Badger Meter (BMI): Building a Data-Driven Water Infrastructure Platform

Overview

Badger Meter (BMI), founded in 1905 in Milwaukee, Wisconsin, acts as one of the leading

providers of flow measurement and water management solutions. They focus on providing

products that control water flow to help customers optimize operations, reduce water loss, and

improve efficiency.

They have a business model which allows for the integration of hardware, software and services

to give a holistic service deck. BMI addresses the needs of municipal water utilities, emphasizing

innovative, data-driven solutions. BMI has two main segments: Utility Water and Flow Instrumentation.

• Utility Water has accounted for most sales in recent years, contributing 88% of sales in

2024, serving municipal water utilities.

• The Flow Instrumentation segment serves more commercial and industrial roles, through

HVAC, oil & gas, food & beverage, and more.

Products and Technology

They offer the BlueEdge suite, which is a customizable platform that integrates measurement

hardware, communications technology, data analytics software, and ongoing support services.

This results in a mix of traditional meters and advanced ultrasonic meters, providing greater

accuracy and longer lifespans, driving a long-term replacement cycle for aging infrastructure.

A key component of this system is the ORION Cellular AMI technology. This allows BMI to

leverage public cellular networks, removing the high capital expenditures and maintenance costs

associated with building and managing dedicated radio infrastructure, thereby accelerating

deployment and adoption.

Business Model

Badger Meter focuses on a “land and expand” approach, combining upfront hardware sales with

high-margin, recurring software-as-a-service (SaaS) revenue to drive substantial customer

acquisition and retention. They offer integrated solutions that provide an entire setup in their

“smart” meter, allowing it to become part of a larger network by adding a communication device

via their ORION Cellular radio endpoints. These endpoints use existing cellular networks to

transmit data to the utility’s system. One of their key growth areas is SaaS.

• Currently, they use BEACON Advanced Metering Analytics (AMA), a cloud-based

solution for utilities to monitor meter readings, reporting, and customer water usage in

real time, which is essential not only for billing but also for leak detection.

• They also have a system called RADAR that collects and analyzes water network data

from various sensors.

Though the SaaS component is much smaller than most when it comes to total sales (around 7%

in 2024), it has high margins (60-70% gross margins vs. 40% gross margins for the rest) and is

highly resilient, providing a stable income stream. As such, capital expenditure is relatively low,

focused on particular investments in manufacturing automation and capacity. This model

contributes to robust Free Cash Flow generation, supporting the strategy of internal investment,

annual dividend growth, and targeted M&A.

A significant competitive advantage is its direct sales force and owned distribution network,

which handles about 65% of sales. This allows for the retention of customer relationships with

over 50,000 utilities across the U.S.

Competitive Landscape and Retention

Badger Meter’s primary competitors in the North American smart water market include large,

diversified players such as Xylem, Itron, Inc., and Neptune Technology Group.

Customer retention is extremely high as the replacement cycle of municipal infrastructure is

15-20 years. Once a utility installs the comprehensive BlueEdge system, the costs associated

with replacing meters make switching providers very expensive.

The company drives this growth through Innovation, Acquisitions, and Market Tailwinds.

• Innovation: Badger Meter has a heavy R&D investment, especially in AI-driven analytics

and water-quality sensors.

• Acquisitions: They employ “tuck-in” acquisitions to fill technology gaps, such as

SmartCover Systems for wastewater monitoring, which help expand their product

portfolio and service capabilities.

• Market Tailwinds: They also have favorable trends such as aging water infrastructure,

increasing environmental regulations, and concerns about water scarcity, which drive

demand for Badger Meter’s solutions.

Leadership

BMI has immense leadership experience; on average, its executive team has a tenure of 6.8

years, suggesting a consistent strategic vision and deep understanding of the municipal water

market. Their CEO, Kenneth Bockhorst, has held his position since January 2019, after previously

joining the company in 2017, with a background rooted in global operations management

emphasizing continuous improvement and operational efficiency. Bockhorst’s promotion marked a shift in the company's transition from a hardware manufacturer to an innovative water- solutions provider, with a focus on the data and analytics that underpin its brand. Bockhorst holds the titles of Chairman, President, and Chief Executive Officer, which allows for a streamlined decision-making process by concentrating power in one individual. Their CFO, Robert Wrocklage, was also appointed around the same time as the CEO in 2019, and they share the same fact-based, data-driven management style, which is essential for steering a successful transition to a higher-margin SaaS model.

The leadership’s core focus is driving the BlueEdge platform to be the new future of BMI, integrating flow measurement, communications, and software to deliver comprehensive utility solutions. They view themselves as preserving the company’s long-term legacy of trust and quality while simultaneously driving the innovation required for the future. BMI’s valuation is also strong which has an upside of 30.9% at implied share price $227.50 based on our DCF. Badge meter is an infrastructure water quality measurement company with strong financials as observed with growing revenues, ebitda, and ebitda margins. It is a company in the industrials sector that manages the source to tap process ensuring efficiency in collection, testing, storage, and distribution of clean water. The company was founded in 1905 and has made many strong acquisitions over the years.

Badger Meter’s revenue is anchored across five key sectors: Municipalities, Industrials,

Commercial Enterprises, Agriculture, and Energy. Municipalities account for roughly half of the

total revenue, driven by water and wastewater utilities that depend on BMI’s technology for

accurate measurement and compliance. Industrial clients including manufacturers and food and

beverage companies contribute about 20%. The remainder comes from commercial businesses,

agricultural operations requiring precise water metering, and energy producers with significant

water usage. This diversified customer base ensures stable, recurring demand for BMI’s

solutions, as water monitoring is essential and costly to replace, creating long-term customer

stickiness and predictable growth.

Badger Meter continues to show its growth with strong financials as seen in its increase of Total

sales of $235.7 million, 13% higher than the prior year's $208.4million. Base sales of $224.5 million increased 8% year-over-year. Operating earnings increased 13% year-over-year to $46.1 million, with operating profit margins following the consisten growth by increasing 19.6% versus 19.5% in the priory ear quarter. Base operating earnings of $46.6 million increased 15% year-over-year, with Base operating profit margins of 20.7%. Its EPS increased by 10% to $1.19 from prior year. The cash provided by operations is robust measure of $51.3 million. A strong financial aspect is its 33 year consecutive dividend growth increasing the annual rate by 16%. Continuing on with the BMI avenues for growth we can see a 16% avg growth rate in revenues in the past years with future projections looking consistent and stable rate especially combined with the inorganic growth due to acquisitions they have made in recent past such as smart cover,

ATI, and D-flow. BMI integration with AI is show in 4 paths. For the overview, Digital Twin Network: Real-time virtual replica of distribution systems via sensors. Predictive Analytics: AI forecasts failures

(e.g., pipe breaks) for proactive ops. SaaS Delivery Model: Cloud-based BEACON® service reduces IT burden. NRW Optimization: Algorithms pinpoint leaks and theft using high-frequency data.

BMI’s growth in 2024 and 2025 displays its ability to outperform in one of the most stable

industries. This momentum is fueled by Advanced Metering Infrastructure (AMI), which adds a

SaaS aspect to BMI. AMI enables remote operations, cutting costs and boosting efficiency, yet

only 40% of customers have adopted it, leaving enormous upside. SaaS revenue has already

surged 15.9% in just two years, proving the model works. BMI is doubling down: accelerating

AMI adoption, monetizing data analytics, and enhancing user experience to deepen customer

loyalty. Beyond technology, BMI is targeting international markets and niche segments, creating

multiple growth levers.

On the industry side, regulatory constraints on capital spending remain a challenge. Utilities

can’t replace aging infrastructure as quickly as needed because regulators cap the rate base,

slowing upgrades and adding risk. And any attempt to raise water rates faces political pushback,

regardless of financial necessity. These headwinds are real, but on the other water is non-discretionary and recession-proof. Demand doesn’t drop in downturns, and the Infrastructure Investment and Jobs Act is injecting billions into water projects over the next decade. Add to that BMI’s alignment with public health mandates which bmis work is essential for preventing waterborne disease, and you have a strong social license to operate. Now, company-specific concerns: integrating BMI’s AI-driven platforms with legacy SCADA systems is costly and time-consuming. There’s also a severe talent gap in digital roles, and cybersecurity risk is growing as BMI monetizes water data. But the merits far outweigh these challenges. BMI leads the market in reducing Non-Revenue Water losses by 18% on average, saving clients millions. Its integrated service model combining engineering, operations, and digital under one P&L creates stickiness and efficiency giving significant advantage over competitors. And the pivot to ‘Water Intelligence as a Service’ means high-margin, recurring revenue that’s more resilient than traditional CapEx contracts.

The Bottom line is: while there are integration and talent hurdles, BMI’s structural advantages and digital strategy position it for durable, profitable growth.

Going on with comparables we’ve selected 5 other companies by looking at the competitor list

on the BMI annual report and overall market context such as size and industry which concluded

with xylem, itron, Hubbell, rope technologies, and veralto. As seen with the multiple deviation from the median the price for BMI is more overvalued, however we are seeing market re-adjustment in the months with high selling volume in contrast to its continuous growth in both organic and inorganic subsections combined with its upside of 30% making it an attractive long term investment.