Badger Meter, inc (BMI) Q2 2021 Earnings Call Transcript

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Badger Meter, inc (BMI 15.78%)
Q2 2021 Earnings Call
Jul 20, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the Badger Meter Second Quarter 2021 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer. Please go ahead, Ms. Bauer.

Karen M. Bauer -- Vice President, Investor Relations, Corporate Strategy And Treasurer

Good morning and thank you for joining the Badger Meter second quarter 2021 earnings conference call. On the call with me today are Ken Bockhorst, Chairman, President and Chief Executive Officer; and Bob Wrocklage, Chief Financial Officer. The earnings release and related slide presentation are available on our website.

Quickly, I will cover the Safe Harbor, reminding you that any forward-looking statements made during this call are subject to various risks and uncertainties. The most important of which are outlined in our press release and SEC filings.

On today's call, we will refer to certain non-GAAP financial metrics. Our earnings slides provide a reconciliation of the GAAP to non-GAAP financial metrics used. Finally, during this call, we will refer to core results for various financial metrics, for example, core utility water sales. Core means designated financial metrics excluding the impact of the recent s::can and ATi acquisitions. We believe this reference point is important for year-over-year comparability.

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

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Thanks Karen, and thank you for joining our second quarter earnings call. I couldn't be more pleased with the dedication and execution demonstrated by our team supporting our customers and delivering record sales in the face of widespread supply chain inflation and logistics challenges. Our strong order momentum from the first quarter continued into the second, and even with that strong execution, our backlog reached another record high as we exited the second quarter. Our two water quality acquisitions s::can and ATi delivered strong top line performance above our expectations with solid EPS accretion. Overall, it was a great quarter, due in large part to the activity in the trenches day in and day out.

I'll talk about the current environment and our outlook later in the call, but for now let me turn the call over to Bob to go through the details of the quarter.

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Thanks, Ken, and good morning everyone. As you can see on Slide 4, total sales for the second quarter were $122.9 million compared to the coronavirus impacted trough of $91.1 million in the same period last year, an increase of 35%. Overall utility water sales increased 38%. Excluding the approximately $12 million of sales from s::can and ATi acquisitions, core utility water revenues increased 22% year-over-year. Comparing back to the pre-COVID impacted second quarter of 2019, core utility water sales increased 11%. As Ken noted, we continue to experience robust orders, however supplier allocations of certain electronics and other components along with logistics challenges again limited manufacturing output in deliveries.

We did experience growth in overall meter sales and BEACON software as a service revenue and we benefited from strategic value-based pricing actions. We exited the quarter with another record high backlog, which bodes well for our sales expectations moving forward. As anticipated, the flow instrumentation product line sales rate of change returned to growth with a 22% year-over-year improvement, stabilizing demand trends across the majority of global end markets and applications as well as an easier comp influenced the increase.

We were pleased with the operating profit margins generated in the quarter in light of the significant and varied inflationary forces. The quarter's operating margin was 15.2%, an increase of 130 basis points year-over-year. Gross margin for the quarter was 40.8%, an increase of 150 basis points year-over-year. Margins benefited from favorable acquisition mix as well as the higher volumes and positive product sales mix, namely higher SaaS revenues, along with favorable value-based pricing realization. Combined, these drivers tempered the cost headwinds from higher brass and other component and logistics inflation.

Taking a closer look at copper, prices have settled back down into the $4.30 range after escalating to about $4.80 earlier in the quarter. This is generally in line with our most recent year-over-year headwind estimate, which was approximately $7 million to $8 million on a full year basis unmitigated. As our margins demonstrate, we have executed well in implementing appropriate pricing mechanisms to offset this inflation and we will continue to actively monitor pricing in light of the inflationary pressures.

Turning to SEA expenses. The second quarter spend of $31.4 million was sequentially in line with the $31.6 million from Q1 2021 and represents an increase of $8.2 million from the prior year. You may recall, the prior year included the benefit of various cost reduction actions taken at the onset of COVID-19 including temporary furloughs. The SEA run rate includes both the s::can and ATi along with the higher level of acquired intangible asset amortization, and is in line with our ongoing expectations of normalized SEA leverage in 25% to 26% range over time. The income tax provision in the second quarter of 2021 was 25%, slightly higher than the prior year's 24.3% rate.

In summary, EPS was $0.48 in the second quarter of 2021, an increase of 45% from the prior year's EPS of $0.33. Working capital as a percent of sales was 24.3% on par with the prior quarter-end. Inventory increased due to the manufacturing output constraints as well as commodity inflation as described earlier. Free cash flow of $11.9 million was lower than the prior year, the result of higher cash tax payments and the increase in inventory. On a year-to-date basis, free cash flow conversion of net earnings is sitting at 147%.

As we noted in the press release and in our 8-K a few weeks back, we entered into a new five-year credit facility in advance of the September 30 expiration of the prior facility. We took the opportunity to upsize the facility to $150 million and to add additional flexibility in the form of leverage covenants and an accordion feature among others. Our strong cash flow combined with our borrowing capacity provides us with ample liquidity to fund our ongoing capital allocation priorities.

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

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Thanks, Bob. Turning to Slide 5. We updated the chart we introduced last quarter with actual second quarter data. Given the number of different variables at play in both the current year and prior year comparables, we think this chart can be helpful in understanding the uneven results we have and we'll continue to see in our sales. The robust growth rate we experienced this quarter excluding the acquisitions was the result of continued strong order rates as well as the record high backlog with which we started the quarter. Not surprisingly, it was also due in part to the easier comp from the most significantly COVID-19 impacted second quarter last year.

As we enter the back half of the year, the strong order momentum and record high backlog will be supportive of our growth outlook. The third quarter will see a difficult comp, both in terms of sales and profitability based on the post-COVID lockdown recovery in both manufacturing output and orders last year. Our supply chain team continues to work tirelessly at [Indecipherable] with the varied electronic and other component shortages. While we don't expect to be back to normal, we do expect further backlog conversion as the year moves ahead. We are very pleased with the results from the last two water quality acquisitions this quarter contributing just over $12 million of revenue in the quarter, a pro forma growth rate in the double-digits. Their underlying performance along with the integration work underway to establish and cross-trained sales resources and harmonized product offerings within water quality validates our confidence in the underlying strategy of combining water quantity with quality in order to accelerate our customers' digital transformations.

In summary here on Slide 6, the step change in order rates over the past several quarters confirms the fundamental market demand for intelligent water solutions to monitor, manage and support operational efficiencies throughout the water distribution system. We are uniquely positioned with a full line of smart water offerings encompassing both water quantity and quality to serve utility and industrial customers alike. A record backlog is one of those good problems to have and the challenge we expect will persist for some time as we migrate through the second half of the year and beyond. Electronic and other component suppliers are making good progress in restoring and building capacity, however, the rate of recovery is fluid and will continue to be uneven until inventory levels are able to be -- to fully meet demand. Despite the component availability, inflation and logistics challenges, our teams are working hard to build supply chain resiliency and actively communicate to suppliers and customers to proactively manage expectations. Our effective sourcing strategies, market driven innovation and operational agility are supporting Badger Meter's profitable business growth and delivering value for shareholders.

Finally, I want to highlight several additional ESG related disclosures that we've added to our website. One is an outline of how Badger Meter works to align our ESG efforts with the United Nations Sustainable Development Goals, notably Goal 6, 3 and 11 that focus on water, health and safety and sustainable cities. The second is a stand-alone SASB focused report providing annual metrics and other information for 2020, which is cross-referenced to GRI. Badger Meter continues to advance its ESG journey as we work to understand and mitigate the most material and impactful risks of climate change and preserve and protect the world's most precious resource.

To close on our prepared remarks, I want to welcome back to the office many of our remote work employees who returned this month, adding to the teams of dedicated employees in production and our support staff who never left. I want to thank all of our colleagues for their agility and consistent and dedicated efforts to serve our customers.

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

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is coming from the line of Nathan Jones with Stifel. Your line is open.

Nathan Jones -- Stifel -- Analyst

Good morning, everyone.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Hi Nathan.

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Good morning, Nathan.

Nathan Jones -- Stifel -- Analyst

I guess, I'll start out by digging a bit further into the supply chain and logistics challenges. I think you guys commented that it defers themselves out of this quarter, that's sitting in backlog. Now, can you talk about just how much you -- revenue you think got deferred out of the second quarter into the back half? What your expectations are for catching that up completely?

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Yes, Nathan. As you know, the supply chain situation and logistics, certainly not confined to just ask pretty dynamic all the way across and we don't typically size backlog, obviously we've talked about it in the last couple of quarters, because we find it significant enough that we should mention it, but we're not going to size that out. The bottom line is, supply chain challenges are going to continue to persist. Our team is doing a great job. We think this will continue to be a challenge throughout the year, but we do expect that we will perform very well throughout the cycle.

Nathan Jones -- Stifel -- Analyst

So do you think that you'll have caught up with all of these backlog by the end of the year or do you think this is something that's going to carry over into next year?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Yes, I think it's possible that is going to carry over into next year. Every day you're seeing companies larger than us like GM shutting down production for two weeks in certain things and we're certainly not in that situation, but, yes, I get -- I'd like to be more optimistic, but I think I'm being more realistic to say that it's likely to drag into next year.

Nathan Jones -- Stifel -- Analyst

Always that it's about plan for the worst and hope for the best right. What other make -- what are the biggest pain point, is it the electronic part of it here? Is it truck availability shipping. What are the biggest pain points for Badger in -- with all of these supply chain tightness going on at the moment?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Hey, well it can depend on the day. So, sometimes it's logistics because COVID is still an issue in several parts of the world in trying to move products and manufacturing challenges. At times it's been plastics when you had the deep freeze in Texas. At times it's semiconductor chips, at times it's electronic. So that's why we're being somewhat cautious with the commentary as this isn't one specific supply chain or logistics challenge, it's pretty wide-ranging.

Nathan Jones -- Stifel -- Analyst

Okay, fair enough. I'll pass it on there. Thanks.

Operator

We have our next question coming from the line of Andrew Buscaglia. Your line is open.

Andrew Buscaglia -- Analyst -- Berenberg Capital

Hey, guys. Thanks for taking my question.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

You bet.

Andrew Buscaglia -- Analyst -- Berenberg Capital

Can you talk about -- actually as you mentioned in the quarter with the supply chain challenges, what -- with your revenue has been higher, otherwise or by how much exactly if so?

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Yes, so certainly not going to say how much, but the fact that we're -- that we had sequentially strong growth year-over-year, strong growth and we went out of our way to tell you that we built on top of an already record backlog, I think its pretty clear to indicate we could have done more without the supply chain challenges. But we're not going to size it.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

I think the story coming out of Q2 is very similar to the story coming out of Q1, which is very much record order intake, but supply chain challenges impacting that backlog. We didn't size kind of the carryover from Q1 to Q2 or Q1 into later years, but you guys have pretty darn good job of predicting where we come at it from a consensus standpoint. So we're not going to size it, but yes, your conclusion is accurate, we could have done better, if not for those things. And really the dynamics are very similar where we said at June as where we said at the end of March.

Andrew Buscaglia -- Analyst -- Berenberg Capital

Yes, it's still exceeded, what I was estimating and I think that -- well, going forward, is the issue more that having to reach sales on the table, sort of, or is it more navigating these costs as they come back or I guess, where is your bigger problem here?

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

I mean I think realistically it's both, but I would put the priority on navigating the supply chain challenges that are evolving by the day. So, well, I think if you do ask me, do I feel more comfortable now sitting here on -- in the middle of July than where we were when we talked in April, I think so, but that literally is evolving by the day and week, given the varied contributing factors here. It's not just one supply component. It's not just one supplier or -- it runs the full gamut. So I think the next six months is going to be all about navigating that. Now obviously with that comes the challenge of cost. Certainly, we've seen it from the copper perspective given what I've talked to, but its other cost categories as well, including resins and logistical costs and we're doing everything we can in the trenches every day to offset that. I think the last two quarters of margin performance speak to that. But we haven't absorbed through the P&L, the full high cost aspects of the copper peak or the recent increase in resin. So I think, while we're very optimistic about what the second half looks like, I think we're just being realistically cautious in this inflationary environment, when we haven't absorbed the peak through the P&L to just suggest that is not all sunshine and roses.

Andrew Buscaglia -- Analyst -- Berenberg Capital

Yes, OK. Maybe just one last broad one, given it's a difficult environment and you guys talked about. Well now that you're working through [Indecipherable] seem to be going well, it actually came in a little bit higher than what I was expecting from the revenue contribution. You got your arms around that [Indecipherable]. Are you still willing to move forward with more M&A and may even have some leverage, given where rates are for the time being to do a larger deal here? Or is this environment going to kind of put a lid on that for the time being?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Well, financially we're in great shape to be able to advance any of our M&A strategies. And organizationally, I couldn't be more pleased with how we've gone through the acquisitions of s::can and ATi. I mean obviously our funneling process found two extremely great assets, great companies throughout the diligence process. Our Badger Meter employees in combination with s::can and ATi have done a great job on the integration, the performance is there. So from a financial point of view and from an organizational point of view, I feel really good about our opportunities to execute our M&A strategy. So I wouldn't say that we're paused, but at the same time, we've got a disciplined process and we'll make the right M&A decisions at the right time.

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

I think to the leverage question, no question, the word on The Street and as we talk about it with investors is, we have a comfort level that's much higher than the leverage ratio that we sit at now. We always talk about 1.5 times to 2 times or type of leverage ratio comfort level. It's just more about timing and pacing. I think if you look at the debt agreement that we just signed recently, it signals all the right things in terms of expanding the facility, having a leverage covenant, that's a notch higher than where it was historically and I think that should signal -- realign and align with that philosophy.

Andrew Buscaglia -- Analyst -- Berenberg Capital

All right, thanks guys.

Operator

We have our next question coming from the line of Connor Lynagh with Morgan Stanley. Your line is open.

Connor Lynagh -- Morgan Stanley -- Analyst

Yes, thanks. I was hoping maybe you could provide a little bit more context on the orders you're seeing, so it make sounds like pretty robust across the board. But I'm curious if you could frame if there were any meaningful changes versus say pre-COVID or just versus history and general? Could you suggest any sort of notable mix shift within your customer base? Any sort of changes in customer sourcing strategies as a result of the pandemic?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

I wouldn't say that there have been any significant shifts, I mean, we're seeing a broad-base across the portfolio. It's just a really strong environment. We're executing really well and the profile is primarily the same.

Connor Lynagh -- Morgan Stanley -- Analyst

Okay. That's helpful. And I guess just on the other side of it, you've certainly had some supply chain constraints that have affected shipments. Is that disproportionate to any type of product and basically where I'm driving with this is, is there a -- is there any mix effects that we should be thinking about for margins as supply chain uses [Phonetic] up and you're able to ship across the board?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Yes, without getting specific into which products, it was more impactful in the utility product line than it was in flow instrumentation.

Connor Lynagh -- Morgan Stanley -- Analyst

Okay, fair. Maybe just one last one to pivot to the higher level a little bit here. There was some concern, more so I would say last year around municipal budgets as you may have had support from the government. Things are looking better. But I'm just curious if you can give any high-level thoughts around customer sentiment and how you think budgets are likely to evolve over the next couple of years here?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Yes, so, throughout this entire process, I really couldn't be more proud of our sales and marketing teams and how close they stayed to customers to understand how budgets were going to develop. So we were a little bit more optimistic than I think others in the market, that we would get through the budget cycles and that spending would still be -- would not be dropping, if you will, would be strong and we saw that as we crossed July of 2020, the budgets remained intact. We saw it as we got through January, when the new budgets came through and we're optimistic that as we hit another key budget cycle here in July of 2021 that we -- that's going to be fine as well. So from a budget point of view, we were always on the more optimistic side and I think we've been right from the outset on that.

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

I think the other encouraging factor is the order rate or the demand environment that we saw in Q1 and we're certainly happy with and then now in Q2, even stronger. That's happening in an environment with a rumored infrastructure plan on the sideline. And so I think we're very encouraged by the fact that that to us is a signal that budgets are healthier than maybe some expected a year ago and even with the rumor of money falling from the sky, people are still spending money. So that's encouraging as well.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Yes, and if I can add to that, it also speaks to the point that we talk about often on how smart metering is so critical to the water distribution that our customers spend on that throughout cycles.

Connor Lynagh -- Morgan Stanley -- Analyst

Yes, makes sense. Thanks for all the color.

Operator

We have our next question coming from the line of Hasan Doza with Water Asset Management. Your line is open.

Hasan Doza -- Water Asset Management -- Analyst

Good morning, gentlemen. Couple of questions. I wanted to start with, on the inventory, can you give update as much as possible as to what is causing the build up of inventories? Is it like finished goods? Is it work-in-progress? Is it raw material? Just wanted to get a color on the inventory side?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Yes, so Hasan, first of all it was finished goods, we will ship them. So we're more in the mode of, as we're trying to play through as I referred to with the [Indecipherable] analogy is, you get some buildup, because you might have built a -- built up your components to build in assembly or a package of sorts and then you don't get a component, so that inventory build, is there. I'll let Bob talk more about the copper step up, but I think it's also an issue.

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Yes, I would look at the current quarter increases primarily being timing and think of that as copper obviously has escalated significantly and that's a high -- it's about high, but it's a component, one of the larger components of our inventory and that just being at a higher cost is inflating inventory and then to what Ken alluded to earlier, we're obviously trying to stay ahead of the supply chain game and if you have one component holding up other things, it doesn't mean you stop buying the other things and that's why we've got basically in the quarter an increase in inventory. I think as we move forward, we've got -- we were going to have higher working capital to support this increased demand level that we've talked about in terms of the order trends that we've seen. And so I would expect as we move forward in the second half to have working capital, unfortunately, being a free cash flow headwind, but I think we've been signaling that for quite some time.

Hasan Doza -- Water Asset Management -- Analyst

Okay. My next question is Ken or Bob, in your primary facility, manufacturing-wise is in Mexico and as that facility been impacted by any chance in terms of work interruptions or anything else from COVID. I just wanted to get an update on that factory in Mexico?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Well, so a year ago, right, we had several challenges as everyone did when COVID was really raging throughout the US and Mexico. But I -- certainly we're not seeing any impacts currently at all on that front.

Hasan Doza -- Water Asset Management -- Analyst

Okay. And when you guys talk about value-based pricing, you obviously -- you laid out very helpful the cost side. So when we think about the value-based pricing, can you give some color as to how much price increases you have been able to pass-through. And again, I don't need an exact number, but other companies have given like orders of magnitude like -- is it like a mid single-digit, single-digit, high single-digit? Just wanted to understand from a topline perspective, how much price increases you have been able to pass-through to customers so far this year, order of magnitude?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

I appreciate the effort, but I'm sure you knew, I wouldn't answer that. So from a pricing point of view, what I think you need to understand is, this is not a pricing initiative. What we're talking about here is Business Excellence processes, like anything else. So we're doing, I think a very effective job at understanding the value that we provide for customers and getting the right amount of price for it. There is a second lever to getting Business Excellence around pricing, and it's also winning at least our fair share of new business. So for us it's a two factor, right. It's making sure that we both grow and grow profitably. So I'm really proud of the work that's been done. As we've said in other quarters, not a copper surcharge if anything else, it's just the way that we do business. So we're proud of what we've put through. But no, I mean, we're not going to size it out in percent, so I think, because it's frankly it's not that simple. It's not like this is a price increase that you're spreading peanut butter across product lines.

Operator

We have our next question coming from the line of Robert Mason with Baird. Your line is open.

Robert Mason -- Baird -- Analyst

Yes, good morning. Bob you've made the comment just in discussing some of the inflationary impacts. You've not yet absorbed or seen the peak yet in some of those. When might you expect to see that? Do you have a timeframe in mind or?

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Yes, So I would think about it very much. I would say -- when I say that I'm not trying to predict forward-look, I'm talking about what's occurred in the history, and how that is realized in our P&L. So, I think you can expect that I'll use copper as an example. Copper hit $4.80 I think in the May timeframe. So I would expect that to come flowing through the P&L in the third quarter. So when I make that statement we haven't seen that peak, I'm primarily speaking to copper and resins and that's more of a third quarter event.

Robert Mason -- Baird -- Analyst

And then I just had a question on the acquisition performances. I mean, we were pleased as well, a little bit above our expectations. And Ken you noted, those growing double-digit. Is that kind of growth rate? I mean, can we hang our hat on that going forward? Or how comfortable are you around that kind of a double-digit growth rate or is there some seasonality in that business as well that we need to be aware of as they drop into the P&L?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Well, I'll go first, so I can see Bob wants to get in on this one too, but the first thing I'd caution you still is, it is kind of the law of small numbers. I mean it can move pretty quickly when you're talking about percents of growth. We're absolutely bullish that these businesses were growing high single-digits before we acquired them. We believe in the synergy aspects of bringing them together. We're extremely pleased with the first six and eight months of having these two companies here and we think they'll perform in that high-single-digits, some quarters maybe a little higher, some quarters maybe a little lower, but through the cycle we feel really good about it.

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

The only thing I would add is, with respect to the second quarter results as a whole, related to the acquisitions, I would just caution you, there is a bit of backlog timing and again at a relatively small basis, but a discrete project. So I would expect that level --that absolute level of revenue dollars to moderate in quarters going forward, but still very little seasonality and I would think of it as high single-digit growth that you could bake in going forward.

Robert Mason -- Baird -- Analyst

Okay, pretty good. And is it fair to assume that those businesses relative to your other utility businesses would be less exposed to some of the supply chain challenges as well or is that a fair statement?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

It's not a fair statement. I mean we've seen challenges there as well. Again, I think it's pretty broad-based. I'd be surprised if other people you're following aren't talking about it too.

Robert Mason -- Baird -- Analyst

No, no, they definitely are. It's a common issue for sure.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Right, right.

Robert Mason -- Baird -- Analyst

Very good. Thank you. Thanks for the question.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Yes, thanks.

Operator

[Operator Instructions] Our next question comes from the line of Ryan Connors with Boenning & Scattergood. Your line is open.

Ryan Connors -- Boenning & Scattergood -- Analyst

Hey, great, thanks for taking my question and congrats on a great result.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Thanks, Ryan.

Ryan Connors -- Boenning & Scattergood -- Analyst

One thing that you didn't mention much in your prepared remarks and only briefly in the Q&A, which has been prominent in the last year is this infrastructure stimulus package and I suspect that's partly because this certainly doesn't sound like a market at this point that needs federal support, but what's your view there? I mean, what would -- Bob, you mentioned money falling from the sky and we might actually get that, it looks like if you look at the news. What would that do to the market? I mean, will we be looking at an overheated situation? Would you and peers have to build new factories at that point? I mean what's the view on stimulus and you even wanted or needed at this point?

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

So I'll go first and then I'm sure Bob will have some thoughts on this too. So, if you recall, it may have been end of Q2 or early Q3 that things that I thought were really important were vaccination and we're there for people to be able to actually go out and do the work. And low interest rates, I thought would be really positive. Stimulus for us can only be positive, right. And unless that condition we've talked about before where it's just rumored and it doesn't happen that could sometimes be a delay, but that wasn't even in the case this time. We've seen really robust order growth for the last three quarters, while people knew there would be infrastructure. So for us we sit here and think about $55 billion for water infrastructure in the bipartisan bill.

Still again we believe in the fact that AMi is a really strong proposition for using those funds, shovel ready projects are usually priority with our infrastructure free AMi and we feel really strong about that water quality, delivering clean, safe drinking water is a big deal. That's why we want to get into it. We think we could see some positivity there. So it isn't that we don't want it, we wouldn't have to build factories. I mean we've got a very strong manufacturing model. Supply chain challenges I can't imagine would get easier, if we keep throwing money into the market, but in terms of manufacturing capacity, we're fine.

Ryan Connors -- Boenning & Scattergood -- Analyst

Okay. And then the other question kind of big picture, you've been very comprehensive so far on the call. So this is bigger picture, but this issue of price and price expectations in the market, I mean a lot of the talk about inflation is consumers and in this case businesses kind of expecting and realizing that we're in an inflationary environment and expecting price increases, and therefore maybe we are asking to them easier than they would have in the past. Is there any evidence of that that customer expectations -- customer is a little easier about taking price than they used to be or no?

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Well, so, two things on that. I mean, I want to be clear, when we're talking about value-based pricing. We're not trying to go out and grab every nickel that we can. Affordability of water to us is still an important thing in our minds as we talk to our customers. They are accepting. The market is still rational. So that's why I try to use the word value-based pricing rather than pricing initiative, because that's really what we're doing here. And -- but the market is still rationale and understanding of the challenges that are driving the costs are up.

Ryan Connors -- Boenning & Scattergood -- Analyst

Got it. Thanks again for your time.

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Thanks, Ryan.

Operator

Thank you. There are no further questions at this time. I will now turn the call back over to Karen Bauer.

Karen M. Bauer -- Vice President, Investor Relations, Corporate Strategy And Treasurer

Thanks everyone for joining our call today. For your planning purposes, our third quarter call is tentatively scheduled for Friday, October 15. I'll be around all day to take any follow-up questions you have. And good luck to our Marquee Bucks [Phonetic] and I cheer the dear. Thank you.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Karen M. Bauer -- Vice President, Investor Relations, Corporate Strategy And Treasurer

Kenneth C. Bockhorst -- Chairman, President & Chief Executive Officer

Robert A. Wrocklage -- Senior Vice President, Chief Financial Officer

Nathan Jones -- Stifel -- Analyst

Andrew Buscaglia -- Analyst -- Berenberg Capital

Connor Lynagh -- Morgan Stanley -- Analyst

Hasan Doza -- Water Asset Management -- Analyst

Robert Mason -- Baird -- Analyst

Ryan Connors -- Boenning & Scattergood -- Analyst

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