Badger Meter Inc. (NYSE:BMI) Q1 2018 Earnings Conference Call - Final Transcript

Apr 18, 2018 • 11:00 am ET

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Badger Meter Inc. (NYSE:BMI) Q1 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And our first question will come from the line of Nathan Jones with Stifel. Your line is now open.

Analyst
Nathan Jones

Good morning, everyone.

Executive
Richard Johnson

Good morning.

Analyst
Nathan Jones

Let's start on with some of the margin pressure there. A number of items that you guys called out that impacted gross margins in the quarter from higher brass cost, closing the facility in Scottsdale, lower volume. Is there any way you can parse out in a little bit more detail what the impact of each of those main buckets was on the margins?

Executive
Richard Johnson

Well, this is Rick. The margins were down about 300 basis points. And really, this is a rough cut, and this is how we're looking at it. Copper is probably about 100 of those basis points downward. The Scottsdale closure was about another 100 basis points. The impact of the lower volumes on our capacity utilization was probably a couple of 100 basis points. So that's about 400. And then offsetting that somewhat were the price increases coming back by about 100 basis points. That's just -- that's the rough cut on the margin. There's probably a 1,000 little things in there also, but those are the main ones that jump out.

Analyst
Nathan Jones

No, I think that's very helpful. Could you then comment on -- you talked about realizing about 100 basis points of price there, but also that your rates in January 1, you still got backlog to ship from December that those prices were in at. Now that we're probably going to get a full quarter and a second quarter of realizing those price increases, does that 100 go 200 basis points? Does it go to 300 basis points?

Executive
Richard Meeusen

This is Rich. I don't think it reaches 300, but it does go closer to the 200 mark. I'm hoping that we're going to pick up about 200 basis points when everything gets fully integrated through our order log.

Analyst
Nathan Jones

Does that show up in 2Q? Or does it take until 3Q to hit the full run rate?

Executive
Richard Johnson

More of it will show up in Q2. The full impact will be in Q3. But to be honest with you, as you start the second quarter, a lot of what's ordered for the second quarter came in the first quarter under the new prices. Yes, there's some lagging business yet from longer-term orders that came in last year, I just don't have it quantified right now.

Executive
Richard Meeusen

But we don't do any contracts anymore that go more than a year without the price escalators in them. So really, by the end of the year, everything's in there, but I would say the vast majority of it is in there by the end of the second quarter.

Analyst
Nathan Jones

Okay. That helps a lot. I'll hop back in the queue.

Operator
Operator

Thank you. And our next question will come from the line of Richard Eastman with RWB. Your line is now open.

Analyst
Richard Eastman

Yes. Good morning.

Executive
Richard Meeusen

Good morning

Analyst
Richard Eastman

Just a couple of things I wanted to run by you.