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Management attributes the 9% Q1 revenue decline to a 'project air pocket' where historical AMI deployments concluded before newly awarded projects reached the installation phase.

Short-cycle order rates were approximately $15 million to $20 million lower than internal expectations, which management views as inherent timing variability rather than a structural demand shift.

The company successfully maintained gross margins at 41.7% despite lower volumes, credited to value-based pricing discipline and a favorable mix of high-margin SaaS and beyond-the-meter products.

Operational deleveraging from lower sales caused operating margins to contract to 17.4%, prompting temporary cost-reduction measures including a 10% executive salary cut.

Management emphasized that the current backlog normalization follows an 'elevated' period from 2023 to 2025, during which high project activity masked underlying short-cycle volatility.

The acquisition of UDLive for $100 million strategically expands the company's sewer line monitoring capabilities into the UK market, mirroring the successful US SmartCover model.

Full-year 2026 organic revenue is expected to be 'on balance' or flattish with 2025, with performance heavily weighted toward the second half of the year.

Management anticipates sequential quarterly revenue improvement throughout 2026 as awarded AMI projects, representing 2.6 million to 3.6 million connections, begin deployment.

The PRASA project in Puerto Rico is expected to begin installations around midyear 2026, supported by a significant purchase order received in Q1.

Q2 2026 organic revenue is projected to improve sequentially from the Q1 trough but will likely remain down year-over-year against a record prior-year comparison.

The company expects to exit 2026 with significant momentum into 2027, driven by the ramp-up of a project cohort more than three times the size of the 2023-2025 cycle.

The UDLive acquisition is expected to be EPS accretive in year one, contributing approximately $22 million in trailing twelve-month revenue upon its expected April closing.

Section 232 tariff exposure remains stable, as the company utilizes USMCA protections and sources primary materials like recycled brass within the US.

Turnkey projects, while generating higher absolute revenue due to installation labor, may carry different margin profiles than supply-only contracts.

Management noted that while long-term project visibility is high, quarterly timing remains subject to utility labor availability and external factors like hurricane season in Puerto Rico.

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Management clarified that the $15 million to $20 million shortfall was not tied to weather or specific geographic issues but was a timing-based 'air pocket' typical of the industry.

They noted that because the market has returned to normalized lead times, the inherent variability of short-cycle orders is now more visible than it was during the supply chain crisis.

Confidence has increased since last month because the company has now received the first significant purchase order and confirmed that installation partners are lined up.

While the project is prone to seasonal weather disruptions like hurricanes, the midyear start for deployment remains the current expectation.

Management highlighted that seven of nine recently awarded projects involved competitive conversions, often replacing legacy fixed-network systems with Badger's cellular AMI technology.

The 'choice-matters' strategy is allowing the company to win RFPs even where they were not the incumbent meter provider by leading with superior software and cellular connectivity.

Management expects to stay within the 39% to 42% target range, noting that while large projects like PRASA may have lower gross margins, they offer significant SEA leverage.

Value-based pricing remains a core principle, ensuring that even as project mix shifts, the overall operating profit profile remains healthy.

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