ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Long Term Business Trends
Significant infrastructure investment needs, aging workforce, increasing regulations and a focus on climate change and sustainability are driving companies and utilities to better manage critical resources like water across the globe. Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to automate manufacturing. Other customers employ measurement to comply with government mandates and laws including those associated with process and discharge water quality monitoring. The Company provides flow measurement technology critical to providing baseline usage data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where it is most viable. With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and identified areas for process improvements.
Increasingly, customers in the utility water market are interested in more frequent and diverse data collection and the use of water metering, pressure and quality analytics to evaluate water distribution activity. Specifically, AMI technology enables water utilities to capture readings from each meter at more frequent and variable intervals. There are more than 50,000 water utilities in the United States and the Company estimates that approximately 40% of their respective connections have converted to an AMI radio solution. The Company believes it is well positioned to meet the continuing conversion trends to AMI with its comprehensive radio and software solutions.
In addition, certain water utilities are converting from mechanical to static meters. Ultrasonic water metering maintains a high level of measurement accuracy over the life of the meter, reducing a utility’s non-revenue water. The Company has over a decade of proven reliability in the market with its ultrasonic meters.
As noted above, customers are increasingly looking for more frequent and diverse data to holistically manage their water networks. As a leading provider of water quality, pressure management, sewer line and lift station monitoring solutions, we are able to meet these needs and enhance the scope of actionable data for customers to measure, conserve and protect water.
Our BlueEdge tailorable smart water solutions provide actionable information through data analytics derived from an interconnected and interoperable network of sensors and devices that enable people and organizations to efficiently use and conserve water. Badger Meter is well positioned to benefit from the adoption of smart water solutions. Our strong relationships with telecommunication providers such as AT&T and Verizon (among others) allows us to stay abreast of emerging cellular technology changes to provide the premier infrastructure-free AMI solution.
Revenue and Product Mix
As the water industry continues to evolve, the Company has been at the forefront of innovation across measurement hardware (metering, water quality, pressure sensors, sewer monitoring, etc.) and communication and software technologies in order to meet its customers’ increasing expectations for accurate and actionable data and insights. As technologies such as ORION Cellular and BEACON digital solutions have become more widely adopted, the Company’s revenue from SaaS has increased significantly and is margin accretive.
The Company also seeks opportunities for additional revenue enhancement. For instance, the Company has made inroads into select regional markets outside the U.S. such as the Middle East, U.K. and others with our BlueEdge offering. The Company sometimes oversees and supervises field installation of its products and provides training and other services for certain customers. Strategic mergers and acquisitions are another avenue for profitable sales growth.
Current Business Trends - Tariffs
In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. In many cases, these tariffs resulted in reciprocal tariffs and other actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. We evaluate the impact of global tariffs and trade restrictions on our business and operations and leverage our manufacturing footprint, when possible, through the use of the USMCA trade agreement to minimize impact. Additionally, we have enacted certain price increases to offset tariff costs that we are not able to mitigate. As the global economic environment, trade and tariff negotiations continue to evolve, the Company will continue to evaluate the exposure and work to mitigate these costs.
Acquisitions
Effective January 30, 2025, the Company acquired 100% of the outstanding stock of Hadronex, Inc, a Delaware Corporation d/b/a SmartCover® Systems (SmartCover), headquartered in Escondido, California. SmartCover is a provider of sewer line and lift station monitoring solutions.
The total purchase consideration for SmartCover, net of cash acquired, was $184.0 million, following the net working capital adjustment of $0.9 million. The Company's allocation of the purchase price at December 31, 2025 included $6.6 million of receivables, $4.5 million of inventories, $4.8 million of other assets, $59.6 million of developed technology intangible assets, $26.0 million of other intangible assets and $118.3 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily developed technology, customer relationships and trademarks with estimated average useful lives of 12 to 20 years. The Company also assumed $1.6 million of payables, $18.3 million of net deferred income tax liabilities, $12.2 million of deferred revenue and $3.7 million of other liabilities as part of the acquisition. The allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition.
As of December 31, 2025, the Company had completed its analysis for estimating the fair value of the net assets acquired. Revenue associated with SmartCover for the eleven months ended December 31, 2025 was $39.7 million. SmartCover is reported within the utility water product line and the Company will continue to operate under a single segment. This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial Statements.
Effective January 1, 2024, the Company acquired select remote water monitoring hardware and software, inclusive of the Telog® product line and Unity Remote Monitoring software as a service (the Telog/Unity Assets). The total purchase consideration for the Telog/Unity Assets was $3.0 million in cash.
As of December 31, 2024, the Company had completed its analysis for estimating the fair value of the assets acquired with no additional adjustments. This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Net Sales
Net sales in 2025 increased $90.1 million, or 10.9%, to $916.7 million from $826.6 million in 2024. Sales into the utility water market were $816.1 million, an increase of 12.5% over the prior year’s $725.5 million. The increase in utility water sales reflected the ongoing customer adoption of the Company's broad suite of digital smart water solutions, including ultrasonic meters, ORION Cellular endpoints, water quality products and BEACON SaaS, as well as revenue associated with the acquisition of SmartCover of $39.7 million. Sales of products into the global flow instrumentation end markets were $100.6 million, a decrease of 0.5% from the prior year’s $101.1 million due to modest growth across the water-focused end markets, offset by declines in de-emphasized applications.
Net sales in 2024 increased $123.0 million, or 17.5%, to $826.6 million from $703.6 million in 2023. Sales into the utility water market were $725.5 million, an increase of 20.3% over the prior year’s $603.1 million. The increase in utility water sales reflected strong growth across the Company's suite of smart water solutions, led by cellular AMI adoption, including mechanical and ultrasonic meters, ORION Cellular endpoints, and BEACON SaaS. Sales of products into the global flow instrumentation end markets were $101.1 million, 0.6% higher than the prior year’s $100.5 million due to modest growth across the water-focused end markets, offset by slight declines in de-emphasized general industrial markets.
Operating Earnings
Operating earnings in 2025 were $183.4 million, or 20.0% of sales, compared to $157.9 million, or 19.1% of sales, in 2024. Gross margin dollars increased $52.9 million due to higher net sales, with gross margin as a percent of sales increasing from 39.8% in 2024 to 41.7% in 2025. The gross margin improvement was due to favorable product mix, driven by sales growth in ultrasonic meters, ORION Cellular radios, water quality products and SmartCover. Selling, engineering and administration (SEA) expenses were $198.6 million or 21.7% of sales in 2025 compared to $171.2 million or 20.7% of sales in the prior year. The increase in SEA expenses year-over-year included $19.4 million for SmartCover, including $5.8 million of acquired intangible asset amortization. Excluding the impact of SmartCover, SEA increased $8.0 million from higher personnel costs, including salaries and incentive compensation.
Operating earnings in 2024 were $157.9 million, or 19.1% of sales, compared to $118.0 million, or 16.8% of sales, in 2023. Gross margin dollars increased $52.7 million due to higher net sales, with gross margin as a percent of sales increasing from 39.3% in 2023 to 39.8% in 2024. The gross margin improvement was due to higher volumes and favorable product and customer sales mix. SEA expenses were $171.2 million or 20.7% of sales in 2024 compared to $158.4 million or 22.5% of sales in the prior year. The increase in SEA expenses year-over-year was due to higher personnel costs, including headcount, salaries and incentive compensation, as well as professional fees associated with acquisition-related activities.
Interest Income, Net
Net interest income was $5.1 million in 2025, $8.6 million in 2024 and $4.0 million in 2023. The decrease in interest income in 2025 was due to the deployment of $184.0 million of cash associated with the SmartCover acquisition. The increase in interest income in 2024 and 2023 was due to increase in cash balances.
Income Taxes
There were no significant variations in the provision for income taxes as a percentage of earnings before income taxes which were 24.9%, 25.0% and 24.1% for 2025, 2024 and 2023, respectively.
Earnings and Diluted Earnings per Share
For 2025, the increase in operating earnings resulted in net earnings of $141.6 million compared to $124.9 million in 2024. On a diluted basis, earnings per share were $4.79 in 2025 compared to $4.23 in 2024.
For 2024, the increase in operating earnings resulted in net earnings of $124.9 million compared to $92.6 million in 2023. On a diluted basis, earnings per share were $4.23 in 2024 compared to $3.14 in 2023.
LIQUIDITY AND CAPITAL RESOURCES
The main sources of liquidity for the Company are cash from operations and borrowing capacity. In addition, depending on market conditions, the Company may access the capital markets to strengthen its capital position and to provide additional liquidity for general corporate purposes.
Primary Working Capital
We use primary working capital (PWC) as a percentage of sales as a key metric for working capital efficiency. We define this metric as the sum of receivables and inventories less payables, divided by the last 12 months net sales. The following table shows the components of our PWC:
December 31, 2025
December 31, 2024
PWC%
PWC%
(In thousands)
Receivables
Inventories
Payables
Primary Working Capital
Overall, PWC increased $19.9 million compared to the previous year-end. Receivables at December 31, 2025 were $112.4 million compared to $84.3 million at the end of 2024, an increase of $28.0 million due to the addition of SmartCover and timing of shipments within the fourth quarter. The Company believes its receivables balance is fully collectible. Inventories at December 31, 2025 were $151.9 million compared to $143.4 million at the end of 2024. Inventory increased $8.5 million, due to increased commodity costs, timing of inventory receipts and the acquisition of SmartCover. Payables at December 31, 2025 were $72.3 million
compared to $55.7 million at the end of 2024. The increase was due to the increased inventory balance and the timing of payments relative to year end.
Cash Provided by Operations
Cash provided by operations in 2025 was $183.7 million compared to $155.0 million in 2024. The increase from 2024 was driven primarily by increased operating earnings. Operating cash flow and cash on hand were more than adequate to fund acquisitions of $184.0 million, capital expenditures of $14.0 million and dividends of $43.5 million in 2025.
Cash provided by operations in 2024 was $155.0 million compared to $110.1 million in 2023. The increase from 2023 was driven primarily by increased operating earnings and working capital management. Operating cash flow was more than adequate to fund acquisitions of $3.0 million, capital expenditures of $12.8 million and dividends of $35.8 million in 2024.
Capital expenditures were $14.0 million, $12.8 million and $12.0 million in fiscal 2025, 2024 and 2023, respectively. Capital expenditures for fiscal 2026 are expected to be in the $15.0-19.0 million range, but could vary depending on timing of projects, growth opportunities and the amount of assets purchased.
The Company had no borrowings as of the end of 2025 or 2024. At the end of 2025, the Company was in a net cash position of $226.0 million.
The Company’s financial condition remains strong. On July 8, 2021, the Company entered into a new credit agreement, with a maturity date of July 8, 2026. The credit agreement includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the Company’s financial flexibility including an increase feature, acquisition holiday and favorable financial covenants. The Company was in compliance with all covenants as of December 31, 2025. The Company believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company had $154.7 million of unused credit lines available at December 31, 2025.
CONTRACTUAL OBLIGATIONS
The Company's significant contractual obligations as of December 31, 2025 are discussed in Note 12 “Leases” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2025 Annual Report on Form 10-K. There are no material undisclosed guarantees. As of December 31, 2025, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant and equipment, which generally have terms of less than 90 days. The Company also has long-term obligations related to its postretirement plans which are discussed in detail in Note 7 “Employee Benefit Plans” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2025 Annual Report on Form 10-K. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.2 million in 2026 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
We believe the following accounting estimates are the most critical to the understanding of our financial statements as they could have the most significant effect on our reported results and require subjective or complex judgments by management. Accounting principles generally accepted in the United States require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. These estimates are based on our best judgment about current and future conditions, but actual results could differ from those estimates. Refer to Note 1 "Basis of Presentation and Accounting Policies" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2025 Annual Report on Form 10-K for information regarding our significant accounting policies.
Warranty and After-Sale Costs
Our products carry warranties that generally range from one to twenty years and are based on terms that are generally accepted in the market. We provide for the estimated cost of product warranty at the time of sale. The product warranty provision is estimated based upon warranty loss experience using actual historical failure rates and estimated costs of product replacement. The variables used in the calculation of the provision are reviewed throughout the year. At times, warranty issues may arise which are beyond the scope of our historical experience. We provide for any such warranty issues as they become known and estimable. The introduction of additional technology, such as our ORION cellular radios, electronic meters and registration, have generally caused our annual warranty claims rates to increase over time. While our warranty costs have historically been within calculated estimates, it
is possible that future warranty costs could differ significantly from those estimates. At December 31, 2025 and 2024, our reserve for product warranties was $21.6 million and $16.7 million, respectively.
Income Taxes
The Company operates in numerous taxing jurisdictions and is subject to regular examinations by U.S. federal, state and non-U.S. taxing authorities. Our income tax provision for income taxes is based on the interpretation of applicable taxing laws in the jurisdictions in which we conduct business. Due to the ambiguity of tax laws within each jurisdiction, the judgment involved in evaluating and estimating certain tax positions, and how these estimates impact other taxing considerations, it is possible that our income tax positions could differ from actual payments made or benefits received. The Company annually reviews all uncertain tax positions, which represent tax positions taken that are subject to varied interpretations of applicable tax law. The gross accrued liability for unrecognized tax benefits was $1.3 million and $1.2 million, as of December 31, 2025 and 2024, respectively. Interest is accrued on all unrecognized tax benefits and recorded as interest expense and penalties are recorded as operating expenses in the Consolidated Statements of Operations. Accrued interest was approximately $0.2 million and $0.1 million as of December 31, 2025 and 2024, respectively, and there were no penalties accrued in either year.
The Company recognizes deferred tax assets and liabilities for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The Company establishes valuation allowances against certain deferred tax assets that are not likely to be realized. The Company recorded valuation allowances of $3.2 million and $3.3 million as of December 31, 2025 and 2024, respectively. The valuation allowance relates primarily to foreign net operating loss carryforwards.
Goodwill and Intangible Assets
Goodwill and intangible assets arise through business acquisitions. The allocation of purchase price includes the use of estimates in determining future cash flows, the allocation of future cash flows to identifiable intangibles, and their estimated useful lives. If actual results differ from those estimates, it could result in future impairment. The Company assesses goodwill and intangible assets for impairment on an annual basis, or more frequently if an event indicates potential impairment. Potential impairment is first assessed using a qualitative assessment to determine if the fair value is more likely than not less than its carrying value. If it is estimated through the qualitative analysis that fair value is less than carrying value, a quantitative assessment is completed. This assessment uses estimates, including the estimate of future useful life, the amount and timing of future cash flows, and the fair value of future operations. Any impairment charges are recorded in the period the impairment is determined. Multiple factors can have an impact on future cash flows of a reporting unit, as such, it is possible that our estimates in evaluating impairment could differ from future results.
We completed our impairment analysis for goodwill and intangible assets in the fourth quarter for the year ended December 31, 2025. No impairment was noted and no adjustments were recorded to goodwill or intangible assets as a result of this analysis.
Business Combinations
Estimating the fair value of acquired long-lived assets and liabilities as part of a business combination requires the use of significant judgment and estimates. These estimates are often calculated using valuation models which leverage historical results and forecast assumptions, which are driven by business and market expectations. Forecasted results, including future revenue growth and profit margins, are scrutinized for reasonableness based on known inputs at the time of model creation, but actual results could vary significantly from these estimates. The Company utilizes third party valuation specialists for certain business combinations to assist in the valuation of these long-lived assets and liabilities, with significant focus on purchase price allocation between acquired intangible assets, such as developed technology, customer lists and tradenames. The valuation of identifiable intangible assets utilizes these historical and forecasted results, and utilizes complex valuation calculations, including the excess earnings and relief from royalty methods, and other judgmental assumptions, such as customer attrition and discount rates.
An initial purchase price allocation is calculated at the time of acquisition based on data obtained via due diligence and other sources to determine the fair value of acquired assets and assumed liabilities. These estimates are refined as additional information is obtained over the twelve months following acquisition, including asset appraisals and valuation reports, to ensure best estimates are utilized in calculating fair value and proper allocation of the purchase price.
Refer to Note 3 "Acquisitions" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2025 Annual Report on Form 10-K for information regarding our recent business combinations.
OTHER MATTERS
The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2025, 2024 and 2023 were not material.
See the “Special Note Regarding Forward Looking Statements” at the front of this Annual Report on Form 10-K and Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of risks and uncertainties that could impact the Company's financial performance and results of operations.
MARKET RISKS
In the ordinary course of business, the Company is exposed to various market risks. The Company operates in an environment where competition varies from moderate to strong. The Company believes it currently provides the leading technology in water meters and radio systems for water utilities. A number of the Company's competitors in certain markets have greater financial resources. As the global water metering market continues to adopt static metering technology, the number of competitors in the North American market may increase. We believe new static metering market entrants lack brand recognition and product breadth and do not have the appropriate utility sales channels to meaningfully compete in the North American market. In addition, the market's level of acceptance of the Company's newer product offerings, including real-time water quality monitoring, sewer line monitoring and BEACON SaaS, may have a significant effect on the Company's results of operations. As a result of significant research and development activities, the Company enjoys favorable patent positions for several of its products.
The Company's ability to generate operating income and to increase profitability depends somewhat on the general conditions of the United States and foreign economies, including to some extent such things as the length and severity of global economic downturns; the timing and size of governmental programs such as annual federal funding and periodic stimulus fund programs, as well as the impact of government budget cuts or partial shutdowns of governmental operations; international or civil conflicts that affect international trade; the ability of municipal water utility customers to authorize and finance purchases of the Company's products; the Company's ability to obtain financing; housing starts in the United States; and overall industrial activity. In addition, changes in governmental laws and regulations, particularly laws dealing with the content or handling of materials, customs, tariffs or trade practices, may impact the results of operations. These factors are largely beyond the Company's control and depend on the economic condition and regulatory environment of the geographic region of the Company's operations.
The Company relies on single suppliers for certain castings and components in several of its product lines. Although alternate sources of supply exist for these items, the loss of certain suppliers could temporarily disrupt operations in the short term. The Company attempts to mitigate these risks by working closely with key suppliers, purchasing minimal amounts from alternative suppliers and by purchasing business interruption insurance where appropriate.
Raw materials used in the manufacture of the Company's products include purchased castings made of metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel, cast iron and bismuth), plastic resins, glass, microprocessors and other electronic subassemblies, and components. The Company does not hold significant amounts of precious metals. The price and availability of raw materials is influenced by economic and industry conditions, including supply and demand factors that are difficult to anticipate and cannot be controlled by the Company. Commodity risk is managed by keeping abreast of economic conditions and locking in purchase prices for quantities that correspond to the Company's forecasted usage.
The Company's foreign currency risk relates to the sales of products to foreign customers and purchases of material from foreign vendors. The Company believes the effect of a change in foreign currency rates will not have a material adverse effect on the Company's financial position or results of operations, either from a cash flow perspective or on the financial statements as a whole.
The Company typically does not hold or issue derivative instruments and has a policy specifically prohibiting the use of such instruments for trading purposes.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is set forth in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Market Risks” in this 2025 Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTAL DATA
BADGER METER, INC.
Management's Annual Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2025 using the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this assessment, the Company's management believes that as of December 31, 2025 the Company's internal control over financial reporting was effective based on those criteria.
Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the effectiveness of the Company's internal control over financial reporting.
BADGER METER, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
BADGER METER, INC.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Badger Meter, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Badger Meter, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Badger Meter, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 17, 2026, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
February 17, 2026
BADGER METER, INC.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Badger Meter, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Badger Meter, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 17, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.
Warranty and After-Sale Costs Reserve
Description of the Matter
As described in Note 1 to the consolidated financial statements, the Company estimates and records provisions for warranties and other after-sale costs. Warranty provisions are recorded in the period of sale, using historical claims data revised for recent trending and expectations to estimate future warranty costs. After-sale costs represent costs expected to be incurred related to specifically identified product issues as well as activities outside the written warranty policy and are estimated by the Company based on the individual facts and circumstances. The Company’s accrued current and long-term warranty liabilities were $8.5 million and $13.1 million, respectively, as of December 31, 2025, representing its best estimate of the expected warranty and after-sale costs.
Auditing management's estimates for warranty and after-sale costs involved significant auditor judgment because the reserve for warranty and after-sale costs requires the Company to estimate future claims. The calculation to estimate future claims includes a number of inputs and assumptions, the most significant of
which include the number and type of claims, an evaluation of warranty trends, consideration of product developments, and estimates of future costs to replace or repair specifically identified items.
How We Addressed the Matter in Our Audit
We evaluated the design and tested the operating effectiveness of internal controls over the Company's warranty and after-sale costs reserve process, including management's assessment of the assumptions and data underlying the projection of future warranty and after-sale costs.
Our substantive audit procedures included, among others, evaluating the significant assumptions discussed above and the accuracy and completeness of the underlying data used in management's warranty and after-sales costs reserve calculation. We evaluated the historical activity used to develop the lag calculation, including reviewing the data for any developing trends in the claims data, and considered the impact of product developments on the calculation. We assessed the historical accuracy of management's estimates by comparing the warranty and after-sale costs reserve in prior years to the actual claims paid in the subsequent years. We also tested an analysis which utilized historical claim amounts as a percentage of sales and compared the results of this to the Company’s reserve calculation. We evaluated the completeness of the reserve estimate for known warranty claims or product issues based on our review of after-sales costs and through inquiries of operational and executive management and evaluated whether specific product issues were appropriately considered in the determination of the warranty and after-sale costs reserve.
Accounting for Acquisitions – Valuation of Hadronex, Inc. Developed Technology Intangible Asset
Description of the Matter
As discussed in Note 3 to the consolidated financial statements, the Company completed its acquisition of Hadronex, Inc. (SmartCover) for total consideration of $184.0 million, net of cash acquired, resulting in the recording of goodwill and other intangibles, of which $59.6 million was allocated to the developed technology intangible asset. The other intangibles recorded were lesser in significance to the total consideration. The transaction was accounted for using the guidance under ASC 805, Business Combinations .
Auditing the Company's accounting for its acquisition of SmartCover was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of intangible assets, which principally consisted of developed technology. The significant estimation uncertainty was primarily due to the sensitivity of the fair value to underlying assumptions about the future performance of the acquired business. The Company valued the developed technology intangible asset using an income approach; specifically, the multi-period excess earnings model. The significant assumptions used to estimate the value of the developed technology intangible asset are projected revenue, projected EBITA margin, and discount rate. These assumptions are forward-looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company's controls over its accounting for acquisitions. For example, we tested controls over the estimation process supporting the measurement of the developed technology intangible asset, including management’s review of the significant assumptions used in the valuation model.
To test the estimated fair value of the developed technology intangible asset, our audit procedures included, among others, evaluating the Company's valuation methodology (i.e. the excess earnings model), testing the significant assumptions discussed above including the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We compared the significant assumptions to third-party industry projections, market and economic trends, the assumptions used by the Company to value similar assets in other acquisitions, as well as historical performance of the acquired business and other guideline companies within the same industry. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimate. We also performed a sensitivity analysis of the significant assumptions to evaluate the change in the estimated fair value of the developed technology intangible asset resulting from changes in the assumptions.
/s/ Ernst & Young LLP
We have served as Badger Meter, Inc.’s auditor since 1927.
Milwaukee, Wisconsin
February 17, 2026
BADGER METER, INC.
Consolidated Ba lance Sheets
December 31,
(In thousands)
Assets
Current assets:
Cash and cash equivalents
Receivables, net of allowance for doubtful accounts
Inventories:
Finished goods
Work in process
Raw materials
Total inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, at cost
Land and improvements
Building and improvements
Machinery and equipment
Less accumulated depreciation
Net property, plant and equipment
Intangible assets, at cost less accumulated amortization
Other assets
Deferred income taxes
Goodwill
Total assets
Liabilities and Shareholders’ equity
Current liabilities:
Payables
Accrued compensation and employee benefits
Warranty and after-sale costs, current
Other current liabilities
Total current liabilities
Long-term deferred revenue
Deferred income taxes
Accrued non-pension postretirement benefits
Other accrued employee benefits
Warranty and after-sale costs, long-term
Other long-term liabilities
Commitments and contingencies (Note 6)
Total long-term liabilities
Shareholders’ equity:
Common stock, $ 1 par, authorized 80,000,000 shares, issued
37,221,098 shares in 2025 and 2024
Capital in excess of par value
Reinvested earnings
Accumulated other comprehensive income (loss)
Less: Treasury stock, at cost, 7,834,360 shares in 2025 and
7,810,158 shares in 2024
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes.
BADGER METER, INC.
Consolidated Statem ents of Operations
Years ended December 31,
(In thousands except per share amounts)
Net sales
Cost of sales
Gross margin
Selling, engineering and administration
Operating earnings
Interest income, net
Other pension and postretirement (income) costs
Earnings before income taxes
Provision for income taxes
Net earnings
Earnings per share:
Basic
Diluted
Shares used in computation of earnings per share:
Basic
Impact of dilutive securities
Diluted
See accompanying notes.
BADGER METER, INC.
Consolidated Statements of Comprehensive Income
Years ended December 31,
(In thousands)
Net earnings
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement benefits, net of tax
Comprehensive income
See accompanying notes.
BADGER METER, INC.
Consolidated Statem ents of Cash Flows
Years ended December 31,
(In thousands)
Operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation
Amortization
Deferred income taxes
Noncurrent employee benefits
Stock-based compensation expense
Changes in:
Receivables
Inventories
Payables
Prepaid expenses and other assets
Other liabilities
Total adjustments
Net cash provided by operations
Investing activities:
Property, plant and equipment expenditures
Acquisitions, net of cash acquired
Net cash used for investing activities
Financing activities:
Dividends paid
Proceeds from exercise of stock options
Repurchase of common stock for treasury stock
Net cash used for financing activities
Effect of foreign exchange rates on cash
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes
Interest
Property, plant and equipment acquired through operating lease
Property, plant and equipment accrued and unpaid
See accompanying notes.
BADGER METER, INC.
Consolidated Statements of Shareholders’ Equity
Years ended December 31,
Common
Stock at $1
par value*
Capital in
excess of
par value
Reinvested
earnings
Accumulated
other
comprehensive
income
(loss)
Treasury
stock (at cost)
Total
(In thousands except per share amounts)
Balance, December 31, 2022
Net earnings
Pension and postretirement benefits
(net of ($ 26 ) tax effect)
Foreign currency translation
Cash dividends of $ 0.99 per share
Stock options exercised
Stock-based compensation
Issuance of treasury stock ( 24 shares)
Balance, December 31, 2023
Net earnings
Pension and postretirement benefits
(net of $ 76 tax effect)
Foreign currency translation
Cash dividends of $ 1.22 per share
Stock options exercised
Stock-based compensation
Issuance of treasury stock ( 41 shares)
Balance, December 31, 2024
Net earnings
Pension and postretirement benefits
(net of $ 153 tax effect)
Foreign currency translation
Cash dividends of $ 1.48 per share
Stock options exercised
Stock-based compensation
Purchase of common stock for treasury stock ( 82 shares)
Issuance of treasury stock ( 43 shares)
Balance, December 31, 2025
* Each common share of stock equals $ 1 par value; therefore, the number of common shares is the same as the dollar value.
See accompanying notes.
BADGER METER, INC.
Notes to Consolidated Financial Statements
Note 1 Basis of Presentation and Accounting Policies
Profile
With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water management solutions, with approximately 95 % of net sales derived from water-related applications. Badger Meter's offerings, marketed as BlueEdge®, are comprised of a suite of tailorable solutions that connect water management technology, software and support services to deliver insights enabling the proactive management of water across the water cycle. These tailorable solutions encompass measurement and control hardware, connectivity and communication, data visualization and software-delivered actionable insights as well as ongoing support and expertise essential to optimize customers' operations and contribute to the sustainable use and protection of the world’s most precious resource.
The Company's measurement and control hardware, instruments and sensors are primarily comprised of the following product families:
meters that measure the flow of water and other fluids and are known for accuracy, long-lasting durability and for providing valuable and timely flow measurement data.
water quality monitoring solutions, including optical sensing and electrochemical instruments that provide real-time, on demand data parameters.
high frequency pressure and acoustic leak detection hardware that provides real-time monitoring data.
remote sewer monitoring solutions to aid in predicting, detecting and preventing sewer overflow spills and lift station solutions for monitoring and control.
The Company’s broad range of communication solutions include the ORION® branded family of radio endpoints, along with remote telemetry units, providing customers with a choice of industry-leading options for communicating data from hardware into use-specific software applications.
The Company’s hardware-enabled software solutions provide insights and analytics critical to the holistic management of our customers’ water systems. These digital solutions increase visibility, empowering customers to monitor system performance and make decisions aiding efficiency, resiliency, and sustainability.
The Company also provides training, project management, technical support and other collaborative services for customers. This support is becoming increasingly critical as customers strive to extract maximum value from their deployed technology investments while managing workforce demographic changes, infrastructure upgrades, and water loss management, among other operating challenges.
The Company’s solutions fall into two product lines:
Utility Water - sales of meters, water quality and sewer monitoring sensors and other hardware, communication, and software and related technologies, to water utilities.
Flow Instrumentation - sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers, including water-related applications.
Utility water smart metering solutions are comprised of water meters along with the connected radio endpoints and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues, enabling operating efficiencies and engaging with their end consumers. This product line further comprises other instruments and sensors used in the water distribution system to ensure the safe and efficient treatment, delivery and return of water. These sensors are used to detect leaks, monitor various water quality parameters throughout the distribution system and treatment process, and monitor, detect and prevent sewer overflow spills. The largest geographic market in which the Company operates is North America, primarily the United States.
The flow instrumentation product line primarily serves water applications throughout the broader industrial market, with both standard and customized solutions. This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids including water, air, steam, and other liquids and gases. These
products, oftentimes leveraging the same technologies used in utility water, are used in a variety of industries and applications, with the Company’s primary market focus being water/wastewater, heating, ventilating and air conditioning (HVAC), and corporate sustainability. Flow instrumentation products are generally sold through manufacturers’ representatives and original equipment manufacturers as the primary flow measurement device within a product or system. Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents.
Receivables
Receivables consist primarily of trade receivables. The Company does not require collateral or other security and evaluates the collectability of its receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items and the customer's ability and likelihood to pay, as well as applying a historical write-off ratio to the remaining balances. Changes in the Company's allowance for doubtful accounts are as follows:
Balance at
beginning
of year
Provision and
reserve
adjustments
Write-offs less
recoveries
Balance at end
of year
(In thousands)
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The Company estimates and records provisions for obsolete and excess inventories. Changes to the Company's obsolete and excess inventories reserve are as follows:
Balance at
beginning
of year
Net additions
charged to
earnings
Disposals
Balance at end
of year
(In thousands)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the respective assets by the straight-line method. The estimated useful lives of assets are: for land improvements, 15 years; for buildings and improvements, 10 to 39 years ; and for machinery and equipment, 3 to 20 years .
Capitalized Software and Hardware
Capitalized internal use software and hardware included in other assets in the Consolidated Balance Sheets were $ 3.7 million and $ 3.8 million at December 31, 2025 and 2024 , respectively. These amounts are amortized on a straight-line basis over the estimated useful lives of the software and/or hardware, ranging from 1 to 5 years . Amortization expense recognized for the years ending December 31, 2025, 2024 and 2023 was $ 3.5 million, $ 3.4 million and $ 3.3 million, res pectively.
Long-Lived Assets
Property, plant and equipment and identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets.
Intangible Assets
Intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 20 years . The Company does not have any intangible assets deemed to have indefinite lives. Amortization expense was $ 14.7 million in 2025, $ 9.1 million in 2024 and $ 8.6 million in 2023. Amortization expense expected to be recognized is $ 14.4 million in 2026, $ 11.7 in 2027, $ 10.4 million in 2028, $ 9.9 million in 2029, $ 9.1 million in 2030 and $ 63.0 million thereafter. The carrying value and accumulated amortization by major class of intangible assets are as follows:
December 31, 2025
December 31, 2024
Gross carrying
amount
Accumulated
amortization
Gross carrying
amount
Accumulated
amortization
(In thousands)
Technologies
Intellectual property
Non-compete agreements
Licenses
Customer lists
Customer relationships
Trade names
Total intangibles
Goodwill
Goodwill is tested for impairment annually during the fourth quarter or more frequently if an event indicates that the goodwill might be impaired. Potential impairment is identified by comparing the fair value of a reporting unit with its carrying value. No adjustments were recorded to goodwill as a result of these tests during 2025, 2024 and 2023. Goodwill was $ 235.6 million at December 31, 2025 and $ 111.8 million at December 31, 2024. The change in goodwill from 2024 to 2025 resulted from currency translation adjustments of $ 5.5 million and the acquisition of SmartCover of $ 118.3 million. This acquisition is further described in Note 3 “Acquisitions”.
Warranty and After-Sale Costs
The Company estimates and records provisions for warranties and other after-sale costs in the period in which the sale is recorded, based on a lag factor and historical warranty claim experience. After-sale costs represent a variety of activities outside of the written warranty policy, such as investigation of unanticipated issues after the customer has installed the product or analysis of water quality issues. Changes in the Company's warranty and after-sale costs reserve are as follows:
Balance at
beginning
of year
Provision of acquired business
Net additions
charged to
earnings
Costs incurred
Balance at end
of year
(In thousands)
Research and Development
Research and development costs are charged to expense as incurred and amounted to $ 21.6 million in 2025, $ 19.2 million in 2024 and $ 19.0 million in 2023 .
Healthcare
The Company estimates and records provisions for healthcare claims incurred but not reported, based on medical cost trend analysis, reviews of subsequent payments made and estimates of unbilled amounts.
Accumulated Other Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss) at December 31, 2025 are as follows:
(In thousands)
Unrecognized
pension and
postretirement
benefits
Foreign currency
Total
Balance at beginning of period
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income, net of tax of $ 153
Net current period other comprehensive income, net of tax
Accumulated other comprehensive income
Reclassifications out of accumulated other comprehensive income (loss) during 2025 were immaterial.
Components of accumulated other comprehensive income (loss) at December 31, 2024 are as follows:
(In thousands)
Unrecognized
pension and
postretirement
benefits
Foreign currency
Total
Balance at beginning of period
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive income, net of tax of $ 76
Net current period other comprehensive income (loss), net of tax
Accumulated other comprehensive income (loss)
Reclassifications out of accumulated other comprehensive income (loss) during 2024 were immaterial.
Use of Estimates
The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Fair Value Measurements of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and payables in the financial statements approximate their fair values due to the short-term nature of these financial instruments. Included in other assets are insurance policies on various individuals who were associated with the Company. The carrying amounts of these insurance policies approximate their fair value.
Subsequent Events
The Company evaluates subsequent events at the date of the balance sheet as well as conditions that arise after the balance sheet date but before the financial statements are issued. The effects of conditions that existed at the balance sheet date are recognized in the financial statements. Events and conditions arising after the balance sheet date but before the financial statements are issued are evaluated to determine if disclosure is required to keep the financial statements from being misleading. To the extent such events and conditions exist, if any, disclosures are made regarding the nature of events and the estimated financial effects for those events and conditions. For purposes of preparing the accompanying consolidated financial statements and the notes to these financial statements, the Company evaluated subsequent events through the date the accompanying financial statements were issued.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires additional disclosure associated with the effective tax rate reconciliation and payment of income taxes. The guidance is effective for fiscal years beginning after December 15, 2025 and can be applied on a prospective basis
with the option to apply the standard retrospectively. The Company adopted ASU No. 2023-09 on December 31, 2025 , applying the standard on a retrospective basis, the impact of which was not significant to the Company or its related disclosures.
In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure," which requires additional disclosure of specified information about certain costs and expense categories. The guidance is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently assessing the impact of this proposed change on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, "Targeted Improvements to the Accounting for Internal-Use Software," which removes the development stage requirements and implements a probable-to-complete recognition threshold associated with capitalization of internal use software costs. This guidance is effective for fiscal years beginning after December 15, 2027 and interim periods within those reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been made available for issuance. The Company is currently assessing the impact of this proposed changed on its consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, "Interim Reporting (Topic 270): Narrow-scope improvements." The amendments clarify the scope, form, and content of interim financial statement disclosures and improve the navigability of Topic 270 without changing existing interim reporting requirements. This guidance is effective for fiscal years beginning after December 15, 2027, and interim periods within those reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its condensed consolidated financial statements and related disclosures.
Note 2 Common Stock
Common Stock
In February 2023, the Board authorized the repurchase of up to 200,000 shares of the Company's Common Stock through February 2026 . In November 2025, the Board replaced the prior authorization with an authorization to purchase up to $ 75 million of its Common Stock through November 2028.
The authorized common stock of the Company consisted of 80,000,000 shares of common stock as of December 31, 2025 and 2024 , respectively, $ 1 par value, of which 37,221,098 were issued and outstanding as of December 31, 2025 and 2024 , respectively.
Note 3 Acquisitions
Acquisitions are accounted for under the purchase method, and accordingly, the results of operations were included in the Company's financial statements from the date of acquisition. The acquisitions did not have a material impact on the Company's consolidated financial statements or the notes thereto.
Effective January 30, 2025 , the Company acquired 100 % of the outstanding stock of Hadronex, Inc, a Delaware Corporation d/b/a SmartCover® Systems (SmartCover), headquartered in Escondido California. SmartCover is a provider of sewer line and lift station monitoring solutions.
Th e total purchase consideration for SmartCover, net of cash acquired, was $ 184.0 million, following the net working capital adjustment of $ 0.9 million. The Company's allocation of the purchase price at December 31, 2025 included $ 6.6 million of receivables, $ 4.5 million of inventories, $ 4.8 million of other assets, $ 59.6 million of developed technology intangible assets, $ 26.0 million of other intangible assets and $ 118.3 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily developed technology, customer relationships and trademarks with estimated average useful lives of 12 to 20 years. The Company also assumed $ 1.6 million of payables, $1 8.3 million of net deferred income tax liabilities, $ 12.2 million of deferred revenue and $ 3.7 million of other liabilities as part of the acquisition. The allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of December 31, 2025, the Company completed its analysis for estimating the fair value of the assets acquired. Revenue associated with SmartCover for the eleven months ended December 31, 2025 was $ 39.7 million. SmartCover is reported within the utility water product line and the Company will continue to operate under a single segment.
Effective January 1, 2024 , the Company acquired select remote water monitoring hardware and software, inclusive of the Telog® product line and Unity Remote Monitoring software as a service (the Telog/Unity Assets). The total purchase consideration for the Telog/Unity Assets was $ 3.0 million in cash. The allocation of purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of December 31, 2024, the Company had completed its analysis for estimating the fair value of the assets acquired.
Note 4 Short-term Debt and Credit Lines
The Company did no t have short-term borrowings at December 31, 2025 and 2024 . On July 8, 2021 , the Company entered into a new credit agreement, with a maturity date of July 8, 2026 . The Company amended its credit agreement to modify the benchmark interest rate on January 20, 2023. The credit agreement includes a $ 150.0 million multi-currency line of credit that supports commercial paper (up to $ 100.0 million). The facility includes several features that enhance the Company’s financial flexibility including an increase feature, acquisition holiday and favorable financial covenants. The Company was in compliance with all covenants as of December 31, 2025. The Company had $ 154.7 million of unused credit lines available at December 31, 2025 .
Note 5 Stock Compensation
As of December 31, 2025 , the Company has an Omnibus Incentive Plan under which 1,000,000 shares are reserved for stock options, restricted stock, performance shares grants for employees, as well as stock grants for directors. The plan was approved in 2021 and replaced all prior stock-based plans except for shares and options previously issued under those plans. As of December 31, 2025 and 2024 there were 826,945 and 870,642 shares, respectively, of the Company’s Common Stock available for grant under the 2021 Omnibus Incentive Plan. The Company recognizes the cost of stock-based awards in net earnings for all of its stock-based compensation plans on a straight-line basis over the service period of the awards. The following sections describe the four types of awards in more detail.
Stock Options
The Company estimates the fair value of its option awards using the Black-Scholes option-pricing formula, and records compensation expense for stock options ratably over the stock option grant’s vesting period. Stock option compensation expense for the year ended December 31, 2025 was less than $ 0.1 million. Stock option compensation expense recognized by the Company for the years ended December 31, 2024 and 2023 was $ 0.1 million and $ 0.2 million, respectively. No new stock options were granted in 2025, 2024 and 2023.
The following table summarizes stock option activity for the three-year period ended December 31, 2025:
Number of shares
Weighted-
average
exercise price
Options outstanding - December 31, 2022
Options exercised
Options outstanding - December 31, 2023
Options exercised
Options outstanding - December 31, 2024
Options exercised
Options outstanding - December 31, 2025
Exercisable options —
December 31, 2023
December 31, 2024
December 31, 2025
The weighted-average contractual life remaining for options outstanding as of December 31, 2025 was 2.6 years.
The following table summarizes the aggregate intrinsic value related to options exercised, outstanding and exercisable as of and for the years ended December 31:
(In thousands)
Exercised
Outstanding
Exercisable
As of December 31, 2025 , there was no unrecognized compensation expense related to stock options. There were no anti-dilutive options in 2025, 2024 and 2023.
Restricted Stock
The Company periodically issues nonvested shares of the Company's Common Stock to certain eligible employees. The Company values restricted stock on the closing price of the Company's stock on the day the grant was awarded. The Company records compensation expense for this plan ratably over the vesting periods. Restricted stock compensation expense recognized by the Company was $ 2.8 million in 2025, $ 2.4 million in 2024 and $ 2.0 million in 2023.
The fair value of nonvested shares is determined based on the market price of the shares on the grant date.
Shares
Fair value
per share
Nonvested at December 31, 2022
Granted
Vested
Forfeited
Nonvested at December 31, 2023
Granted
Vested
Forfeited
Nonvested at December 31, 2024
Granted
Vested
Forfeited
Nonvested at December 31, 2025
As of December 31, 2025, there was $ 4.0 million of unrecognized compensation cost related to nonvested restricted stock that is expected to be recognized over a weighted average period of 1.9 years.
Performance Share Units
The Company periodically issues performance share units to certain eligible employees. Recipients of performance share grants are eligible to receive shares of common stock subject to achievement of total adjusted return on invested capital (ROIC) and adjusted free cash flow conversion targets as measured over a three-year performance period. The number of shares earned for awards granted in 2023, 2024 and 2025 will range from 50 % to 200 % of the granted number of performance shares for the three-year performance period ending December 31, 2025 , December 31, 2026 , and December 31, 2027 , respectively, and will vest, to the extent earned, in the fiscal quarter following the end of the applicable three-year performance period. Performance share compensation expense recognized by the Company was $ 5.7 million in 2025, $ 3.2 million in 2024 and $ 2.5 million in 2023.
A summary of performance share activity for the three years ended December 31 is as follows:
Performance Shares
Weighted Average Grant Date Fair Value
Nonvested at December 31, 2022
Granted
Adjustment for expected performance results
Nonvested at December 31, 2023
Granted
Adjustment for expected performance results
Vested
Forfeited
Nonvested at December 31, 2024
Granted
Adjustment for expected performance results
Vested
Forfeited
Nonvested at December 31, 2025
As of December 31, 2025, there was $ 7.4 million of unrecognized compensation cost related to nonvested performance share units that is expected to be realized over a weighted average period of 1.9 years.
Director Stock Grant
Non-employee directors receive an annual stock award of the Company’s Common Stock under the 2021 Omnibus Incentive Plan. The annual stock award for 2025 was $ 100,000 . The Company values stock grants for directors at the closing price of the Company’s stock on the day the grant was awarded. The Company records compensation expense for this plan in the period the grants are awarded. Director stock compensation expense recognized by the Company was $ 0.6 million in 2025, $ 0.5 million in 2024 and $ 0.5 million in 2023. As of December 31, 2025 , there was no unrecognized compensation cost related to director stock awards.
Note 6 Commitments and Contingencies
Commitments
The Company makes commitments in the normal course of business. The Company rents equipment, vehicles and facilities under operating leases, some of which contain renewal options. Total rental expense charged to operations under all operating leases was $ 5.1 m illion in 2025, $ 4.0 million in 2024 and $ 3.6 million in 2023. The Company’s lease commitments and future minimum lease payments are discussed in Note 12 “Leases.”
Contingencies
In the normal course of business, the Company is named in legal proceedings. There are currently no material legal proceedings pending with respect to the Company.
The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2025, 2024 and 2023 were not material.
The Company relies on single suppliers for most brass castings and certain resin and electronic subassemblies in several of its product lines. The Company believes these items would be available from other sources, but that the loss of certain suppliers could result in a higher cost of materials, delivery delays, short-term increases in inventory and higher quality control costs in the short term. The Company attempts to mitigate these risks by working closely with key suppliers, purchasing minimal amounts from alternative suppliers and by purchasing business interruption insurance where appropriate.
The Company reevaluates its exposures on a periodic basis and makes adjustments to reserves as appropriate.
Note 7 Employee Benefit Plan s
The Company maintains supplemental non-qualified plans for certain officers and other key employees. The expense for these plans was not material for 2025, 2024 or 2023. The discount rate used to measure the net periodic pension cost was 5.52 % for 2025, 4.89 % for 2024 and 5.09 % for 2023. The amount accrued was $ 1.2 million and $ 1.0 million as of December 31, 2025 and 2024, respectively.
The Company also maintains an Employee Savings and Stock Ownership Plan (“ESSOP”) for the majority of the U.S. employees. The ESSOP includes a voluntary 401(k) savings plan that allows certain employees to defer up to 50 % of their income on a pretax basis subject to limits on maximum amounts. The Company matches 25 % of each employee’s contribution, with the match percentage applying to a maximum of 7 % of each employee's salary. Compensation expense was $ 1.6 million in 2025, $ 1.5 million in 2024 and $ 1.2 million in 2023.
The Company also contributes to a defined contribution feature within the ESSOP plan. Contributions are discretionary and are calculated as a percentage of eligible wages of the employee. Compensation expense under the defined contribution feature was $ 5.1 million in 2025, $ 4.7 million in 2024 and $ 4.0 million in 2023.
Other Postretirement Benefits
The Company also has a postretirement healthcare benefit plan that provides medical benefits for certain U.S. retirees and eligible dependents hired prior to November 1, 2004. Employees are eligible to receive postretirement healthcare benefits upon meeting certain age and service requirements. No employees hired after October 31, 2004 are eligible to receive these benefits. This plan requires employee contributions to offset benefit costs.
The following table sets forth the components of net periodic postretirement benefit cost for the years ended December 31, 2025, 2024 and 2023:
(In thousands)
Service cost, benefits attributed for service of active employees for the period
Interest cost on the accumulated postretirement benefit obligation
Amortization of actuarial gain
Net periodic postretirement benefit (income) cost
The discount rate used to measure the net periodic postretirement benefit cost was 5.59 % for 2025, 4.96 % for 2024 and 5.16 % for 2023 . It is the Company's policy to fund healthcare benefits on a cash basis. Because the plan is unfunded, there are no plan assets. The following table provides a reconciliation of the projected benefit obligation at the Company's December 31 measurement date:
(In thousands)
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain
Plan participants' contributions
Benefits paid
Benefit obligation, end of year
The amounts recognized in the Consolidated Balance Sheets at December 31 are:
(In thousands)
Accrued compensation and employee benefits
Accrued non-pension postretirement benefits
Amounts recognized at December 31
The discount rate used to measure the accumulated postretirement benefit obligation was 5.24 % for 2025 and 5.59 % for 2024. The Company's discount rate assumptions for its postretirement benefit plan are based on the average yield of a hypothetical high quality bond portfolio with maturities that approximately match the estimated cash flow needs of the plan. Because the plan requires the Company to establish fixed Company contribution amounts for retiree healthcare benefits, future healthcare cost trends do not generally impact the Company's accruals or provisions.
Estimated future benefit payments of postretirement benefits, assuming increased cost sharing, expected to be paid in each of the next five years beginning with 2026 are $ 0.2 million through 2030 , with an aggregate of $ 1.0 million for the five years thereafter. These amounts can vary significantly from year to year because the cost sharing estimates can vary from actual expenses as the Company is self-insured.
Amounts included in accumulated other comprehensive income, net of tax, at December 31, 2025 that have not yet been recognized in net periodic benefit cost are as follows:
Pension
plans
Other
postretirement
benefits
(In thousands)
Net actuarial loss (gain)
Amounts included in accumulated other comprehensive income, net of tax, at December 31, 2025 expected to be recognized in net periodic benefit cost during the fiscal year ending December 31, 2026 are not expected to be material.
Note 8 Income Taxes
The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording the related deferred tax assets and liabilities.
Details of earnings before income taxes are as follows:
(In thousands)
Domestic
Foreign
Total
The provision (benefit) for income taxes is as follows:
(In thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
The provision for income tax differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate in each year due to the following items, which includes adjusted presentation for the years ended December 31, 2024 and 2023 in accordance with ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures:
(In thousands)
Provision at statutory rate
State income taxes, net of federal tax benefit (1)
Foreign tax effects
Effects of cross-border tax laws
Tax credits
Nontaxable or nondeductible items
Changes in unrecognized tax benefits
Actual provision
(1) The states that contribute to the majority (greater than 50%) of the tax effect of this category include California, Florida, Illinois, Tennessee, Georgia and Texas.
The amount of cash taxes paid is as follows:
(In thousands)
Federal
State
Foreign
Cash paid for income taxes (net of refunds)
Income taxes paid (net of refunds) exceed 5% of total income taxes paid (net of refunds) in the following jurisdictions:
State
(In thousands)
California
* Jurisdiction below the threshold for the period presented.
The components of deferred income taxes as of December 31 are as follows:
(In thousands)
Deferred tax assets:
Reserve for receivables and inventory
Accrued compensation
Reserves and payables
Accrued post-retirement medical benefits
Net operating loss and credit carryforwards
Deferred compensation
Accrued qualified plan benefits
Accrued stock-based compensation
Deferred revenue
Operating lease liabilities
Research and development costs
Other
Total gross deferred tax assets
Less: valuation allowance
Total net deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Intangible assets
Prepaids
Operating lease assets
Other
Total deferred tax liabilities
Net deferred tax assets
As of December 31, 2025 , the Company had U.S. federal net operating loss carryforwards of approximately $ 4.3 million, U.S. state net operating loss carryforwards of approximately $ 1.4 million, and foreign net operating loss carryforwards of approximate ly $ 32.6 million, of which $ 32.4 million ha ve an unlimited carryforward period. The Company's tax credit carryforward of $ 0.6 million relates to state specific tax credits that the Company expects to fully utilize in future tax periods. The Company has recorded a full valuation allowance against certain deferred tax assets which are not likely to be realized. The valuation allowance relates primarily to foreign net operating loss carryforwards.
In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt these rules, which are expected to be effective for accounting periods beginning on or after December 31, 2023. The United States has not yet enacted legislation implementing Pillar Two. The Company is continuing to evaluate the Pillar Two rules and their potential impact on future periods. Based on existing proposed rules, the Company does not meet the revenue requirements for the Pillar Two rules to apply. As a result, the Company does not expect the rules to have a material impact on its effective tax rate.
In general, it is the Company's practice and intention to reinvest earnings of its non-U.S. subsidiaries in those operations. As of December 31, 2025 , the Company has not made a provision for incremental U.S. income taxes or additional foreign withholding taxes on approximately $ 11.9 million of such undistributed earnings, $ 15.5 million of which was previously subject to U.S. tax that is deemed indefinitely reinvested.
Changes in the Company's gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows:
(In thousands)
Balance at beginning of year
Reductions in unrecognized tax benefits as a result of positions taken
during the prior year
Increases in unrecognized tax benefits as a result of positions taken during the
current year
Reductions to unrecognized tax benefits as a result of a lapse of the applicable
statute of limitations
Balance at end of year
The Company does not expect a significant increase or decrease to the total amount of unrecognized tax benefits during the next twelve months. To the extent these unrecognized tax benefits are ultimately recognized, they will impact the effective tax rate. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2022, and, with few exceptions, state and local income tax examinations by tax authorities for years prior to 2021. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. Accrued interest was approximatel y $ 0.2 million and $ 0.1 million as of December 31, 2025 and 2024 , respectively, and there were no penalties accrued in either year.
Note 9 Industry Segm ent and Geographic Areas
The Company is an innovator, manufacturer, developer, marketer and distributor of water management solutions incorporating hardware and sensors, communication solutions and data analytics, which comprise one reportable segment. The Company concludes on their segments based on the internally reported financial information that is routinely reviewed by the chief operating decision maker (CODM) to assess financial performance, make decisions and allocate resources. The Company manages and evaluates its operations as one segment primarily due to similarities in the nature of the products, production processes, customers and methods of distribution. The Company’s CODM is the Chairman, President and Chief Executive Officer.
The Company’s CODM assesses performance by using gross margin, operating earnings and net earnings. These metrics are analyzed by reviewing budget versus actual and prior year versus current year reporting. The various income performance measures are reviewed to ensure proper pricing strategies and effective cost controls across the organization. The CODM is regularly provided with consolidated expenses as noted on the consolidated income statements. Additionally, the CODM reviews assets at the same level as noted on the consolidated balance sheets.
Information regarding revenues by geographic area is as follows:
(In thousands)
Revenues:
United States
Foreign:
Asia
Canada
Europe
Mexico
Middle East
Other
Total
Information regarding assets by geographic area is as follows:
(In thousands)
Long-lived assets:
United States
Foreign:
Europe
Mexico
Total
(In thousands)
Total assets:
United States
Foreign:
Europe
Mexico
Total
Note 10 Unaudited: Quarterly Results of Operations, Common Stock Price and Dividends
The Company's Common Stock is listed on the New York Stock Exchange under the symbol BMI. Earnings per share are computed independently for each quarter. As such, the annual per share amount may not equal the sum of the quarterly amounts due to rounding. The Company currently anticipates continuing to pay cash dividends. Shareholders of record as of December 31, 2025 and 2024 total ed 549 and 562 , respectively. Vo ting trusts and street name shareholders are counted as single shareholders for this purpose.
Quarter ended
March 31
June 30
September 30
December 31
(In thousands, except per share data)
Net sales
Gross margin
Net earnings
Earnings per share:
Basic
Diluted
Dividends declared
Stock price:
High
Low
Quarter-end close
Net sales
Gross margin
Net earnings
Earnings per share:
Basic
Diluted
Dividends declared
Stock price:
High
Low
Quarter-end close
Note 11 Revenue Recognition
Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts include the sale of utility water and flow instrumentation products, such as flow meters and radios, quality sensing, pressure monitoring and sewer line monitoring equipment, software as a service (SaaS) and other ancillary services. Contracts generally state the terms of sale, including the description, quantity and price of each product or service. Since the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the majority of the Company's contracts do not contain variable consideration. The Company establishes a provision for estimated warranty and returns as well as certain after sale costs as discussed in Note 1 “Summary of Significant Accounting Policies.”
The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors. Information regarding revenues disaggregated by geographic area is disclosed in Note 9 “Industry Segment and Geographic Areas.”
Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows for the years ended December 31:
(In thousands)
Revenue recognized over time
Revenue recognized at a point in time
Total
The Company performs its obligations under a contract by shipping products or performing services in exchange for consideration. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable to the Company is established. The Company recognizes a contract liability when a customer prepays for goods or services and the Company has not transferred control of the goods or services.
The Company's receivables and contract liabilities are as follows at the years ended December 31 are as follows:
(In thousands)
Receivables
Contract liabilities
Contract liabilities are included in other current liabilities and long-term deferred revenue on the Company’s Consolidated Balance Sheets at December 31, 2025 and 2024. The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at December 31, 2025 and 2024.
A performance obligation in a contract is a promise to transfer a distinct good or service to the customer. At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, the Company considers all of the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.
The Company's performance obligations are satisfied at a point in time or over time as services are delivered. The majority of the Company's revenue recognized at a point in time is for the sale of utility and flow instrumentation products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer during the shipping process. The majority of the Company's revenue that is recognized over time relates to SaaS, including BEACON and Active Site Monitoring, among others.
The Company records revenue for SaaS revenue over time as the customer benefits from the use of the Company's software. Control of an asset is therefore transferred to the customer over time and the Company will recognize revenue for SaaS as service units are used by the customer.
Total SaaS revenue is as follows for the years ended December 31:
(In thousands)
SaaS revenue
Revenue is recorded for various ancillary services, such as project management and training, over time as the customer benefits from the services provided. The majority of this revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. If the service is not provided evenly over the contract period, revenue will be recognized by the associated input/output method that best measures the progress towards contract completion.
As of December 31, 2025, the Company had certain contracts with unsatisfied performance obligations. For contracts recorded as long-term liabilities, $ 97.0 million was the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of the end of the reporting period. The Company estimates that revenue recognized from satisfying those performance obligations will be approximately $ 24.3 million in 2026 , $ 9.6 million in 2027 , $ 8.1 million in 2028 , $ 7.1 million in 2029 , $ 5.9 million in 2030 and $ 42.0 million thereafter .
The Company also has contracts that include both the sale and installation of flow meters as performance obligations. In those cases, the Company records revenue for installed flow meters at the point in time when the flow meters have been accepted by the customer. The customer cannot control the use of and obtain substantially all of the benefits from the equipment until the customer has accepted the installed product. Therefore, for both the flow meter and the related installation, the Company has concluded that control is transferred to the customer upon customer acceptance of the installed flow meter. In addition, the Company has a variety of ancillary revenue streams which are immaterial. The types and composition of the Company's revenue streams did not materially change during the year ended December 31, 2025.
The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract's transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.
The recording of assets recognized from the costs to obtain and fulfill customer contracts primarily relate to the deferral of sales commissions and network service contracts on the Company's SaaS software arrangements. The Company's costs incurred to obtain or fulfill a contract with a customer are amortized over the period of benefit of the related revenue. The Company expenses any costs incurred immediately when the amortization period would be one year or less. These costs are recorded within selling, engineering and administration expenses.
For the year ended December 31, 2025 and 2024 , the Company elected the following practical expedients :
In accordance with Subtopic 340-40 “Other Assets and Deferred Costs - Contracts with Customers,” the Company elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, and contracts for which it has the right to invoice for services performed.
The Company has made an accounting policy election to exclude all taxes by governmental authorities from the measurement of the transaction price.
Note 12 Leases
The Company rents facilities, equipment and vehicles under operating leases, some of which contain renewal options. Upon inception of a rent agreement, the Company determines whether the arrangement contains a lease based on the unique conditions present. Leases that have a term over a year are recognized on the balance sheet as right-of-use assets and lease liabilities. Right-of-use assets are included in other assets on the Company’s Consolidated Balance Sheet. Lease liabilities are included in other current liabilities and other long-term liabilities on the Company’s Consolidated Balance Sheet. Information regarding the Company's right-of-use assets and the corresponding lease liabilities at the years ended December 31 is as follows:
(In thousands)
Right-of-use assets
Lease liabilities
The Company’s operating lease agreements have lease and non-lease components that require payments for common area maintenance, property taxes and insurance. The Company has elected to account for both lease and non-lease components as one lease component. The fixed and in-substance fixed consideration in the Company’s rent agreements constitute operating lease expense that is included in the capitalized right-of-use assets and lease liabilities. The variable and short-term lease expense payments are not included in the present value of the right-of use-assets and lease liabilities on the Consolidated Balance Sheet. The Company’s rent expense for the years ended December 31 is as follows:
(In thousands)
Operating lease expense
Variable and short-term lease expense
Rent expense
The Company records right-of-use assets and lease liabilities based upon the present value of lease payments over the expected lease term. The Company’s lease agreements typically do not have implicit interest rates that are readily determinable.
As a result, the Company utilizes an incremental borrowing rate that would be incurred to borrow on a collateralized basis over a similar term in a comparable economic environment. As of December 31, 2025 and 2024 , the remaining lease term on the Company’s leases was 6.8 and 6.9 years, respectively. As of December 31, 2025 and 2024, the discount rate w as 5.0 %. The future minimum lease payments to be paid under operating leases are as follows:
December 31,
(In thousands)
Thereafter
Total future lease payments
Present value adjustment
Present value of future lease payments
