배저 미터(BMI) 2026년 3분기 실적 발표 콘퍼런스 콜: 마진 개선 및 4분기 성장 전망

핵심 요약

• 2026년 3분기 매출은 2억 3,590만 달러로 전년 동기 대비 변동이 없었습니다. UDlive의 매출 560만 달러를 제외한 기존 매출은 전년 동기 대비 2% 감소했으나 전 분기 대비로는 5% 증가했습니다.
• 영업이익은 4% 증가했으며, 영업이익률은 60bp 확대된 20.2%를 기록했습니다. 기존 영업이익률은 130bp 상승한 20.9%에 달했습니다.
• 매출총이익률은 120bp 상승한 41.9%를 기록했습니다. 초음파 미터기의 우호적인 제품 믹스와 SaaS 매출 증가가 전자 부품 원가 상승 압력 및 UDlive 재고자산 공정가치 상향 평가 상각 부담을 상쇄했습니다.
• 희석 주당순이익(EPS)은 1.19달러에서 1.24달러로 4% 증가했습니다. 잉여현금흐름은 전년 동기 4,820만 달러에서 4,030만 달러로 감소했습니다.
• 경영진은 4분기 근무일수가 5% 적음에도 불구하고 4분기 기존 매출이 전 분기 대비 및 전년 동기 대비 모두 성장할 것으로 예상하고 있습니다. 아울러 연간 자체 매출은 1자리 수 초반 퍼센트 감소할 것으로 예상된다고 설명했습니다.
• 배저 미터는 구체적인 연간 전망을 제시하지 않고 프로젝트 시점의 변동성을 강조했으나, 성장 모멘텀이 2027년까지 이어질 것으로 기대하고 있습니다.

핵심 재무 데이터

사업 및 영업 실적

푸에르토리코 상하수도청(PRASA)향 추가 물량을 포함해 기존에 수주한 프로젝트 공급이 계속 본격화됨에 따라 기존 유틸리티 수도 매출은 전 분기 대비 5% 증가했습니다. 원격검침인프라(AMI) 관련 제품 매출 감소는 소프트웨어 매출 증가로 일부 상쇄되었습니다.

경영진은 기초 유틸리티 수요가 견조하다고 설명했습니다. 유난히 부진했던 1분기 이후 2분기와 3분기 모두 단기 주기 수요가 정상 수준을 되찾았다고 언급했습니다. 회사에 따르면 컨설턴트와의 프로젝트 평가부터 제안요청서(RFP) 제출 및 본격 도입에 이르기까지 광범위한 파이프라인은 최근 수년간과 마찬가지로 견조하게 유지되고 있습니다.

유량 계측기 매출은 기저 효과가 높았던 전년 동기 대비 2% 증가했습니다. 배저 미터는 데이터 센터 애플리케이션의 수요 증가도 보고했으나, 이는 여전히 전체 매출에서 차지하는 비중이 상대적으로 작습니다.

회사는 AMI, 네트워크 모니터링 및 수질 데이터를 결합한 실시간 플랫폼인 원네트워크(OneNetwork)를 공식 출시했습니다. 이 플랫폼은 유틸리티 기업이 수압 변동, 수질 변화, 무수수 급증을 감지하는 동시에 운영 대응을 조율할 수 있도록 돕기 위해 설계되었습니다.

UDlive와 스마트커버(SmartCover)는 배저 미터가 계측 분야를 넘어 사업을 확장하는 데 지속적으로 기여하고 있습니다. 경영진은 두 사업 모두 회사의 장기 성장 전략과 일치한다고 밝혔습니다.

경영진 가이던스

경영진은 수주한 유틸리티 프로젝트 공급이 더욱 본격화됨에 따라 2026년 4분기 기존 매출이 전 분기 대비 및 전년 동기 대비 모두 증가할 것으로 예상하고 있습니다. 회사는 예상되는 4분기 성장을 완만한 수준으로 규정하며, 휴일로 인해 4분기 근무일수가 5% 적다고 언급했습니다.

2026년 전체 실적과 관련해 경영진은 자체 매출이 1자리 수 초반 퍼센트 감소할 것으로 예상된다고 명확히 밝혔습니다.

배저 미터는 성장 모멘텀을 2027년까지 유지하고 전략적 목표인 1자리 수 후반대 성장 기조로 복귀하는 것에 대해 자신감을 표명했습니다. 다만 프로젝트 도입과 단기 주기 수요가 분기별로 다를 수 있다는 이유로 2027년에 대한 구체적인 전망치 제시는 사양했습니다.

회사는 매출총이익률이 기존에 설정한 39%~42% 범위 내에 머물 것으로 계속 예상하고 있습니다. UDlive 관련 연간 무형자산 상각비 예비치는 약 500만 달러를 유지하고 있습니다.

리스크 및 관전 포인트

AI 및 데이터 센터 건설로 공급망 전반의 수요가 늘어나면서 전자 부품 비용 및 수급 압력이 한층 강화되었습니다. 경영진은 지금까지 가격 정책, 조달 및 운영 조치를 통해 이러한 영향을 완화했으나, 분기별 시점 차이에 따른 영향은 여전히 가능하다고 밝혔습니다.

대형 유틸리티 프로젝트는 설치 인력, 날씨, 고객 일정에 따라 진행이 불균일할 수 있습니다. PRASA는 2분기와 3분기에 제품을 인도받기 시작했으며 4분기에 설치가 시작될 예정이지만, 경영진은 일정한 선형적 설치 일정을 가정하지 말라고 당부했습니다.

재고자산은 매출 발생 시점과 전자 부품 안전 재고 확보로 인해 평년 수준을 상회했습니다. 회사는 연말까지 이러한 재고 잔액을 줄여나갈 것으로 예상합니다.

수익성 성과는 초음파 미터기, 소프트웨어, 턴키 프로젝트 및 전자 부품 원가를 포함한 제품 믹스에 여전히 민감하게 반응하고 있습니다. UDlive의 재고자산 공정가치 상향 평가 상각 역시 3분기 매출총이익률을 희석시키는 요인으로 작용했습니다.

애널리스트 Q&A 하이라이트

• 4분기 및 연간 매출: 경영진은 4분기에 기존 매출이 전 분기 대비 및 전년 동기 대비 완만하게 성장할 것으로 예상하고 있습니다. 연간 자체 매출은 1자리 수 초반 퍼센트 감소할 것이라고 설명했습니다.
• 이익률 강세: 초음파 미터기 믹스 개선과 지속적인 소프트웨어 성장이 주요 긍정적 요인이었습니다. 경영진은 관세 환급과 같은 의미 있는 일회성 이익은 없었다고 밝혔습니다.
• 2027년 성장 잠재력: 비교 기저 부담 완화와 프로젝트 공급 본격화는 회사의 전략적 목표인 1자리 수 후반대 성장 궤도로의 복귀에 대한 자신감을 뒷받침하지만, 경영진은 2027년 전망치를 수치화하지는 않았습니다.
• PRASA 프로젝트 도입: 제품 출하는 2분기에 시작되어 3분기에도 이어졌습니다. 설치 시공업체가 계약을 마쳤으며, 통상적인 집행 변동성에 따라 4분기에 설치가 시작될 예정입니다.
• 자본 배분: 배저 미터는 3분기 동안 5,500만 달러 규모의 자사주를 매입했으며, 매입 한도 내 잔여 금액은 약 3,500만 달러입니다. 8월에 연간 배당률을 10% 인상하여 34년 연속 연간 배당 인상을 기록했습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Ladies and gentlemen, welcome to the Third Quarter 2026 Badger Meter Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the conference over to Dan Weltzien, Chief Financial Officer and Treasurer. Please go ahead, Mr. Weltzien.

Daniel Weltzien

Good morning. Thank you for joining the Badger Meter Third Quarter 2026 Earnings Conference Call. I'm here today with Ken Bockhorst, our Chairman, President and Chief Executive Officer; and Bob Wrocklage, our Executive Vice President of North America Municipal Utility.

This morning, we posted the earnings release and related slide presentation on our website. As a reminder, any forward-looking statements made on this call are subject to various risks and uncertainties, the most important of which are outlined in our news release and SEC filings.

On today's call, we may refer to certain non-GAAP financial metrics, including base results, which exclude the impact of UDlive acquired May 1, 2026. Our release and earnings presentation provide a reconciliation between the most directly comparable GAAP measure and any non-GAAP financial measures discussed.

With that, I'll turn the call over to Ken.

Kenneth Bockhorst

Thanks, Dan, and good morning. We were pleased with the sales and operating profit performance in the quarter. Excluding the solid revenue contribution of the UDlive acquisition, third quarter base sales increased 5% sequentially from the second quarter. This was largely in line with our expectations and the result of the ongoing ramp of previously disclosed awarded projects and solid underlying market demand in the quarter.

As noted in the release, we continue to anticipate both sequential and year-over-year improvement in revenue in the fourth quarter and expect to sustain this growth momentum into 2027, which I'll discuss further in the outlook. The team executed well on the profitability front as we continued operating cost management actions to mitigate the uneven 2026 sales cadence while also addressing ongoing material cost pressures related to broad electronic supply chain dynamics as we described last quarter.

I'll turn the call over to Dan to walk through the specifics of the quarter, and then Bob will provide an update on commercial activity, including our formal launch of OneNetwork. I'll then come back to cover the outlook and take your questions.

Go ahead, Dan.

Daniel Weltzien

Thanks, Ken. Turning to Slide 3. Total sales in Q3 were $235.9 million, in line with the third quarter of 2025. Excluding the benefit of UDlive sales of $5.6 million, base sales were down 2% year-over-year. Sequentially, base sales were 5% higher than the second quarter levels with a number of the previously disclosed awarded projects ramping, including another quarter of PRASA shipments. Utility water sales were flat year-over-year and excluding the acquisition, were down 3%, reflecting the same project pacing dynamics mentioned earlier.

Lower AMI-related product sales were partially offset by higher software revenue. It is important to note that base utility sales improved 5% sequentially. Sales of the flow instrumentation product line were up 2% year-over-year against the prior year's most difficult comparison as we experienced broad-based water application demand. We continue to see increasing demand in data center applications for our flow instrumentation products, albeit from a relatively small revenue base. We were pleased with operating profitability this quarter, largely the result of higher sales, ongoing structural mix benefit to gross margins and effective price/cost management.

On a year-over-year basis, operating earnings increased 4% with margins up 60 basis points to 20.2% Base operating profit margins, excluding UDlive were 20.9%, up 130 basis points from last year's third quarter.

Gross margin was 41.9%, up 120 basis points from the third quarter of 2025, reflecting structural mix improvements primarily from higher ultrasonic meter sales and continued growth of our Software-as-a-Service revenue, partially offset by the dilutive impact of UDlive's inventory fair value step-up amortization in the quarter. Base gross margin was 42.1% at the top end of our normalized range, indicative of the resiliency of our overall structural mix and pricing discipline.

Last quarter, I called out the increasing level of electronic component costs and availability pressures to gross margins, which are a byproduct of the AI and data center build-out demand. As demonstrated by our margin performance, we have thus far been able to adequately mitigate these impacts. However, the challenges posed by these pressures have not abated.

Turning to selling, engineering and administrative expenses. The third quarter's $51.1 million was $1.3 million higher year-over-year, including $2.3 million from the addition of UDlive, inclusive of the intangible asset amortization. This was partially offset by lower incentive compensation and the benefit of appropriate cost controls. As a reminder, our preliminary expectation for UDlive intangible asset amortization is approximately $5 million annually. The effective income tax rate in the quarter was 25.1% compared to 26.1% last year.

Finally, diluted earnings per share were $1.24, an increase of 4% from $1.19 in the prior year period. Primary working capital as a percentage of sales was 23.6%, up slightly from 22.9% at the prior quarter end. We anticipate continuing to work down the above-average inventory levels resulting from revenue pacing dynamics and electronic safety stock levels as the year concludes.

Free cash flow was $40.3 million, down from $48.2 million in the prior year comparable quarter. As always, we remain focused on delivering free cash flow conversion in excess of 100% of net earnings. In the third quarter of 2026, we repurchased 423,000 shares for a total of approximately $55 million and have roughly $35 million remaining on our current share repurchase authorization.

With that, I'll turn the call over to Bob.

Robert Wrocklage

Thanks, Dan. A few weeks ago, we had the opportunity to connect with customers, engineering consulting firms and investors at WEFTEC in New Orleans. During the show, we formally launched OneNetwork, our real-time network monitoring and analysis platform for water and wastewater utilities.

For those that attended our Investor Day back in May of this year, you heard an early preview of OneNetwork. In short, OneNetwork brings AMI, network monitoring and water quality data together in one platform, enabling customers to identify issues sooner, coordinate responses faster and make more informed operational decisions.

Why is this important? Utilities today have an immense amount of data from online sensors to SCADA and GIS information. OneNetwork provides a unified real-time view of this disconnected data to make it usable. By moving from fragmented data to a single operational view, OneNetwork empowers utilities through alerts, advanced analytics and workflows to better manage issues such as pressure events, water quality changes and non-revenue water spikes. This saves utilities both time and money while increasing their capability to respond faster and act with purpose.

WEFTEC visitors were able to view OneNetwork demonstrations and customer and consultant interest was high. It serves as another example of our competitive differentiation through innovation, portfolio constructions and the benefits derived by customers from our sole focus on value-driven water technology.

One important way we gain critical feedback and inform our innovation is through our engaged customer community, which encompasses in-person and virtual discussions throughout the year. This week, we had the signature event, ENGAGE Live hosted in our hometown of Milwaukee, where current and prospective customers interacted with our leadership, product management and sales and customer support teams.

Among other outcomes, the event has served to share best practices for implementations, outcomes and funding sources as well as gain insight and share feedback on our future product and software plans. It is clear from talking to customers that utility needs for and interest in our tailorable solutions to meet their increasing challenges remains high, and we are well positioned to capitalize on these opportunities to improve customer outcomes.

With that, I'll turn the call back to Ken.

Kenneth Bockhorst

Thanks, Bob. Looking ahead to the fourth quarter, I'll reiterate here what we said in the release, which is consistent with our discussions over the past few quarters. We continue to anticipate further ramping of awarded utility projects, noting, as always, the inherent unevenness typical of the business. We expect both year-over-year and sequential quarterly base sales growth in the fourth quarter of 2026, despite fewer total operating days given the holidays, which is a standard annual dynamic.

While I won't delve into 2027 specifics at this point, I will note that our conviction in sustaining this growth momentum into 2027 as well as the long-term growth profile for Badger Meter remains intact as we continue to manage usual quarter-to-quarter dynamics. We remain committed to the strategic formula that has driven our prolonged success, focusing on our customers, offering innovative and differentiated technologies and driving operational excellence.

You heard Bob speak to advancements in software outcomes and customer engagement, which reinforce our multiyear opportunities in both metering and beyond the meter growth. Our long-standing capital allocation approach of investing in growth while also returning cash to shareholders also supports this long-term growth strategy.

For example, in August, we increased our annual dividend rate by 10%, marking the 34th consecutive year of increases, and we repurchased $55 million of our outstanding shares, bringing the trailing 4 quarters to over $130 million.

In summary, I remain optimistic about our team's ability to deliver value creation opportunities for our customers and shareholders alike.

With that, operator, please open the line for questions.

Operator

[Operator Instructions]

Your first question comes from the line of Nathan Jones with Stifel.

질의응답

Nathan Jones

I guess, Ken, I'm going to start off with the 4Q guidance. You guys have talked about full year revenue being flattish. The 4Q guide being sequentially and year-over-year better would be a pretty wide range to get into something that would be flattish. So I'm hoping you can put a finer point on what you think 4Q revenue is likely to be? And what's the upper and lower bound view on flattish?

Kenneth Bockhorst

Yes. Yes. Thanks, Nathan. Yes. When we put that term out there earlier in the year, you'll recall that at Investor Day, when we were asked on flattish, I called out, don't expect upside, right? So on a year-over-year basis, I was pretty vocal on the best case would be flat year-over-year. The way things have played out, we're really proud of where we're headed going into Q4, looking at year-over-year growth. We said we'd exit the year with momentum. We're doing that. When we talk about modest growth in the quarter, that keeps in mind the 5% fewer workdays in the quarter, but we expect to be up. So if you needed to peg me on something at this point, I would say that I would expect modest growth in the quarter sequentially and perhaps low single digits on a year-over-year full year basis.

Nathan Jones

Okay. That's helpful. I guess my follow-up question is on gross margins, which were much better than I expected them to be in the quarter given some of the pressures that you were facing from lower gross margins on some of the projects that are ramping up. Obviously, there's inflation that's passing through. So maybe you can just talk a little bit about the dynamics there, what led to those gross margins being as strong as they were and how you're thinking about those in the fourth quarter and as we head into next year?

Kenneth Bockhorst

Yes, sure. So first thing, I want to clarify, I'm sure you understood what I meant, but I didn't say the word down. So we expect to be down year-over-year, low single digits, just to be clear. In terms of...

Nathan Jones

Low single digits year-over-year...

Kenneth Bockhorst

Full year, down low single digits.

Nathan Jones

Low single digit. Full year, down low single digits, 4Q up low single digits? Or was that not what you said?

Kenneth Bockhorst

I'm not providing a digits on the up for Q4. Modestly up.

Nathan Jones

Down low single digits full year. Got it.

Kenneth Bockhorst

Correct. Got it. Perfect. Now when it comes to margin -- yes, sure thing. When it comes to margins, I'll just reiterate what we've said for several years now. We have this really positive structural mix that regardless of operating conditions, it does tend to get incrementally better every year when we have really nice growth in software that's higher margin. Beyond the meter is all higher margin.

So the structural mix remains greatly intact, which helps us with a really strong floor on margins. And then also our hallmark, I think, for the last 5 or 6 years is when challenged, we've performed in a really operationally excellent way. So we understood what the challenges are, and I'm really proud of our team, how we handled it. I'll turn it to Dan here for some more specifics. But just generally, I feel really good of how we've navigated the quarter.

Daniel Weltzien

Yes. And so Nathan, if I look at the quarter specifically and go back to the remarks that I had in the script, the biggest 2 drivers within the quarter were what I called out, which was ultrasonic meter mix generally across the residential space and then continued software growth. So as we move throughout the year, and as you know, the resiliency of our software growth is in the installed base. And so despite the unevenness that we've experienced throughout the year, that software growth has continued.

All the other things I've called out in prior quarters are the same drivers that we're paying attention to, both on the positive side from a structural mix perspective, but also on the downside risk perspective from turnkey mix and electronic component availability and supply and cost. So it's really all of the same drivers. It's just how does that particular quarter play out.

Nathan Jones

No onetimers like tariff refunds or anything in the quarter?

Daniel Weltzien

Nothing meaningful.

Operator

Your next question comes from the line of Quinn Fredrickson with Baird.

Quinn Fredrickson

Recognize you have these larger AMI projects kicking off, but the release mentioned solid underlying demand trends in the third quarter. I know you don't break it out, but even qualitatively, does the underlying day-to-day replacement business feel like it's getting a little healthier or more normal? Just any commentary there?

Kenneth Bockhorst

Yes. Just if we circle back to how we talked about this in Q1, we were pointing out that on that shorter visibility window, there is inherent unevenness, can be up, can be down. And certainly, we were surprised to how far down in Q1. But Qs 2 and 3 have been perfectly normal. So obviously, to get to the result that we did, Q2 was better than Q1. Q3 was better than Q1. So structurally, demand feels good to us. And while Q1 was down, the year has really been pretty normal other than that one outlier.

Quinn Fredrickson

Great. Second, just on PRASA. There's been some headlines about drought and water supply pressures in Puerto Rico. Is the urgency around the AMI rollout changed at all with that? Or does that create any more urgency to create a faster deployment schedule? Just any commentary on how that impacts the project there?

Kenneth Bockhorst

Yes. So it wouldn't be appropriate for me to comment on their ability or desire to go faster or not. The challenges you read about are certainly real, and that's why they're looking to adopt our AMI system. What I can tell you is we've begun shipping product this year. We had mentioned that we began in Q2 and Q3 because they're ramping up to get started with installations. They've hired the installation contractors. They're in planning, and they're expecting to start installations in Q4.

Yes, I think ideally, if they could go faster, they'd love to. But the way these projects are, I should probably point out that just because the projects are ramping, they will also be inherently uneven. Some go faster, some go slower from quarter-to-quarter as you run into manpower challenges or weather issues. So the project starting, inclusive of PRASA and the others feels great for the long term, but I do always want to remind people quarter-to-quarter, there can be variation even though these projects are in flight.

Operator

The next question comes from the line of Jeff Reive with RBC Capital Markets.

Jeffrey Reive

So given the 9 projects ramping, UDlive annualizing midyear next year and kind of easier comps across all 4 quarters, is it fair to expect a return to high single-digit organic next year? Or could that ramp dynamic actually push you above that range?

Kenneth Bockhorst

Yes. I think the math equation of that sounds correct, right? As we head into Q4, that's an easier year-over-year comp and the first couple of quarters are certainly easier than the back half will be. I'm not going to peg a year because of all the inherent unevenness I just talked about when short cycles can be and how projects can ramp or not, but we feel really good about the year in general in terms of our ability to get back on our strategic growth horizon of high single digits. But to peg the year is probably not great at the moment, but we feel good about it.

Jeffrey Reive

Fair enough. And then last quarter, you flagged the increasing electronic component costs and availability pressures tied to AI and data center demand. Have those pressures escalated further? And have you needed to take any incremental pricing or sourcing actions?

Kenneth Bockhorst

Yes. So they have escalated. So we do continue to see some price escalation. We do continue to see availability challenges. Again, I want to point out, our team has been excellent this time and the last time we faced a similar situation. We understand the challenge in front of us. Our team is working hard on it. Fortunately, for us, our portfolio is highly valued by our customers. They understand what we do for them, and we're able to extract the value that we deserve. So the word -- I'd rather talk about that than pricing. But yes, we can balance price/cost dynamics pretty effectively.

Operator

The next question comes from the line of James Ko with Jefferies.

Jae Hyun Ko

Just one quick clarification question. When you say low single-digit decline for the full year, is that organic or inclusive of UDlive here?

Kenneth Bockhorst

That is organic.

Jae Hyun Ko

Awesome. Yes. And I guess, can we talk about like the non-metering businesses like UDlive and SmartCover, how they are doing, whether those are growing above the company average and whether those are kind of trending in line with your deal case?

Kenneth Bockhorst

Yes. So as you know, those are also in our utility bucket that we talked about more broadly. UDlive is still very public. We're really excited about the opportunities as we were when we acquired both of these companies. It's an absolute need that every utility customer deals with. It's an innovative product. We've got the right sales channel. So feel good about the progress on UDlive, feel equally as good about SmartCover, and that will continue to be part of this high-digit growth story that we talked about for years to come.

Operator

The next question comes from the line of Scott Graham with Seaport.

Scott Graham

I have 2 questions for you. First is, I know you talked about underlying demand in a previous question. I'm just wondering, the other 2 of the big 3, so to speak, are talking about the category having been fairly sluggish all year. And it's hard to say if they're parsing out their software businesses. But certainly, the metering units seems to be an issue this year. Could you talk about that a little bit and kind of why that weakness has kind of pervaded all year and perhaps what you're thinking that the category looks like in units, meter units next year?

Kenneth Bockhorst

Yes. So that's a great question. So with 50,000 utilities of different sizes and shapes and geographies, it's hard for me to tell you across the board, a cookie-cutter answer that the market is down x percent. I don't know what the other big 2 have in terms of projects like we detailed for you. They may have different unevenness in their business that -- actually, I'm certain they have it. I just don't know what their particular mix is.

So it wouldn't be appropriate for me to comment on what their issue is. But what I see and when we talk to customers, and we -- as Bob pointed out, we saw customers at WEFTEC, we saw customers this week in Milwaukee. And I get all the noise that's out there about the market and all the things that people have talked about in the past around funding, but our customers are looking forward to the future to deal with the issues that they have to deal with. They have to upgrade their infrastructure. They have to be better informed about what decisions to make with their limited resources. And we're just really happy that they're choosing our portfolio. So I shouldn't comment on the other guys.

Scott Graham

Okay. I wanted to just also ask about the gross margin in the backlog. And I know the backlog has been burned down a lot in the last couple of years with supply chain getting better. I'm just wondering, you have a little bit more visibility now on these projects, which are now starting to ship. I was just sort of hoping if you can just tell us that the gross margin backlog, how much of that is linked to CPI? And for the rest of it, how are you handling price increases?

Kenneth Bockhorst

Yes. So I would just reiterate that even though we've been operating at the higher end, just given all the mix things that can happen and some of the lack of visibility on short term, as you pointed out, we feel really good about our ability to operate within the 39% to 42% gross margin range that we talked about. We feel great as we resume growth, being able to get back to that really good leverage of SEA that we've talked about before. So all in, it feels manageable to us to stay within the margin ranges that we've consistently communicated.

Operator

Your next question comes from the line of William Grippin with Barclays.

William Grippin

All right. Apologies to come back to the margin question again. But your commentary last quarter when you called out some of the supply chain cost pressures, it felt to me like maybe you were trying to signal something, right? And here with third quarter results, clearly, margin was quite good at the high end of your long-term target range. Are you trying to signal something in terms of how we should expect margin to trend in the fourth quarter or even into next year as some of these larger projects start to ramp and perhaps I don't know if there's any notable differences in your contract structures we should be aware of there.

Daniel Weltzien

Yes. So when I signal those things, I'm trying to signal the whole of all of the components that go into our gross margin picture. And again, I always remind people, structural mix is the biggest driver. And so when we call out in the quarter, what's happening with ultrasonic meter mix and what's happening with software mix, maybe that's masking some of what's happening on the electronics side, but we're also managing that dynamic as well.

And so me calling that out as a particular risk isn't trying to, in the next quarter, tell you what's going to happen. It's just trying to show you that there's multiple levers that contribute to what our margin performance is in any given quarter or month -- quarter or year. And at the time where we are right now, we started to talk about that pressure here in the second quarter and as of the end of the third quarter, I would say the challenges still exist. We've been able to manage it. We feel over the long term, we'll be able to continue to manage it. But quarter-to-quarter, there can be leading and lagging impacts of that.

William Grippin

Appreciate that color. And then maybe a bit of a long shot here. Are you able to share how much PRASA contributed in the third quarter to the top line?

Kenneth Bockhorst

No, we're not going to get into that. I think the other thing, William, that's important to notice, too, is throughout the year, we have won other projects, too, like the year has gone on and been normal. So I know there's a lot of focus on PRASA and rightfully so because it's very large. But the year has played out really well and really, I guess, normalized for us. So we're not going to get into quarter-by-quarter any project on what it is, but we're happy that we've seen these projects beginning to start. And what that does is quarter-to-quarter can be uneven. But how we look at the business over the 5-year horizon, we feel fantastic that these are all now moving to in-flight status.

Operator

The next question comes from Michael Fairbanks with JPMorgan.

Michael Fairbanks

On one of those last points you made, Ken, beyond the cohort of projects that you've talked about extensively, how would you say the pipeline and awards or even backlog beyond that are trending compared to this time last year?

Kenneth Bockhorst

Yes. So throughout the past several years, when we look at the universe of utilities that are currently working with consultants to scope out doing metering projects, which are revenue later in our 5-year horizon or the people that are currently in RFP that are going through the selection processes up to and including in-flight projects, that whole piece feels as robust as it has over the past several years.

Michael Fairbanks

Okay. Great. And then we saw share buybacks accelerate this quarter. How are we thinking about capital allocation from here?

Kenneth Bockhorst

Yes. So our capital allocation priorities remain the same. So we're going to continue to invest in the business and extend our lead in R&D and innovation. We're going to continue to return cash to shareholders and 34 years of increased dividends. We're certainly in a position to continue on that trend.

And in terms of share buybacks, we still have $35 million on the authorization. Even before this period when we weren't buying shares, we've always had an authorization open. So -- so I would imagine as long as we feel great about our superior position of being a cash generator, we'll be able to do that. And this year, we also did a really exciting acquisition. So regardless of this being a pretty challenging year for us, we've been able to navigate through this, execute on all 3 of our important capital allocation priorities, and we'll continue to do that going forward.

Operator

We have now reached the end of the Q&A session. I will now turn the call back to Dan Weltzien for closing remarks.

Daniel Weltzien

Thank you, operator. Just a quick note for your planning purposes that our year-end 2026 earnings release is tentatively scheduled for January 28, 2027. Feel free to reach out to me if you have any follow-ups at investors@badgermeter.com. Have a great day.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.