility customers that value reliability over price. The stock pulled back sharply after a temporary air pocket in revenue growth tied to project timing, rather than any change in long-term demand. We believe the multidecade replacement cycle for aging water infrastructure, combined with increasing technology adoption, gives Badger a durable growth runway, and the recent weakness provided an attractive entry point.

Badger Meter Inc. is the only pure-play, publicly traded manufacturer of water meters in North America, supporting over 50,000 water utilities. With 85% of its revenue derived from replacement demand, the company benefits from stable unit volume growth and positive mix benefits from its advanced metering infrastructure and software, which carry higher margins. Despite slowing industry growth, we expect operating performance to improve as Badger Meter executes against its strong pipeline of opportunities. The company has a long history of profitable growth, a net cash balance sheet, and a management team focused on FCF conversion and returns on invested capital, making it a compelling investment at a meaningful discount to our estimate of fair value.

Badger Meter is the only pure-play, publicly traded manufacturer of water meters in North America, supporting over 50,000 water utilities. With 85% of its revenue derived from replacement demand, the company benefits from stable unit volume growth and positive mix benefits from its advanced metering infrastructure and software, which carry higher margins. Despite slowing industry growth, we expect operating performance to improve as Badger Meter executes against its strong pipeline of opportunities. The company has a long history of profitable growth, a net cash balance sheet, and a management team focused on FCF conversion and returns on invested capital, making it a compelling investment at a meaningful discount to our estimate of fair value.

Badger Meter Inc. is the only pure-play, publicly traded manufacturer of water meters in North America, supporting over 50,000 water utilities. With 85% of its revenue derived from replacement demand, the company benefits from stable unit volume growth and positive mix benefits from its advanced metering infrastructure and software offerings. Despite industry growth challenges, we expect Badger Meter's operating performance to improve as it executes on a strong pipeline of opportunities. The company has a long history of profitable growth, a net cash balance sheet, and a management team focused on free cash flow conversion and returns on invested capital, making it a compelling investment at a meaningful discount to our estimate of fair value.

Badger Meter is the only pure-play, publicly traded manufacturer of water meters in North America, supporting over 50,000 water utilities. With 85% of its revenue from replacement demand, the company benefits from stable unit volume growth and positive mix benefits from its advanced metering infrastructure. Despite industry growth slowing, we expect operating performance to improve as Badger Meter executes on its strong pipeline of opportunities. The company has a long history of profitable growth, a net cash balance sheet, and a management team focused on FCF conversion and returns on invested capital. We are pleased to be owners today at a meaningful discount to our estimate of fair value.