10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021                

or

☐        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File No. 001-06706

BADGER METER, INC.

(Exact name of registrant as specified in its charter)

Wisconsin	39-0143280
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4545 W. Brown Deer Road Milwaukee, Wisconsin	53233
(Address of principal executive offices)	(Zip code)

(414) 355-0400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BMI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer	☒	Smaller reporting company	☐
Accelerated filer	☐	Emerging growth company	☐
Non‑accelerated filer	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐        No  ☒

As of April 12, 2021 there were 29,175,515 shares of Common stock outstanding with a par value of $1 per share.

BADGER METER, INC.

Quarterly Report on Form 10-Q for the Period Ended March 31, 2021

Index

		Page No.
Part I. Financial Information:
Item 1	Financial Statements (unaudited):	4
	Consolidated Condensed Balance Sheets - March 31, 2021 and December 31, 2020	4
	Consolidated Condensed Statements of Operations - Three Months Ended March 31, 2021 and 2020	5
	Consolidated Condensed Statements of Comprehensive Income - Three Months Ended March 31, 2021 and 2020	6
	Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020	7
	Consolidated Condensed Statements of Shareholders’ Equity – Three Months Ended March 31, 2021 and 2020	8
	Notes to Unaudited Consolidated Condensed Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4	Controls and Procedures	20
Part II. Other Information:
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6	Exhibits	21
Signatures		22

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Special Note Regarding Forward Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, as well as other information provided from time to time by Badger Meter, Inc. (the “Company” or “Badger Meter”) or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those statements. The words “anticipate,” “believe,” “estimate,” “expect,” “think,” “should,” “could” and “objective” or similar expressions are intended to identify forward looking statements. All such forward looking statements are based on the company’s then current views and assumptions and involve risks and uncertainties. Potential factors that could affect such forward-looking statements include the duration, severity and geographic spread of the COVID-19 pandemic, the company’s ability to develop and manufacture technologically advanced products that are accepted by the market, supply chain risk, legal and regulatory risks, political and general economic risks, risks related to doing business in several countries, including foreign currency risk, competition for skilled employees, material and labor cost increases, competitive pricing and operating efficiencies, the effects of climate change, cybersecurity attacks and disruptions to our information technology and the successful integration of acquisitions. See Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for further information regarding risk factors, which are incorporated herein by reference. The Company disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

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Part I – Financial Information

Item 1  Financial Statements

BADGER METER, INC.

Consolidated Condensed Balance Sheets

	March 31,			December 31,
	(Unaudited)
	(In thousands)
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	51,402		$	72,273
Receivables		61,642			61,689
Inventories:
Finished goods		27,967			24,881
Work in process		14,094			16,841
Raw materials		42,190			39,864
Total inventories		84,251			81,586
Prepaid expenses and other current assets		6,817			5,303
Total current assets		204,112			220,851
Property, plant and equipment, at cost		217,193			217,404
Less accumulated depreciation		(135,109	)		(134,699	)
Net property, plant and equipment		82,084			82,705
Intangible assets, at cost less accumulated amortization		72,119			53,598
Other assets		18,063			17,428
Deferred income taxes		5,081			5,090
Goodwill		104,836			88,708
Total assets	$	486,295		$	468,380
Liabilities and shareholders’ equity
Current liabilities:
Payables	$	40,014		$	34,923
Accrued compensation and employee benefits		11,505			14,617
Warranty and after-sale costs		12,458			11,617
Other current liabilities		7,789			4,042
Total current liabilities		71,766			65,199
Other long-term liabilities		26,324			25,283
Deferred income taxes		6,057			5,696
Accrued non-pension postretirement benefits		5,786			5,789
Other accrued employee benefits		6,513			5,154
Commitments and contingencies (Note 5)
Shareholders’ equity:
Common stock		37,221			37,221
Capital in excess of par value		45,599			44,964
Reinvested earnings		323,383			314,850
Accumulated other comprehensive income		602			1,313
Less:  Treasury stock, at cost		(36,956	)		(37,089	)
Total shareholders’ equity		369,849			361,259
Total liabilities and shareholders’ equity	$	486,295		$	468,380

See accompanying notes to unaudited consolidated condensed financial statements.

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BADGER METER, INC.

Consolidated Condensed Statements of Operations

	Three Months Ended March 31,
	(Unaudited)
	(In thousands except share and per share amounts)
	2021		2020
Net sales	$	117,842	$	108,508
Cost of sales		68,480		65,186
Gross margin		49,362		43,322
Selling, engineering and administration		31,615		27,307
Operating earnings		17,747		16,015
Interest expense, net		7		31
Other pension and postretirement costs		31		44
Earnings before income taxes		17,709		15,940
Provision for income taxes		3,928		4,086
Net earnings	$	13,781	$	11,854
Earnings per share:
Basic	$	0.47	$	0.41
Diluted	$	0.47	$	0.41
Dividends declared per common share	$	0.18	$	0.17
Shares used in computation of earnings per share:
Basic		29,098,490		29,042,158
Impact of dilutive securities		218,098		181,757
Diluted		29,316,588		29,223,915

See accompanying notes to unaudited consolidated condensed financial statements.

5

BADGER METER, INC.

Consolidated Condensed Statements of Comprehensive Income

	Three Months Ended March 31,
	(Unaudited)
	(In thousands)
	2021			2020
Net earnings	$	13,781		$	11,854
Other comprehensive (loss) income:
Foreign currency translation adjustments		(714	)		(627	)
Pension and postretirement benefits, net of tax		3			1
Comprehensive income	$	13,070		$	11,228

See accompanying notes to unaudited consolidated condensed financial statements.

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BADGER METER, INC.

Consolidated Condensed Statements of Cash Flows

	Three Months Ended March 31,
	(Unaudited) (In thousands)
	2021			2020
Operating activities:
Net earnings	$	13,781		$	11,854
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation		2,873			2,975
Amortization		4,066			3,256
Deferred income taxes		38			392
Noncurrent employee benefits		81			88
Stock-based compensation expense		374			307
Changes in:
Receivables		3,864			1,385
Inventories		1,284			7,437
Payables		4,291			4,517
Prepaid expenses and other assets		(428	)		(609	)
Other current liabilities		332			(1,064	)
Total adjustments		16,775			18,684
Net cash provided by operations		30,556			30,538
Investing activities:
Property, plant and equipment expenditures		(1,759	)		(1,942	)
Acquisitions, net of cash acquired		(44,561	)		-
Net cash used for investing activities		(46,320	)		(1,942	)
Financing activities:
Dividends paid		(5,239	)		(4,938	)
Proceeds from exercise of stock options		352			478
Repurchase of treasury stock		-			(2,467	)
Issuance of treasury stock		42			55
Net cash used for financing activities		(4,845	)		(6,872	)
Effect of foreign exchange rates on cash		(262	)		(219	)
(Decrease) Increase in cash and cash equivalents		(20,871	)		21,505
Cash and cash equivalents – beginning of period		72,273			48,871
Cash and cash equivalents – end of period	$	51,402		$	70,376

See accompanying notes to unaudited consolidated condensed financial statements.

7

BADGER METER, INC.

Consolidated Condensed Statements of Shareholders’ Equity

	Quarter and year-to-date ended March 31,
	Common Stock at $1 par value*		Capital in excess of par value			Reinvested earnings			Accumulated other comprehensive income (loss)			Employee benefit stock			Treasury stock (at cost)			Total
	(Unaudited)
	(In thousands except share and per share amounts)
Balance, December 31, 2019	$	37,200	$	41,956		$	285,879		$	425		$	(154	)	$	(34,238	)	$	331,068
Net earnings		-		-			11,854			-			-			-			11,854
Pension and postretirement benefits    (net of ($1) tax effect)		-		-			-			1			-			-			1
Foreign currency translation		-		-			-			(627	)		-			-			(627	)
Cash dividends of $0.17 per share		-		-			(4,948	)		-			-			-			(4,948	)
Stock options exercised		20		438			-			-			-			20			478
Stock-based compensation		-		307			-			-			-			-			307
Purchase of common stock for treasury stock		-		-			-			-			-			(2,467	)		(2,467	)
Issuance of treasury stock (15 shares)		-		(11	)		-			-			-			66			55
Balance, March 31, 2020	$	37,220	$	42,690		$	292,785		$	(201	)	$	(154	)	$	(36,619	)	$	335,721
Balance, December 31, 2020	$	37,221	$	44,964		$	314,850		$	1,313		$	-		$	(37,089	)	$	361,259
Net earnings		-		-			13,781			-			-			-			13,781
Pension and postretirement benefits    (net of ($1) tax effect)		-		-			-			3			-			-			3
Foreign currency translation		-		-			-			(714	)		-			-			(714	)
Cash dividends of $0.18 per share		-		-			(5,248	)		-			-			-			(5,248	)
Stock options exercised		-		281			-			-			-			71			352
Stock-based compensation		-		374			-			-			-			-			374
Issuance of treasury stock (23 shares)		-		(20	)		-			-			-			62			42
Balance, March 31, 2021	$	37,221	$	45,599		$	323,383		$	602		$	-		$	(36,956	)	$	369,849

* 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 to unaudited consolidated condensed financial statements.

8

BADGER METER, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

Note 1   Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter contain all adjustments (consisting only of normal recurring accruals except as otherwise discussed) necessary to present fairly the Company’s consolidated condensed financial position at March 31, 2021 and December 31, 2020, results of operations, comprehensive income, cash flows and statements of shareholders’ equity for the three-month periods ended March 31, 2021 and 2020.  The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with United States generally accepted accounting principles 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.

Note 2   Additional Financial Information Disclosures

The consolidated condensed balance sheet at December 31, 2020 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.  Refer to the notes to consolidated financial statements included in that report for a description of the Company’s accounting policies and for additional details of the Company’s financial condition.  The details in those notes have not changed except as discussed below and as a result of normal adjustments in the interim.

Cash Equivalents

 The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents.

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 problems 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:

	Three months ended March 31,
(In thousands)	2021			2020
Balance at beginning of period	$	11,617		$	5,583
Net additions charged to earnings		1,420			1,161
Costs incurred		(579	)		(763	)
Balance at end of period	$	12,458		$	5,981

Note 3   Accumulated Other Comprehensive Income (Loss)

Components of and changes in accumulated other comprehensive income at March 31, 2021 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	55	$	1,258		$	1,313
Other comprehensive (loss) before reclassifications		-		(714	)		(714	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($1)		3		-			3
Net current period other comprehensive income (loss), net of tax		3		(714	)		(711	)
Accumulated other comprehensive income	$	58	$	544		$	602

9

Details of reclassifications out of accumulated other comprehensive income during the three months ended March 31, 2021 are immaterial.     

Components of and changes in accumulated other comprehensive income (loss) at March 31, 2020 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	263	$	162		$	425
Other comprehensive (loss) before reclassifications		-		(627	)		(627	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($1)		1		-			1
Net current period other comprehensive income (loss), net of tax		1		(627	)		(626	)
Accumulated other comprehensive income (loss)	$	264	$	(465	)	$	(201	)

Details of reclassifications out of accumulated other comprehensive income (loss) during the three months ended March 31, 2020 are immaterial. 

Note 4   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.

On January 1, 2021, the Company acquired 100% of the outstanding stock of Analytical Technology, LLC (“ATi”), headquartered in Collegeville, Pennsylvania, a provider of water quality monitoring systems.  

The total purchase consideration, net of cash acquired, was $44 million. The Company's preliminary allocation of the purchase price at March 31, 2021 included $3.9 million of receivables, $4.0 million of inventory, $2.5 million of other assets, $21.0 million of intangibles and $16.1 million of goodwill that is deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with estimated average useful lives of 12 to 15 years.  The Company also assumed $1.2 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7 million of other liabilities as part of the acquisition.  

The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of March 31, 2021, the Company had not completed its analysis for estimating the fair value of the assets acquired.

On November 2, 2020, the Company acquired 100% of the outstanding stock of s::can GmbH and subsidiaries (“s::can”) headquartered in Vienna, Austria.  s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of parameters in water and wastewater utilizing in-line monitoring systems.

The total purchase consideration for s::can was $30.6 million, which included $29.1 million in cash, $0.6 million of payments made in the first quarter of 2021 and $0.9 million in payments that are anticipated to be made in the second quarter of 2021, which are recorded in payables on the Consolidated Balance Sheet at March 31, 2021. The Company's preliminary allocation of the purchase price at March 31, 2021 included $3.1 million of receivables, $4.3 million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.4 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with an estimated average useful life of 12 years.  The Company also assumed $3.6 million of accounts payable, $3.2 million of deferred tax liabilities and $1.3 million of other liabilities as part of the acquisition.  

The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of March 31, 2021, the Company had not completed its analysis for estimating the fair value of the assets acquired.      

Note 5   Contingencies, Litigation and Commitments

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.

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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 2020 and the first quarter of 2021 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 6   Income Taxes

The Company is subject to income taxes in the United States and numerous foreign jurisdictions. The Company’s income tax positions are based on interpretations of income tax laws and rulings in each of the jurisdictions that the Company operates.  Significant judgment is required in determining the worldwide provision for income taxes and recording the related deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income for the years in which the assets or liabilities are expected to be realized or settled. Interim provisions are tied to an estimate of the overall annual rate which can vary due to the relationship of foreign and domestic earnings, state taxes and available deductions, credits and discrete items.

The Company’s earnings before incomes taxes, income tax expense and effective income tax rate are as follows:

	Three months ended March 31,
(In thousands)	2021			2020
Earnings before income taxes	$	17,709		$	15,940
Provision for income taxes		3,928			4,086
Effective income tax rate		22.2	%		25.6	%

Note 7   Fair Value Measurements of Financial Instruments

The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities.  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 previously employed by the Company.  The carrying amounts of these insurance policies approximate their fair value.

Note 8   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 that the accompanying financial statements were issued, and has determined that no material subsequent events exist through the date of this filing.

Note 9   New Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and modifies the existing guidance to enable more consistent application. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year with early adoption being permitted. The Company adopted ASU No. 2019-12 on January 1, 2021, the impact of which was not significant to the Company.

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Note 10   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, software access 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 2 "Additional Financial Information Disclosures" in the Notes to Unaudited Consolidated Condensed Financial Statements.

In accordance with ASU No. 2016-10 “Revenue from Contracts with Customers” (“Topic 606”), 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 meets the disclosure objective in Topic 606 which is to depict 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 as follows:

	Three months ended March 31,
(In thousands)	2021		2020
Revenues:
United States	$	94,266	$	94,492
Foreign:
Asia		4,789		1,548
Canada		2,613		3,136
Europe		11,747		4,775
Mexico		1,885		1,970
Middle East		2,176		1,537
Other		366		1,050
Total	$	117,842	$	108,508

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows:

	Three months ended March 31,
(In thousands)	2021				2020
Revenue recognized over time	$	6,461	5.5	%	$	4,804	4.4	%
Revenue recognized at a point in time		111,381	94.5	%		103,704	95.6	%
Total	$	117,842	100.0	%	$	108,508	100.0	%

The majority of the Company's revenue that is recognized over time relates to the BEACON® AMA software as a service, but also includes training, certain installation and other revenues.  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 shipping.

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, however, 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 closing balances of the Company's receivables and contract liabilities are as follows:

	March 31, 2021		December 31, 2020
(In thousands)
Receivables	$	61,642	$	61,689
Contract liabilities		25,891		24,761

Contract liabilities are included in Payables and Other long-term liabilities on the Company’s Consolidated Condensed Balance Sheets.  The balance of contract assets was immaterial as the Company did not have a significant amount

12

of uninvoiced receivables in the three-month period ended March 31, 2021 and twelve-month period ended December 31, 2020.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of measurement in Topic 606.  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 work progresses.  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 the BEACON AMA software as a service.

          As of March 31, 2021, the Company had certain contracts with unsatisfied performance obligations.  For contracts recorded as contract liabilities, $25.9 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 $5.5 million in 2021, $2.6 million in each year from 2022 through 2026 and $7.4 million thereafter.

Note 11   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 Condensed Balance Sheets. Lease liabilities are included in Other current liabilities and Other long-term liabilities on the Company’s Consolidated Condensed Balance Sheets.   Information regarding the Company's right-of-use assets and the corresponding lease liabilities are as follows:

	March 31, 2021		December 31, 2020
(In thousands)
Right-of-use assets	$	7,781	$	6,865
Lease liabilities		8,122		7,218

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 Condensed Balance Sheets. The Company’s rent expense is as follows:

	March 31, 2021
	2021		2020
(In thousands)
Operating lease expense	$	884	$	765
Variable and short-term lease expense		40		57
Rent expense	$	924	$	822

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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 March 31, 2021 and December 31, 2020, the remaining lease term on the Company’s leases was 5.7 years and 6.0 years, respectively.  As of March 31, 2021 and December 31, 2020, the discount rate was 5.0%.  The future minimum lease payments to be paid under operating leases are as follows:

	March 31, 2021
(In thousands)
2021 (remaining nine months)	$	2,212
2022		1,923
2023		1,741
2024		1,357
2025		1,182
Thereafter		994
Total future lease payments		9,409
Present value adjustment		(1,287	)
Present value of future lease payments	$	8,122

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Item 2  Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS DESCRIPTION AND OVERVIEW

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters.  These offerings provide customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious resource.  The Company’s flow measurement products measure water and other fluids and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data through various methods.  The Company’s water quality monitoring solutions include optical sensing and electrochemical instruments that provide real-time, on-demand data parameters. The Company’s product lines fall into two categories: sales of water meters, radios and related technologies, and water quality monitoring solutions to water utilities (utility water) and sales of meters and other sensing instruments, valves and other products for industrial applications in water, wastewater, and other industries (flow instrumentation).  The Company estimates that approximately 90% of its products are used in water related applications.

Utility water, the largest sales category, is comprised of either mechanical or static (ultrasonic) water meters along with the related radio and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues.  It further comprises other sensor technology used in the water distribution system to ensure the safe and efficient delivery of clean water.  These sensors are used to detect leaks in the distribution piping system and to monitor various water quality parameters throughout the distribution system.  The largest geographic market for the Company’s utility water products is North America, primarily the United States, because most of the Company's meters are designed and manufactured to conform to standards promulgated by the American Water Works Association.  The majority of water meters sold by the Company continue to be mechanical in nature; however, ultrasonic meters are an increasing percentage of the water meters sold by the Company and in the industry, due to a variety of factors, including their ability to maintain measurement accuracy over their useful life.  Providing ultrasonic water meter technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other geographical markets, for example the Middle East, Europe and Southeast Asia.  

The flow instrumentation product line primarily serves water applications throughout the broader industrial markets. This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids going through a pipe or pipeline including water, air, steam, oil, and other liquids and gases.  These products 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 to original equipment manufacturers as the primary flow measurement device within a product or system, as well as through manufacturers’ representatives.

Utility water meters (both residential and commercial) are generally classified as either manually read meters or remotely read meters via radio technology.  A manually read meter consists of a water meter and a register that provides a visual totalized meter reading.  Meters equipped with radio technology (endpoints) receive flow measurement data from battery-powered encoder registers attached to the water meter, which is encrypted and transmitted via radio frequency to a receiver that collects and formats the data appropriately for water utility usage and billing systems.  These remotely read systems are classified as either automatic meter reading (AMR) systems, where a vehicle equipped for meter reading purposes, including a radio receiver, computer and reading software, collects the data from the utilities’ meters; or advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network (either fixed or cellular) of data collectors or gateway receivers that are able to receive radio data transmission from the utilities’ meters. AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters.  These systems provide utilities with more frequent and diverse data from their meters at specified intervals.

The ORION® branded family of radio endpoints provides water utilities with a range of industry-leading options for meter reading.  These include ORION (ME) for migratable AMR meter reading, ORION (SE) for traditional fixed network applications, and ORION Cellular for an infrastructure-free meter reading solution.  ORION Migratable makes the migration to fixed network easier for utilities that prefer to start with mobile reading and later adopt fixed network communications, allowing utilities to choose a solution for their current needs and be positioned for their future operational changes.  ORION Cellular eliminates the need for utility-owned fixed network infrastructure, allows for gradual or full deployment, and decreases ongoing maintenance.

Information and analytics are critical to the water metering ecosystem.  The Company’s BEACON® Advanced Metering Analytics (AMA) software suite improves utility visibility to their water and water usage.  BEACON AMA is a secure, cloud-hosted software suite that includes a customizable dashboard, and has the ability to establish alerts for specific conditions.  It also allows for consumer engagement tools that permit end water users (such as homeowners) to view and manage their water usage activity.  Benefits to the utility include improved customer service, increased visibility through faster leak detection, the ability to promote and quantify the effects of its water conservation efforts, and easier compliance reporting.

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Water meter replacement and the adoption and deployment of new technology comprise the majority of water meter product sales, including radio products.  To a much lesser extent, housing starts also contribute to the new product sales base.  Over the last decade, there has been a growing trend in the conversion from manually read water meters to meters with radio technology.  This conversion rate is accelerating, with the Company estimating that approximately 65% of water meters installed in the United States have been converted to a radio solution technology.

In addition to our water utility flow measurement solutions, the Company provides various water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH, chlorine, nitrates and approximately 40 others.   Utilizing these solutions, water quality can be monitored continually or periodically throughout the network from its original source to the point in which it is recycled and returned.  The addition of real-time water quality parameters to core flow measurement, pressure and temperature sensing capabilities enhances the scope of actionable data for water utilities to improve operational security, awareness and efficiency.

The Company’s net sales and corresponding net earnings depend on unit volume and product mix, with the Company generally earning higher average selling prices and margins on meters equipped with radio technology, and higher margins on ultrasonic compared to mechanical meters.  The Company’s proprietary radio products generally result in higher margins than remarketed, non-proprietary technology products.  The Company also sells registers and endpoints separately to customers who wish to upgrade their existing meters in the field.  

Flow instrumentation products are used in flow measurement and control applications across a broad industrial spectrum, occasionally leveraging the same technologies used in the municipal water category.  Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets.  The Company provides both standard and customized flow instrumentation solutions.

The industries served by the Company’s flow instrumentation products face accelerating demands to contain costs, reduce product variability, and meet ever-changing safety, regulatory and sustainability requirements.  To address these challenges, customers must reap more value from every component in their systems.  This system-wide scrutiny has heightened the focus on flow instrumentation in industrial process, manufacturing, commercial fluid, building automation and precision engineering applications where flow measurement and control are critical.

A leader in both mechanical and static (ultrasonic) flow metering technologies for industrial markets, the Company offers one of the broadest flow measurement, control and communication portfolios in the market.  This portfolio carries respected brand names including Recordall®, Hedland®, Dynasonics®, Blancett®, and Research Control®, and includes eight of the ten major flow meter technologies.  Customers rely on the Company for application-specific solutions that deliver accurate, timely and dependable flow data and control essential for product quality, cost control, safer operations, regulatory compliance and more sustainable operations.

In addition, the Company provides various water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters providing industrial customers with both process and discharge water quality monitoring capabilities.  The Company's products are sold throughout the world through employees, resellers and representatives.  Depending on the customer mix, there can be a moderate seasonal impact on sales, primarily relating to higher sales of certain utility water products during the spring and summer months.  No single customer accounts for more than 10% of the Company's sales.

Long-Term Business Trends

Across the globe, increasing regulations and a focus on sustainability are driving companies and utilities to better manage critical resources like water, monitor their use of hazardous materials and reduce exhaust gases.  Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to help 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 to measure water, oil, chemicals and other fluids, gases and steams.  This technology is critical to provide 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 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 65% of them have converted to a radio solution.  The Company believes it is well positioned to meet this continuing conversion trend with its comprehensive radio and software solutions.

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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 and has recently launched its next generation of ultrasonic metering with its D-Flow technology, which the Company believes increases its competitive differentiation.  While the introduction of ultrasonic technology into North America may increase competition, it also opens up further geographic penetration opportunities for the Company as previously described.

For over 115 years, the Company has offered innovative flow metering and control solutions for smart water management, smart buildings and smart industrial processes. The acquisition of s::can, a leading provider of online water quality monitoring solutions, adds real-time water quality parameters to our capabilities and enhances the scope of actionable data for our customers to help measure and protect resources for a smarter world. The combined solutions from Badger Meter and s::can offer technology that measures both the quantity and quality of liquids.

Finally, the concept of “Smart Cities” is one avenue to affect efficient city operations, conserve resources and improve service and delivery.  Smart water solutions (“Smart Water”) are those that provide actionable information through data analytics from an interconnected and interoperable network of sensors and devices that help people and organizations efficiently use and conserve one of the world’s most precious resources.  Badger Meter is well positioned to benefit from the advancement of Smart Water applications within the Smart Cities framework.  Cities have a keen interest in Smart Water as it provides both a revenue base, quality monitoring and conservation outcome.  Badger Meter is one of approximately a dozen firms, and the only smart water company, that participates in the AT&T Smart City Alliance.  By leveraging this alliance, the Company has been able to gain access and sell its broad smart water solutions to higher level decision makers within a city such as the mayor’s office.  In addition, it allows Badger Meter to keep abreast of emerging cellular technology changes which the Company believes is the premier infrastructure-free AMI solution.

Current Business Trends

In December 2019, a novel coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On March 11, 2020, the WHO characterized COVID-19 as a pandemic.

During the second quarter of 2020, the Company implemented remote work arrangements for non-production personnel, adopted robust safety, social distancing and temperature screening protocols throughout its manufacturing sites and enacted other measures to be able to deliver products to meet customer orders on a timely basis.  While the pandemic has had varying levels of impact to demand trends, to date it has not materially affected our ability to maintain business operations, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. The Company has enacted various return-to-work protocols for non-production personnel.

During the first quarter of 2021, the Company continued to operate with various return-to-work protocols for non-production personnel and our manufacturing operations continued to follow safety and COVID-19 protocols. Utility water and flow instrumentation customer orders have been resilient and have returned to pre-COVID-19 levels or higher in some cases. While customer order rates have been strong, a global electronics shortage has caused logistical challenges and manufacturing interruptions which limited the Company’s output in the first quarter of 2021.  The electronic component availability issues continue to inhibit the Company’s ability to fully satisfy the increase in demand for some products.  While the Company is navigating a fluid environment with operational agility to support customers, these intermittent supply disruptions are likely to increase the unevenness of sales patterns for the remainder of 2021.

It remains difficult to estimate the severity and duration of the impact of the COVID-19 pandemic on the Company’s business, financial position or results of operations. The magnitude of the impact will be determined by the duration and span of the pandemic, operational disruptions including those resulting from government actions, delivery interruptions due to component supply availability or logistical challenges, the timeline for broadly available vaccines and the overall impact on the economy.  The Company has contingency plans in place to adequately respond to a wide range of potential economic scenarios and our Board of Directors continues to monitor and evaluate the ongoing situation.

Acquisitions

On January 1, 2021, the Company acquired 100% of the outstanding stock of ATi, headquartered in Collegeville, Pennsylvania, a provider of water quality monitoring systems.  

The total purchase consideration, net of cash acquired, was $44 million. The Company's preliminary allocation of the purchase price at March 31, 2021 included $3.9 million of receivables, $4.0 million of inventory, $2.5 million of other assets, $21.0 million of intangibles and $16.1 million of goodwill that is deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with estimated average useful lives of 12 to 15 years.  The Company also assumed $1.2 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7 million of other

17

liabilities as part of the acquisition.  The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition.

As of March 31, 2021, the Company had not completed its analysis for estimating the fair value of the assets acquired.  This acquisition is further described in Note 4 “Acquisitions” in the Notes to Consolidated Financial Statements.

On November 2, 2020, the Company acquired 100% of the outstanding stock of s::can headquartered in Vienna, Austria.  s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of parameters in water and wastewater utilizing in-line monitoring systems.

The total purchase consideration for s::can was $30.6 million, which included $29.1 million in cash, $0.6 million of payments made in the first quarter of 2021 and $0.9 million in payments that are anticipated to be made in the second quarter of 2021, which are recorded in payables on the Consolidated Balance Sheet at March 31, 2021. The Company's preliminary allocation of the purchase price at March 31, 2021 included $3.1 million of receivables, $4.3 million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.4 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with an estimated average useful life of 12 years. The Company also assumed $3.6 million of accounts payable, $3.2 million of deferred tax liabilities and $1.3 million of other liabilities as part of the acquisition.  The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition.

As of March 31, 2021, the Company had not completed its analysis for estimating the fair value of the assets acquired.  This acquisition is further described in Note 4 “Acquisitions” in the Notes to Consolidated Financial Statements.

Revenue and Product Mix

As the industry continues to evolve, the Company has been at the forefront of innovation across metering, radio and software technologies in order to meet its customers’ increasing expectations for accurate and actionable data.  As technologies such as ORION Cellular and BEACON AMA managed solutions have become more readily adopted, the Company’s revenue from Software as a Service (SaaS) has increased significantly, albeit from a small base, and is margin accretive.

In addition, the Company has expanded its smart water offering with the addition of online water quality monitoring solutions, adding real-time water quality parameters to augment the scope of actionable data for water utility and industrial customers to optimize their operations.

The Company also seeks opportunities for additional revenue enhancement.  For instance, the Company has made inroads into the Middle East market with its ultrasonic meter technology and is pursuing other geographic expansion opportunities.  Additionally, the Company is periodically asked to oversee and perform field installation of its products for certain customers.  In these cases, the Company assumes the role of general contractor and either engages installation subcontractors and supervises their work or performs the installation.

Results of Operations - Three Months Ended March 31, 2021

Net Sales

The Company’s net sales for the three months ended March 31, 2021 were $117.8 million compared to $108.5 million during the same period in 2020. Sales into the utility water market were $95.8 million, an increase of 11.8% from the prior year’s $85.7 million.  The increase was attributable to the acquisitions of s::can and ATi which added approximately $10.0 million of revenue in the quarter.  Excluding these acquisitions, utility sales were essentially flat. Orders exceeded sales in the quarter, the result of manufacturing interruptions from the widespread global electronics shortages and logistics challenges which limited output.  Sales of products into the global flow instrumentation end markets were $22.0 million, 3.4% lower than the prior year’s $22.8 million due to improving, yet continued sluggish activity across the array of end markets and applications served.

Earnings

Total operating earnings for the three months ended March 31, 2021 were $17.7 million, or 15.1% of sales, compared to $16.0 million, or 14.8% of sales, in the comparable prior year quarter.  Gross margin dollars increased $6.0 million, and gross margin as a percent of sales increased from 39.9% to 41.9%.  Positive acquisition and product sales mix, including higher SaaS revenues, contributed to the margin improvement.  In addition, gross margins benefitted from pricing actions which more than offset inflation in brass input costs.  Selling, engineering and administration (“SEA”) expenses were $31.6 million or 26.8% of sales compared to $27.3 million or 25.2% of sales in the comparable prior year quarter.  The increase was due to the inclusion of the s::can and ATi acquisitions, along with the resultant intangible asset amortization.  

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The provision for income taxes as a percentage of earnings before income taxes for the first quarter of 2021 was 22.2% compared to 25.6% in the first quarter of 2020.  Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits and allowances.  

As a result of the above-mentioned items, net earnings for the three months ended March 31, 2021 were $13.8 million, or $0.47 per diluted share, compared to $11.9 million, or $0.41 per diluted share, for the same period in 2020.

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

The Company uses primary working capital (“PWC”) as a percentage of sales as a key metric for working capital efficiency. The Company defines this metric as the sum of Receivables and Inventories less Payables, divided by trailing twelve month net sales. The following table shows the components of our PWC (in millions):

	March 31, 2021				December 31, 2020
	$			PWC%	$			PWC%
Receivables	$	61,642		14.2%	$	61,689		14.5%
Inventories		84,251		19.4%		81,586		19.2%
Payables		(40,014	)	-9.2%		(34,923	)	-8.2%
Primary Working Capital	$	105,879		24.3%	$	108,352		25.5%

Overall, PWC declined $2.5 million compared to the previous year-end, despite the addition of $6.7 million of ATi PWC balances.  Receivables at March 31, 2021 were essentially flat with year-end due to strong collection efforts.  Inventories increased $2.7 million due to the addition of ATi, Payables at March 31, 2021 were $5.1 million higher than year-end due to the addition of ATi as well as timing of payments and previously negotiated payment terms extensions.

Cash Provided by Operations

Cash provided by operations in the first three months of 2021 was $30.6 million compared to $30.5 million in the same period of 2020 as strong earnings and working capital management activities drove solid cash conversion in both years.

Capital expenditures for the first three months of 2021 were $1.8 million compared to $1.9 million in the comparable prior year period.

Cash and cash equivalents declined to $51.4 million from $72.3 million at December 31, 2020 due to the deployment of $44 million to acquire ATi and payment of the quarterly dividend, partially offset by strong cash flow generation.

The Company’s financial condition remains strong.  In June 2018, the Company amended its May 2012 credit agreement with its primary lender and extended its term until September 2021. The credit agreement includes a $125.0 million line of credit that supports commercial paper (up to $70.0 million) and includes $5.0 million of a Euro line of credit.  While the facility is unsecured, there are a number of financial covenants with which the Company must comply, and the Company was in compliance as of March 31, 2021. 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.  As future borrowing requirements would likely be fulfilled via the local commercial paper market, the Company routinely monitors the current borrowing market.  The Company had $133.1 million of unused credit lines available at March 31, 2021.

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 2020 and the first quarter of 2021 were not material.

See the “Special Note Regarding Forward Looking Statements” at the front of this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of risks and uncertainties that could impact the Company’s financial performance and results of operations.

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Off-Balance Sheet Arrangements and Contractual Obligations

The Company’s off-balance sheet arrangements and contractual obligations are discussed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Off-Balance Sheet Arrangements” and “Contractual Obligations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and have not materially changed since that report was filed unless otherwise indicated in this Quarterly Report on Form 10-Q.

Item 3  Quantitative and Qualitative Disclosures about Market Risk

The Company’s quantitative and qualitative disclosures about market risk are included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Market Risks” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and have not materially changed since that report was filed.

Item 4  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management evaluated, with the participation of the Company’s Chairman, President and Chief Executive Officer and the Company’s Senior Vice President - Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the quarter ended March 31, 2021.  Based upon their evaluation of these disclosure controls and procedures, the Company’s Chairman, President and Chief Executive Officer and the Company’s Senior Vice President – Chief Financial Officer concluded that, as of the date of such evaluation, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II – Other Information

Item 1A  Risk Factors

There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2Unregistered Sales of Equity Securities and Use of Proceeds

In February 2020, the Board of Directors authorized the repurchase of up to an additional 400,000 shares of the Company’s Common Stock through February 2023.  The Company did not make any purchases of equity securities under the repurchase program during the quarter ended March 31, 2021.

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of a publicly announced program		Maximum number of shares that may yet be purchased under the program
January 1, 2021 - January 31, 2021		-		-		49,953		350,047
February 1, 2021 - February 28, 2021		-		-		49,953		350,047
March 1, 2021 - March 31, 2021		-		-		49,953		350,047
Total as of March 31, 2021		-				49,953		350,047

Item 6  Exhibits

EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, (v) the Consolidated Condensed Statements of Shareholders’ Equity and (vi) Notes to Unaudited Consolidated Condensed Financial Statements, tagged as blocks of text and including detailed tags.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BADGER METER, INC.
Dated: April 28, 2021	By	/s/ Kenneth C. Bockhorst
		Kenneth C. Bockhorst
		Chairman, President and Chief Executive Officer
	By	/s/ Robert A. Wrocklage
		Robert A. Wrocklage
		Senior Vice President – Chief Financial Officer
	By	/s/ Daniel R. Weltzien
		Daniel R. Weltzien
		Vice President – Controller

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EX-31.1

Exhibit 31.1

Certification of Chairman, President and Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Kenneth C. Bockhorst, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Badger Meter, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	April 28, 2021	By	/s/ Kenneth C. Bockhorst
			Kenneth C. Bockhorst
			Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Senior Vice President – Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Robert A. Wrocklage, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Badger Meter, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	April 28, 2021	By	/s/ Robert A. Wrocklage
			Robert A. Wrocklage
			Senior Vice President – Chief Financial Officer

EX-32

Exhibit 32

Written Statement of the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. §1350

Solely for the purpose of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Badger Meter, Inc., a Wisconsin corporation (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2021 (the “Report”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	April 28, 2021	By	/s/ Kenneth C. Bockhorst
			Kenneth C. Bockhorst
			Chairman, President and Chief Executive Officer
		By	/s/ Robert A. Wrocklage
			Robert A. Wrocklage
			Senior Vice President – Chief Financial Officer

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	Apr. 12, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Trading Symbol	BMI
Title of 12(b) Security	Common Stock
Security Exchange Name	NYSE
Entity Registrant Name	BADGER METER, INC.
Entity Central Index Key	0000009092
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		29,175,515
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-06706
Entity Incorporation, State or Country Code	WI
Entity Tax Identification Number	39-0143280
Entity Address, Address Line One	4545 W. Brown Deer Road
Entity Address, City or Town	Milwaukee
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53233
City Area Code	(414)
Local Phone Number	355-0400

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Consolidated Condensed Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 51,402	$ 72,273
Receivables	61,642	61,689
Inventories:
Finished goods	27,967	24,881
Work in process	14,094	16,841
Raw materials	42,190	39,864
Total inventories	84,251	81,586
Prepaid expenses and other current assets	6,817	5,303
Total current assets	204,112	220,851
Property, plant and equipment, at cost	217,193	217,404
Less accumulated depreciation	(135,109)	(134,699)
Net property, plant and equipment	82,084	82,705
Intangible assets, at cost less accumulated amortization	72,119	53,598
Other assets	18,063	17,428
Deferred income taxes	5,081	5,090
Goodwill	104,836	88,708
Total assets	486,295	468,380
Current liabilities:
Payables	40,014	34,923
Accrued compensation and employee benefits	11,505	14,617
Warranty and after-sale costs	12,458	11,617
Other current liabilities	7,789	4,042
Total current liabilities	71,766	65,199
Other long-term liabilities	26,324	25,283
Deferred income taxes	6,057	5,696
Accrued non-pension postretirement benefits	5,786	5,789
Other accrued employee benefits	6,513	5,154
Commitments and contingencies (Note 5)
Shareholders’ equity:
Common stock	37,221	37,221
Capital in excess of par value	45,599	44,964
Reinvested earnings	323,383	314,850
Accumulated other comprehensive income	602	1,313
Less: Treasury stock, at cost	(36,956)	(37,089)
Total shareholders’ equity	369,849	361,259
Total liabilities and shareholders’ equity	$ 486,295	$ 468,380

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Consolidated Condensed Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Statement [Abstract]
Net sales	$ 117,842	$ 108,508
Cost of sales	68,480	65,186
Gross margin	49,362	43,322
Selling, engineering and administration	31,615	27,307
Operating earnings	17,747	16,015
Interest expense, net	7	31
Other pension and postretirement costs	31	44
Earnings before income taxes	17,709	15,940
Provision for income taxes	3,928	4,086
Net earnings	$ 13,781	$ 11,854
Earnings per share:
Basic	$ 0.47	$ 0.41
Diluted	0.47	0.41
Dividends declared per common share	$ 0.18	$ 0.17
Shares used in computation of earnings per share:
Basic	29,098,490	29,042,158
Impact of dilutive securities	218,098	181,757
Diluted	29,316,588	29,223,915

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Consolidated Condensed Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement Of Income And Comprehensive Income [Abstract]
Net earnings	$ 13,781	$ 11,854
Other comprehensive (loss) income:
Foreign currency translation adjustments	(714)	(627)
Pension and postretirement benefits, net of tax	3	1
Comprehensive income	$ 13,070	$ 11,228

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Consolidated Condensed Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating activities:
Net earnings	$ 13,781	$ 11,854
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation	2,873	2,975
Amortization	4,066	3,256
Deferred income taxes	38	392
Noncurrent employee benefits	81	88
Stock-based compensation expense	374	307
Changes in:
Receivables	3,864	1,385
Inventories	1,284	7,437
Payables	4,291	4,517
Prepaid expenses and other assets	(428)	(609)
Other current liabilities	332	(1,064)
Total adjustments	16,775	18,684
Net cash provided by operations	30,556	30,538
Investing activities:
Property, plant and equipment expenditures	(1,759)	(1,942)
Net cash used for investing activities	(46,320)	(1,942)
Acquisitions, net of cash acquired	(44,561)
Financing activities:
Dividends paid	(5,239)	(4,938)
Proceeds from exercise of stock options	352	478
Repurchase of treasury stock		(2,467)
Issuance of treasury stock	42	55
Net cash used for financing activities	(4,845)	(6,872)
Effect of foreign exchange rates on cash	(262)	(219)
(Decrease) Increase in cash and cash equivalents	(20,871)	21,505
Cash and cash equivalents – beginning of period	72,273	48,871
Cash and cash equivalents – end of period	$ 51,402	$ 70,376

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Consolidated Condensed Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock at $1 par value	[1]	Capital in excess of par value	Reinvested earnings	Accumulated other comprehensive income (loss)	Employee benefit stock	Treasury stock (at cost)
Balance at beginning of period at Dec. 31, 2019	$ 331,068	$ 37,200		$ 41,956	$ 285,879	$ 425	$ (154)	$ (34,238)
Net earnings	11,854				11,854
Pension and postretirement benefits (net of tax effect)	1					1
Foreign currency translation	(627)					(627)
Cash dividends	(4,948)				(4,948)
Stock options exercised	478	20		438				20
Stock-based compensation	307			307
Purchase of common stock for treasury stock	(2,467)							(2,467)
Issuance of treasury stock	55			(11)				66
Balance at end of period at Mar. 31, 2020	335,721	37,220		42,690	292,785	(201)	$ (154)	(36,619)
Balance at beginning of period at Dec. 31, 2020	361,259	37,221		44,964	314,850	1,313		(37,089)
Net earnings	13,781				13,781
Pension and postretirement benefits (net of tax effect)	3					3
Foreign currency translation	(714)					(714)
Cash dividends	(5,248)				(5,248)
Stock options exercised	352			281				71
Stock-based compensation	374			374
Issuance of treasury stock	42			(20)				62
Balance at end of period at Mar. 31, 2021	$ 369,849	$ 37,221		$ 45,599	$ 323,383	$ 602		$ (36,956)

[1] Each common share of stock equals $1 par value; therefore, the number of common shares is the same as the dollar value.

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Consolidated Condensed Statements of Shareholders' Equity (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement Of Stockholders Equity [Abstract]
Tax effect on employee benefit funded status adjustment	$ 1	$ 1
Cash dividends (in dollars per share)	$ 0.18	$ 0.17
Issuance of treasury stock (in shares)	23	15

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Basis of Presentation

3 Months Ended

Mar. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

Note 1   Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter contain all adjustments (consisting only of normal recurring accruals except as otherwise discussed) necessary to present fairly the Company’s consolidated condensed financial position at March 31, 2021 and December 31, 2020, results of operations, comprehensive income, cash flows and statements of shareholders’ equity for the three-month periods ended March 31, 2021 and 2020.  The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with United States generally accepted accounting principles 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.

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Additional Financial Information Disclosures

3 Months Ended

Mar. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Additional Financial Information Disclosures

Note 2   Additional Financial Information Disclosures

The consolidated condensed balance sheet at December 31, 2020 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.  Refer to the notes to consolidated financial statements included in that report for a description of the Company’s accounting policies and for additional details of the Company’s financial condition.  The details in those notes have not changed except as discussed below and as a result of normal adjustments in the interim.

Cash Equivalents

 The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents.

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 problems 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:

	Three months ended March 31,
(In thousands)	2021			2020
Balance at beginning of period	$	11,617		$	5,583
Net additions charged to earnings		1,420			1,161
Costs incurred		(579	)		(763	)
Balance at end of period	$	12,458		$	5,981

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 3   Accumulated Other Comprehensive Income (Loss)

Components of and changes in accumulated other comprehensive income at March 31, 2021 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	55	$	1,258		$	1,313
Other comprehensive (loss) before reclassifications		-		(714	)		(714	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($1)		3		-			3
Net current period other comprehensive income (loss), net of tax		3		(714	)		(711	)
Accumulated other comprehensive income	$	58	$	544		$	602

Details of reclassifications out of accumulated other comprehensive income during the three months ended March 31, 2021 are immaterial.     

Components of and changes in accumulated other comprehensive income (loss) at March 31, 2020 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	263	$	162		$	425
Other comprehensive (loss) before reclassifications		-		(627	)		(627	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($1)		1		-			1
Net current period other comprehensive income (loss), net of tax		1		(627	)		(626	)
Accumulated other comprehensive income (loss)	$	264	$	(465	)	$	(201	)

Details of reclassifications out of accumulated other comprehensive income (loss) during the three months ended March 31, 2020 are immaterial. 

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Acquisitions

3 Months Ended

Mar. 31, 2021

Business Combinations [Abstract]

Acquisitions

Note 4   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.

On January 1, 2021, the Company acquired 100% of the outstanding stock of Analytical Technology, LLC (“ATi”), headquartered in Collegeville, Pennsylvania, a provider of water quality monitoring systems.  

The total purchase consideration, net of cash acquired, was $44 million. The Company's preliminary allocation of the purchase price at March 31, 2021 included $3.9 million of receivables, $4.0 million of inventory, $2.5 million of other assets, $21.0 million of intangibles and $16.1 million of goodwill that is deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with estimated average useful lives of 12 to 15 years.  The Company also assumed $1.2 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7 million of other liabilities as part of the acquisition.  

The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of March 31, 2021, the Company had not completed its analysis for estimating the fair value of the assets acquired.

On November 2, 2020, the Company acquired 100% of the outstanding stock of s::can GmbH and subsidiaries (“s::can”) headquartered in Vienna, Austria.  s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of parameters in water and wastewater utilizing in-line monitoring systems.

The total purchase consideration for s::can was $30.6 million, which included $29.1 million in cash, $0.6 million of payments made in the first quarter of 2021 and $0.9 million in payments that are anticipated to be made in the second quarter of 2021, which are recorded in payables on the Consolidated Balance Sheet at March 31, 2021. The Company's preliminary allocation of the purchase price at March 31, 2021 included $3.1 million of receivables, $4.3 million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.4 million of goodwill that is not deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with an estimated average useful life of 12 years.  The Company also assumed $3.6 million of accounts payable, $3.2 million of deferred tax liabilities and $1.3 million of other liabilities as part of the acquisition.  

The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of March 31, 2021, the Company had not completed its analysis for estimating the fair value of the assets acquired.      

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Contingencies, Litigation and Commitments

3 Months Ended

Mar. 31, 2021

Commitments And Contingencies Disclosure [Abstract]

Contingencies, Litigation and Commitments

Note 5   Contingencies, Litigation and Commitments

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 2020 and the first quarter of 2021 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.

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 6   Income Taxes

The Company is subject to income taxes in the United States and numerous foreign jurisdictions. The Company’s income tax positions are based on interpretations of income tax laws and rulings in each of the jurisdictions that the Company operates.  Significant judgment is required in determining the worldwide provision for income taxes and recording the related deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income for the years in which the assets or liabilities are expected to be realized or settled. Interim provisions are tied to an estimate of the overall annual rate which can vary due to the relationship of foreign and domestic earnings, state taxes and available deductions, credits and discrete items.

The Company’s earnings before incomes taxes, income tax expense and effective income tax rate are as follows:

	Three months ended March 31,
(In thousands)	2021			2020
Earnings before income taxes	$	17,709		$	15,940
Provision for income taxes		3,928			4,086
Effective income tax rate		22.2	%		25.6	%

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Fair Value Measurements of Financial Instruments

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements of Financial Instruments

Note 7   Fair Value Measurements of Financial Instruments

The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities.  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 previously employed by the Company.  The carrying amounts of these insurance policies approximate their fair value.

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Subsequent Events

3 Months Ended

Mar. 31, 2021

Subsequent Events [Abstract]

Subsequent Events

Note 8   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 that the accompanying financial statements were issued, and has determined that no material subsequent events exist through the date of this filing.

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New Pronouncements

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

New Pronouncements

Note 9   New Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and modifies the existing guidance to enable more consistent application. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year with early adoption being permitted. The Company adopted ASU No. 2019-12 on January 1, 2021, the impact of which was not significant to the Company.

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Revenue Recognition

3 Months Ended

Mar. 31, 2021

Revenue From Contract With Customer [Abstract]

Revenue Recognition

Note 10   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, software access 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 2 "Additional Financial Information Disclosures" in the Notes to Unaudited Consolidated Condensed Financial Statements.

In accordance with ASU No. 2016-10 “Revenue from Contracts with Customers” (“Topic 606”), 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 meets the disclosure objective in Topic 606 which is to depict 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 as follows:

	Three months ended March 31,
(In thousands)	2021		2020
Revenues:
United States	$	94,266	$	94,492
Foreign:
Asia		4,789		1,548
Canada		2,613		3,136
Europe		11,747		4,775
Mexico		1,885		1,970
Middle East		2,176		1,537
Other		366		1,050
Total	$	117,842	$	108,508

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows:

	Three months ended March 31,
(In thousands)	2021				2020
Revenue recognized over time	$	6,461	5.5	%	$	4,804	4.4	%
Revenue recognized at a point in time		111,381	94.5	%		103,704	95.6	%
Total	$	117,842	100.0	%	$	108,508	100.0	%

The majority of the Company's revenue that is recognized over time relates to the BEACON® AMA software as a service, but also includes training, certain installation and other revenues.  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 shipping.

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, however, 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 closing balances of the Company's receivables and contract liabilities are as follows:

	March 31, 2021		December 31, 2020
(In thousands)
Receivables	$	61,642	$	61,689
Contract liabilities		25,891		24,761

Contract liabilities are included in Payables and Other long-term liabilities on the Company’s Consolidated Condensed Balance Sheets.  The balance of contract assets was immaterial as the Company did not have a significant amount

of uninvoiced receivables in the three-month period ended March 31, 2021 and twelve-month period ended December 31, 2020.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of measurement in Topic 606.  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 work progresses.  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 the BEACON AMA software as a service.

          As of March 31, 2021, the Company had certain contracts with unsatisfied performance obligations.  For contracts recorded as contract liabilities, $25.9 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 $5.5 million in 2021, $2.6 million in each year from 2022 through 2026 and $7.4 million thereafter.

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Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

Note 11   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 Condensed Balance Sheets. Lease liabilities are included in Other current liabilities and Other long-term liabilities on the Company’s Consolidated Condensed Balance Sheets.   Information regarding the Company's right-of-use assets and the corresponding lease liabilities are as follows:

	March 31, 2021		December 31, 2020
(In thousands)
Right-of-use assets	$	7,781	$	6,865
Lease liabilities		8,122		7,218

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 Condensed Balance Sheets. The Company’s rent expense is as follows:

	March 31, 2021
	2021		2020
(In thousands)
Operating lease expense	$	884	$	765
Variable and short-term lease expense		40		57
Rent expense	$	924	$	822

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 March 31, 2021 and December 31, 2020, the remaining lease term on the Company’s leases was 5.7 years and 6.0 years, respectively.  As of March 31, 2021 and December 31, 2020, the discount rate was 5.0%.  The future minimum lease payments to be paid under operating leases are as follows:

	March 31, 2021
(In thousands)
2021 (remaining nine months)	$	2,212
2022		1,923
2023		1,741
2024		1,357
2025		1,182
Thereafter		994
Total future lease payments		9,409
Present value adjustment		(1,287	)
Present value of future lease payments	$	8,122

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New Pronouncement - (Policies)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

New Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and modifies the existing guidance to enable more consistent application. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year with early adoption being permitted. The Company adopted ASU No. 2019-12 on January 1, 2021, the impact of which was not significant to the Company.

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Additional Financial Information Disclosures (Tables)

3 Months Ended

Mar. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Changes in Warranty and After-Sale Costs Reserve

Changes in the Company’s warranty and after-sale costs reserve are as follows:

	Three months ended March 31,
(In thousands)	2021			2020
Balance at beginning of period	$	11,617		$	5,583
Net additions charged to earnings		1,420			1,161
Costs incurred		(579	)		(763	)
Balance at end of period	$	12,458		$	5,981

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Components of and Changes in Accumulated Other Comprehensive Income

Components of and changes in accumulated other comprehensive income at March 31, 2021 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	55	$	1,258		$	1,313
Other comprehensive (loss) before reclassifications		-		(714	)		(714	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($1)		3		-			3
Net current period other comprehensive income (loss), net of tax		3		(714	)		(711	)
Accumulated other comprehensive income	$	58	$	544		$	602

Components of and changes in accumulated other comprehensive income (loss) at March 31, 2020 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	263	$	162		$	425
Other comprehensive (loss) before reclassifications		-		(627	)		(627	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($1)		1		-			1
Net current period other comprehensive income (loss), net of tax		1		(627	)		(626	)
Accumulated other comprehensive income (loss)	$	264	$	(465	)	$	(201	)

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Schedule of Earnings Before Incomes Taxes, Income Tax Expense and Effective Income Tax Rate

The Company’s earnings before incomes taxes, income tax expense and effective income tax rate are as follows:

	Three months ended March 31,
(In thousands)	2021			2020
Earnings before income taxes	$	17,709		$	15,940
Provision for income taxes		3,928			4,086
Effective income tax rate		22.2	%		25.6	%

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2021

Revenue From Contract With Customer [Abstract]

Disaggregation of Revenue

Information regarding revenues disaggregated by geographic area is as follows:

	Three months ended March 31,
(In thousands)	2021		2020
Revenues:
United States	$	94,266	$	94,492
Foreign:
Asia		4,789		1,548
Canada		2,613		3,136
Europe		11,747		4,775
Mexico		1,885		1,970
Middle East		2,176		1,537
Other		366		1,050
Total	$	117,842	$	108,508

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows:

	Three months ended March 31,
(In thousands)	2021				2020
Revenue recognized over time	$	6,461	5.5	%	$	4,804	4.4	%
Revenue recognized at a point in time		111,381	94.5	%		103,704	95.6	%
Total	$	117,842	100.0	%	$	108,508	100.0	%

Contract with Customer, Liability and Receivables

The closing balances of the Company's receivables and contract liabilities are as follows:

	March 31, 2021		December 31, 2020
(In thousands)
Receivables	$	61,642	$	61,689
Contract liabilities		25,891		24,761

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Schedule of Right-of-Use Assets and the Corresponding Lease Liabilities

Information regarding the Company's right-of-use assets and the corresponding lease liabilities are as follows:

	March 31, 2021		December 31, 2020
(In thousands)
Right-of-use assets	$	7,781	$	6,865
Lease liabilities		8,122		7,218

Schedule of Rent Expenses

The Company’s rent expense is as follows:

	March 31, 2021
	2021		2020
(In thousands)
Operating lease expense	$	884	$	765
Variable and short-term lease expense		40		57
Rent expense	$	924	$	822

Schedule of Future Minimum Lease Payments to be Paid under Operating Leases

The future minimum lease payments to be paid under operating leases are as follows:

	March 31, 2021
(In thousands)
2021 (remaining nine months)	$	2,212
2022		1,923
2023		1,741
2024		1,357
2025		1,182
Thereafter		994
Total future lease payments		9,409
Present value adjustment		(1,287	)
Present value of future lease payments	$	8,122

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Additional Financial Information Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Changes in warranty and after-sale costs reserve
Balance at beginning of period	$ 11,617	$ 5,583
Net additions charged to earnings	1,420	1,161
Costs incurred	(579)	(763)
Balance at end of period	$ 12,458	$ 5,981

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Accumulated Other Comprehensive Income (Loss) - Components of and Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amounts reclassified from AOCI, tax	$ (1)	$ 1,000
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	361,259	331,068
Other comprehensive (loss) before reclassifications	(714)	(627)
Amounts reclassified from accumulated other comprehensive income, net of tax	3	1
Net current period other comprehensive income (loss), net of tax	(711)	(626)
Balance at end of period	369,849	335,721
Unrecognized pension and postretirement benefits
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	55	263
Other comprehensive (loss) before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income, net of tax	3	1
Net current period other comprehensive income (loss), net of tax	3	1
Balance at end of period	58	264
Foreign currency
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	1,258	162
Other comprehensive (loss) before reclassifications	(714)	(627)
Amounts reclassified from accumulated other comprehensive income, net of tax	0	0
Net current period other comprehensive income (loss), net of tax	(714)	(627)
Balance at end of period	544	(465)
Accumulated other comprehensive income (loss)
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	1,313	425
Other comprehensive (loss) before reclassifications	(714)
Net current period other comprehensive income (loss), net of tax		(626)
Balance at end of period	$ 602	$ (201)

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Acquisitions (Details) - USD ($) $ in Thousands			3 Months Ended
	Jan. 01, 2021	Nov. 02, 2020	Mar. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Goodwill			$ 104,836		$ 88,708
Forecast
Business Acquisition [Line Items]
Contingent payments				$ 900
Analytical Technology, LLC
Business Acquisition [Line Items]
Date of acquisition	Jan. 01, 2021
Outstanding common stock acquired (as a percent)	100.00%
Total purchase consideration			44,000
Receivables			3,900
Inventory			4,000
Other assets			2,500
Intangibles			21,000
Goodwill			16,100
Accounts payable			1,200
Deferred tax liabilities			600
Other liabilities			1,700
Fair value of assets acquired			$ 0
Analytical Technology, LLC | Customer relationships | Minimum
Business Acquisition [Line Items]
Estimated average useful life			12 years
Analytical Technology, LLC | Customer relationships | Maximum
Business Acquisition [Line Items]
Estimated average useful life			15 years
GmbH And Subsidiaries
Business Acquisition [Line Items]
Date of acquisition		Nov. 02, 2020
Outstanding common stock acquired (as a percent)		100.00%
Total purchase consideration			$ 30,600
Receivables			3,100
Inventory			4,300
Other assets			1,200
Intangibles			12,700
Goodwill			17,400
Accounts payable			3,600
Deferred tax liabilities			3,200
Other liabilities			1,300
Fair value of assets acquired			0
Cash payment			29,100
Contingent payments			$ 600
GmbH And Subsidiaries | Customer relationships
Business Acquisition [Line Items]
Estimated average useful life			12 years

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Income Taxes - Schedule of Earnings Before Incomes Taxes, Income Tax Expense and Effective Income Tax Rate (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Earnings before income taxes	$ 17,709	$ 15,940
Provision for income taxes	$ 3,928	$ 4,086
Effective income tax rate	22.20%	25.60%

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue [Line Items]
Revenues	$ 117,842	$ 108,508
Revenue, remaining performance obligation, percentage	100.00%	100.00%
Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenues	$ 6,461	$ 4,804
Revenue, remaining performance obligation, percentage	5.50%	4.40%
Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Revenues	$ 111,381	$ 103,704
Revenue, remaining performance obligation, percentage	94.50%	95.60%
United States
Disaggregation of Revenue [Line Items]
Revenues	$ 94,266	$ 94,492
Asia
Disaggregation of Revenue [Line Items]
Revenues	4,789	1,548
Canada
Disaggregation of Revenue [Line Items]
Revenues	2,613	3,136
Europe
Disaggregation of Revenue [Line Items]
Revenues	11,747	4,775
Mexico
Disaggregation of Revenue [Line Items]
Revenues	1,885	1,970
Middle East
Disaggregation of Revenue [Line Items]
Revenues	2,176	1,537
Other
Disaggregation of Revenue [Line Items]
Revenues	$ 366	$ 1,050

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Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Revenue From Contract With Customer [Abstract]
Receivables	$ 61,642	$ 61,689
Contract liabilities	$ 25,891	$ 24,761

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Revenue Recognition - Narrative 1 (Details) $ in Millions	Mar. 31, 2021 USD ($)
Revenue From Contract With Customer [Abstract]
Revenue, remaining performance obligation	$ 25.9

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Revenue Recognition - Narrative 1 (Details 1) $ in Millions	Mar. 31, 2021 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 25.9
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-04-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 5.5
Expected timing of performance obligation satisfaction, period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 2.6
Expected timing of performance obligation satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 2.6
Expected timing of performance obligation satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 2.6
Expected timing of performance obligation satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 2.6
Expected timing of performance obligation satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2026-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 2.6
Expected timing of performance obligation satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2027-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 7.4
Expected timing of performance obligation satisfaction, period	1 year

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Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating leases, practical expedient	true
Operating leases, remaining lease term	5 years 8 months 12 days	6 years
Operating leases, discount rate	5.00%	5.00%

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Leases - Schedule of Right-of-Use Assets and the Corresponding Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Right-of-use assets	$ 7,781	$ 6,865
Lease liabilities	$ 8,122	$ 7,218

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Leases - Schedule of Rent Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Leases [Abstract]
Operating lease expense	$ 884	$ 765
Variable and short-term lease expense	40	57
Rent expense	$ 924	$ 822

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Leases - Schedule of Future Minimum Lease Payments to be Paid under Operating Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
2021 (remaining nine months)	$ 2,212
2022	1,923
2023	1,741
2024	1,357
2025	1,182
Thereafter	994
Total future lease payments	9,409
Present value adjustment	(1,287)
Present value of future lease payments	$ 8,122	$ 7,218