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Xylem Reports Third Quarter 2022 Results

  • Lifting full-year organic revenue growth guidance to 9% to 10%, from 8% to 10%
  • Raising full-year adjusted EPS guidance to $2.65 to $2.75, from $2.50 to $2.70
  • Third quarter revenue growth of 9% on a reported basis, 16% organically
  • Reported earnings per share of $0.07, adjusted earnings per share of $0.79

Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported third quarter revenue of $1.4 billion, surpassing previous guidance, with strong commercial and operational execution. While orders were down 7 percent on a reported basis, they were down 1 percent organically, with the difference due to currency. The Company reported resilient underlying global demand with strong backlog growth.

Earnings also exceeded Xylem’s previous guidance, with strong margin performance. Net income was $12 million, or $0.07 per share. Net income margin decreased 810 basis points to 0.9 percent. These results were mainly driven by a previously announced, one-time non-cash pension plan settlement. Adjusted net income was $144 million, or $0.79 per share, which excludes the impacts of restructuring, realignment and special charges. Third quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin was 18.3 percent, reflecting a year-over-year increase of 40 basis points. Strong price realization offset inflation and, coupled with productivity savings, drove the margin expansion, exceeding the impact of strategic investments.

“The team delivered very strong performance across all our regions, driving third quarter results well above expectations on all key metrics,” said Patrick Decker, Xylem president and CEO. “Demand remains resilient across our largest end-markets, and disciplined operational execution delivered double-digit revenue growth with strong margin expansion.”

“We anticipate our momentum will continue driven by the essential nature of the services we provide. Our strong backlog and bidding pipelines support that outlook. The team, from our factories to our channel partners, continues to demonstrate resilience in managing through a dynamic environment, as our customers and communities invest in essential water infrastructure. Based on this strength, we are further raising our full-year guidance for both revenue and earnings per share, with continued confidence in Xylem’s longer-term growth outlook.”

Outlook

Xylem now expects full-year 2022 organic revenue growth to be in the range of 9 to 10 percent, and approximately 4 percent on a reported basis. This represents a raise of the low end of the Company’s previous full-year organic revenue guidance of 8 to 10 percent, and 3 to 5 percent on a reported basis. Full-year 2022 adjusted EBITDA margin is now expected to be approximately 17.0 percent, raising the low end of the previous range of 16.5 to 17.0 percent. This results in adjusted earnings per share of $2.65 to $2.75, an increase from the previous range of $2.50 to $2.70. The increased guidance reflects strong demand, gradual easing of supply chain constraints, and price realization, partially offset by inflation and foreign exchange headwinds.

Further 2022 planning assumptions are included in Xylem’s third quarter 2022 earnings materials posted at www.xylem.com/investors. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort.

Third Quarter Segment Results

Water Infrastructure

Xylem’s Water Infrastructure segment consists of its portfolio of businesses serving clean water delivery, wastewater transport and treatment, and dewatering.

  • Third quarter 2022 revenue was $574 million, a 5 percent increase, 13 percent organically, compared with third quarter 2021. This strong growth was driven by price realization, robust utilities demand in the US and Western Europe, and dewatering demand in the US and Emerging Markets.
  • Third quarter reported operating income for the segment was $104 million, a 3.0 percent increase versus the comparable period last year. Adjusted operating income for the segment, which excludes $3 million of restructuring and realignment costs, was $107 million, a 4.9 percent increase versus the comparable period last year. Reported operating margin for the segment was 18.1 percent, down 40 basis points versus the prior year, and adjusted operating margin was 18.6 percent, flat versus the prior year. Adjusted EBITDA margin was 20.7 percent, down 50 basis points from the prior year. Favorable price realization net of inflation was offset by strategic investments and unfavorable mix.

Applied Water

Xylem’s Applied Water segment consists of its portfolio of businesses in industrial, commercial building, and residential applications.

  • Third quarter 2022 Applied Water revenue was $458 million, a 15 percent increase, 20 percent organically, year-over-year. The robust growth was driven by strong price realization and backlog execution across all end markets.
  • Third quarter reported operating income for the segment was $77 million, a 28.3 percent increase versus comparable period last year, and adjusted operating income, which excludes $1 million of restructuring and realignment costs, was $78 million, a 25.8 percent increase versus the comparable period last year. The segment reported operating margin was 16.8 percent, up 180 basis points versus the prior year period. Adjusted operating margin increased 150 basis points over the prior year period to 17.0 percent. Adjusted EBITDA margin was 18.1 percent, up 110 basis points from the prior year. Margin expansion was driven by strong price realization more than offsetting inflation coupled with productivity savings.

Measurement & Control Solutions

Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses in smart metering, network technologies, advanced infrastructure analytics, and analytic instrumentation.

  • Third quarter 2022 Measurement & Control Solutions revenue was $348 million, up 9 percent, 15 percent organically, versus the prior year. While chip supply remains constrained, we continue to see modest sequential improvement, and strength in our water quality test applications.
  • Third quarter reported operating income for the segment was $(2) million, a 128.6 percent decrease versus the comparable period last year, and adjusted operating income, which excludes $2 million of restructuring and realignment costs and $12 million of special charges, was $12 million, a 100 percent increase versus the comparable period last year. The segment reported operating margin was (0.6) percent, down 280 basis points versus the prior year period. Adjusted operating margin of 3.4 percent increased 150 basis points over the prior year period. Adjusted EBITDA margin was 13.8 percent, down 40 basis points from the prior year. Strong price realization, volume growth and productivity savings were more than offset by higher inflation.

Supplemental information on Xylem’s third quarter 2022 earnings and reconciliations for certain non-GAAP items is posted at www.xylem.com/investors.

About Xylem

Xylem (XYL) is a leading global water technology company committed to solving critical water and infrastructure challenges with innovation. Our 17,000 diverse employees delivered revenue of $5.2 billion in 2021. We are creating a more sustainable world by enabling our customers to optimize water and resource management, and helping communities in more than 150 countries become water-secure. Join us at www.xylem.com.

Forward-Looking Statements

This press release contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” "contemplate," "predict," “forecast,” “likely,” “believe,” “target,” “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals (including those related to our social, environmental and other sustainability goals); or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by impacts from changes in international conditions, including as a result of the war between Russia and Ukraine, the coronavirus (“COVID-19”) pandemic and macroeconomic conditions, including inflation. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: the impact of overall industry and general economic conditions, including industrial, governmental, and public and private sector spending, inflation, interest rates and related monetary policy by governments in response to inflation, and the strength of the residential and commercial real estate markets, on economic activity and our operations; geopolitical events, including the war between Russia and Ukraine, and regulatory, economic and other risks associated with our global sales and operations, including with respect to domestic content requirements applicable to projects with governmental funding; continued uncertainty around the ongoing impacts of the COVID-19 pandemic on the macroeconomy and our business, operations, growth, and financial condition; actual or potential other epidemics, pandemics or global health crises; availability, shortage or delays in receiving electronic components (in particular, semiconductors), parts, and raw materials from our supply chain; manufacturing and operating cost increases due to macroeconomic conditions, including inflation, energy supply, supply chain shortages, logistics challenges, tight labor markets, prevailing price changes, tariffs and other factors; demand for our products; disruption, competition or pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; ability to retain and attract senior management and other diverse and key talent, as well as competition for overall talent and labor; difficulty predicting our financial results; defects, security, warranty and liability claims, and recalls with respect to products; availability, regulation or interference with radio spectrum used by certain of our products; uncertainty related to restructuring and realignment actions and related costs and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; volatility in served markets or impacts on business and operations due to weather conditions, including the effects of climate change; fluctuations in foreign currency exchange rates; our ability to borrow or refinance our existing indebtedness and uncertainty around the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with, or changes in, laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, our products, competition, and the environment and climate change; changes in our effective tax rates or tax expenses; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; and other factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Annual Report") and in subsequent filings we make with the Securities and Exchange Commission (“SEC”).

Forward-looking and other statements in this press release regarding our environmental and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or are required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking social, environmental and sustainability related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. All forward-looking statements made herein are based on information currently available to us as of the date of this Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

XYLEM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)

(in millions, except per share data)

 

 

Three Months

 

Nine Months

For the periods ended September 30,

2022

 

2021

 

2022

 

2021

Revenue

$

1,380

 

$

1,265

 

 

$

4,016

 

$

3,872

Cost of revenue

 

856

 

 

793

 

 

 

2,505

 

 

2,390

Gross profit

 

524

 

 

472

 

 

 

1,511

 

 

1,482

Selling, general and administrative expenses

 

294

 

 

273

 

 

 

912

 

 

878

Research and development expenses

 

47

 

 

49

 

 

 

152

 

 

152

Restructuring and asset impairment charges (recoveries)

 

15

 

 

(2

)

 

 

22

 

 

7

Operating income

 

168

 

 

152

 

 

 

425

 

 

445

Interest expense

 

12

 

 

21

 

 

 

37

 

 

63

U.K. pension settlement expense

 

140

 

 

 

 

 

140

 

 

Other non-operating income, net

 

1

 

 

2

 

 

 

2

 

 

1

Gain from sale of business

 

 

 

 

 

 

1

 

 

2

Income before taxes

 

17

 

 

133

 

 

 

251

 

 

385

Income tax expense

 

5

 

 

19

 

 

 

45

 

 

71

Net income

$

12

 

$

114

 

 

$

206

 

$

314

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.07

 

$

0.63

 

 

$

1.14

 

$

1.74

Diluted

$

0.07

 

$

0.63

 

 

$

1.14

 

$

1.73

Weighted average number of shares:

 

 

 

 

 

 

 

Basic

 

180.2

 

 

180.2

 

 

 

180.2

 

 

180.2

Diluted

 

180.9

 

 

181.6

 

 

 

180.9

 

 

181.5

 

XYLEM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions, except per share amounts)

 

 

September 30,

2022

 

December 31,

2021

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,186

 

 

$

1,349

 

Receivables, less allowances for discounts, returns and credit losses of $46 and $44 in 2022 and 2021, respectively

 

1,018

 

 

 

953

 

Inventories

 

837

 

 

 

700

 

Prepaid and other current assets

 

150

 

 

 

158

 

Total current assets

 

3,191

 

 

 

3,160

 

Property, plant and equipment, net

 

585

 

 

 

644

 

Goodwill

 

2,637

 

 

 

2,792

 

Other intangible assets, net

 

933

 

 

 

1,016

 

Other non-current assets

 

760

 

 

 

664

 

Total assets

$

8,106

 

 

$

8,276

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

618

 

 

$

639

 

Accrued and other current liabilities

 

828

 

 

 

752

 

Short-term borrowings and current maturities of long-term debt

 

483

 

 

 

 

Total current liabilities

 

1,929

 

 

 

1,391

 

Long-term debt

 

1,880

 

 

 

2,440

 

Accrued post-retirement benefits

 

361

 

 

 

438

 

Deferred income tax liabilities

 

260

 

 

 

287

 

Other non-current accrued liabilities

 

454

 

 

 

494

 

Total liabilities

 

4,884

 

 

 

5,050

 

 

 

 

 

Stockholders’ equity:

 

 

 

Common Stock – par value $0.01 per share:

 

 

 

Authorized 750.0 shares, issued 196.0 shares and 195.6 shares in 2022 and 2021, respectively

 

2

 

 

 

2

 

Capital in excess of par value

 

2,123

 

 

 

2,089

 

Retained earnings

 

2,197

 

 

 

2,154

 

Treasury stock – at cost 15.8 shares and 15.2 shares in 2022 and 2021, respectively

 

(708

)

 

 

(656

)

Accumulated other comprehensive loss

 

(399

)

 

 

(371

)

Total stockholders’ equity

 

3,215

 

 

 

3,218

 

Non-controlling interests

 

7

 

 

 

8

 

Total equity

 

3,222

 

 

 

3,226

 

Total liabilities and stockholders’ equity

$

8,106

 

 

$

8,276

 

XYLEM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions)

 

For the nine months ended September 30,

2022

 

2021

Operating Activities

 

 

 

Net income

$

206

 

 

$

314

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation

 

83

 

 

 

90

 

Amortization

 

93

 

 

 

96

 

Share-based compensation

 

28

 

 

 

25

 

Restructuring and asset impairment charges

 

22

 

 

 

7

 

U.K. pension settlement

 

140

 

 

 

 

Gain from sale of business

 

(1

)

 

 

(2

)

Other, net

 

(9

)

 

 

3

 

Payments for restructuring

 

(7

)

 

 

(21

)

Changes in assets and liabilities (net of acquisitions):

 

 

 

Changes in receivables

 

(145

)

 

 

(78

)

Changes in inventories

 

(214

)

 

 

(135

)

Changes in accounts payable

 

47

 

 

 

19

 

Changes in accrued taxes

 

(12

)

 

 

 

Other, net

 

3

 

 

 

 

Net Cash – Operating activities

 

234

 

 

 

318

 

Investing Activities

 

 

 

Capital expenditures

 

(148

)

 

 

(127

)

Proceeds from sale of business

 

1

 

 

 

2

 

Proceeds from the sale of property, plant and equipment

 

3

 

 

 

1

 

Cash received from investments

 

5

 

 

 

 

Cash paid for investments

 

(9

)

 

 

 

Cash received from cross currency swaps

 

24

 

 

 

11

 

Other, net

 

1

 

 

 

 

Net Cash – Investing activities

 

(123

)

 

 

(113

)

Financing Activities

 

 

 

Long-term debt repaid

 

 

 

 

(600

)

Repurchase of common stock

 

(52

)

 

 

(68

)

Proceeds from exercise of employee stock options

 

6

 

 

 

15

 

Dividends paid

 

(163

)

 

 

(152

)

Other, net

 

(1

)

 

 

(1

)

Net Cash – Financing activities

 

(210

)

 

 

(806

)

Effect of exchange rate changes on cash

 

(64

)

 

 

(19

)

Net change in cash and cash equivalents

 

(163

)

 

 

(620

)

Cash and cash equivalents at beginning of year

 

1,349

 

 

 

1,875

 

Cash and cash equivalents at end of period

$

1,186

 

 

$

1,255

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid during the period for:

 

 

 

Interest

$

67

 

 

$

83

 

Income taxes (net of refunds received)

$

57

 

 

$

71

 

 
Xylem Inc. Non-GAAP Measures
 
  
Management reviews key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, working capital and backlog, among others. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and to provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including but not limited to, dividends, acquisitions, share repurchases and debt repayment. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following items to represent the non-GAAP measures we consider to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
 
“Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales or discontinuance of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate.
 
“Constant currency” defined as financial results adjusted for foreign currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the US dollar.
 
“EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense. “Adjusted EBITDA” and "Adjusted Segment EBITDA" reflect the adjustments to EBITDA and segment EBITDA, respectively, to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses and special charges.
 
"Adjusted EBITDA Margin" and "Adjusted Segment EBITDA Margin" defined as adjusted EBITDA and adjusted segment EBITDA divided by total revenue and segment revenue, respectively.
 
"Adjusted Operating Income", "Adjusted Segment Operating Income", "Adjusted Net Income" and “Adjusted EPS” defined as operating income, segment operating income, net income and earnings per share, adjusted to exclude restructuring and realignment costs, gain or loss from sale of businesses, special charges and tax-related special items, as applicable.
 
"Adjusted Operating Margin" and "Adjusted Segment Operating Margin" defined as adjusted operating income and adjusted segment operating income divided by total revenue and segment revenue, respectively.
 
“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flows, less capital expenditures, and "Free Cash Flow Conversion" defined as Free Cash Flows divided by net income, excluding the gain on sale of businesses, non-cash impairment charges and significant deferred tax items. Our definitions of "free cash flow" and "free cash flow conversion" do not consider certain non-discretionary cash payments, such as debt.
 
“Realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs.
 
“Special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for costs related to the UK pension plan buyout.
 
“Tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments.
 
Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Orders ($ Millions)
   
 

(As Reported - GAAP)

 

(As Adjusted - Organic)

 

Constant Currency

 

 

 

(A)

 

(B)

 

 

 

(C)

 

(D)

 

(E) = B+C+D

 

(F) = E/A

 

(G) = (E - C) / A

 

 

 

 

 

Change

 

% Change

 

Acquisitions /

Divestitures

 

 

 

Change

 

% Change

 

 

 

Orders

 

Orders

 

2022 v. 2021

 

2022 v. 2021

 

 

FX Impact

 

Adj. 2022 v. 2021

 

Adj. 2022 v. 2021

 

 

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30  
Xylem Inc.  

4,818

4,716

102

 

2

%

18

189

309

 

7

%

6

%

Water Infrastructure  

1,985

1,873

112

 

6

%

0

113

225

 

12

%

12

%

Applied Water  

1,394

1,409

(15

)

-1

%

0

45

30

 

2

%

2

%

Measurement & Control Solutions  

1,439

1,434

5

 

0

%

18

31

54

 

4

%

3

%

   
Quarter Ended September 30  
Xylem Inc.  

1,419

1,518

(99

)

-7

%

7

82

(10

)

-1

%

-1

%

Water Infrastructure  

594

623

(29

)

-5

%

0

47

18

 

3

%

3

%

Applied Water  

409

446

(37

)

-8

%

0

20

(17

)

-4

%

-4

%

Measurement & Control Solutions  

416

449

(33

)

-7

%

7

15

(11

)

-2

%

-4

%

   
Quarter Ended June 30  
Xylem Inc.  

1,684

1,660

24

 

1

%

5

67

96

 

6

%

5

%

Water Infrastructure  

731

639

92

 

14

%

0

42

134

 

21

%

21

%

Applied Water  

480

486

(6

)

-1

%

0

15

9

 

2

%

2

%

Measurement & Control Solutions  

473

535

(62

)

-12

%

5

10

(47

)

-9

%

-10

%

   
Quarter Ended March 31  
Xylem Inc.  

1,715

1,538

177

 

12

%

6

40

223

 

14

%

14

%

Water Infrastructure  

660

611

49

 

8

%

0

24

73

 

12

%

12

%

Applied Water  

505

477

28

 

6

%

0

10

38

 

8

%

8

%

Measurement & Control Solutions  

550

450

100

 

22

%

6

6

112

 

25

%

24

%

 
Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Revenue ($ Millions)
   
 

(As Reported - GAAP)

 

(As Adjusted - Organic)

 

Constant Currency

 

 

 

(A)

 

(B)

 

 

 

(C)

 

(D)

 

(E) = B+C+D

 

(F) = E/A

 

(G) = (E - C) / A

 

 

 

 

 

Change

 

% Change

 

Acquisitions / Divestitures

 

 

 

Change

 

% Change

 

 

 

Revenue

 

Revenue

 

2022 v. 2021

 

2022 v. 2021

 

 

FX Impact

 

Adj. 2022 v. 2021

 

Adj. 2022 v. 2021

 

 

 

2022

2021

Nine Months Ended September 30  
Xylem Inc.  

4,016

3,872

144

 

4

%

9

173

326

 

8

%

8

%

Water Infrastructure  

1,696

1,625

71

 

4

%

0

99

170

 

10

%

10

%

Applied Water  

1,312

1,207

105

 

9

%

0

44

149

 

12

%

12

%

Measurement & Control Solutions  

1,008

1,040

(32

)

-3

%

9

30

7

 

1

%

0

%

   
Quarter Ended September 30  
Xylem Inc.  

1,380

1,265

115

 

9

%

4

80

199

 

16

%

15

%

Water Infrastructure  

574

547

27

 

5

%

0

46

73

 

13

%

13

%

Applied Water  

458

400

58

 

15

%

0

21

79

 

20

%

20

%

Measurement & Control Solutions  

348

318

30

 

9

%

4

13

47

 

15

%

14

%

   
Quarter Ended June 30  
Xylem Inc.  

1,364

1,351

13

 

1

%

3

60

76

 

6

%

5

%

Water Infrastructure  

589

569

20

 

4

%

0

34

54

 

9

%

9

%

Applied Water  

429

414

15

 

4

%

0

15

30

 

7

%

7

%

Measurement & Control Solutions  

346

368

(22

)

-6

%

3

11

(8

)

-2

%

-3

%

   
Quarter Ended March 31  
Xylem Inc.  

1,272

1,256

16

 

1

%

2

33

51

 

4

%

4

%

Water Infrastructure  

533

509

24

 

5

%

0

19

43

 

8

%

8

%

Applied Water  

425

393

32

 

8

%

0

8

40

 

10

%

10

%

Measurement & Control Solutions  

314

354

(40

)

-11

%

2

6

(32

)

-9

%

-10

%

 
Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income ($ Millions)
   
   
 

Q1

 

Q2

 

Q3

 

YTD

 

2022

2021

 

2022

2021

 

2022

2021

 

2022

2021

Total Revenue  
• Total Xylem  

1,272

 

1,256

 

1,364

 

1,351

 

1,380

 

1,265

 

4,016

 

3,872

 

• Water Infrastructure  

533

 

509

 

589

 

569

 

574

 

547

 

1,696

 

1,625

 

• Applied Water  

425

 

393

 

429

 

414

 

458

 

400

 

1,312

 

1,207

 

• Measurement & Control Solutions  

314

 

354

 

346

 

368

 

348

 

318

 

1,008

 

1,040

 

   
Operating Income (Loss)  
• Total Xylem  

111

 

133

 

146

 

160

 

168

 

152

 

425

 

445

 

• Water Infrastructure  

74

 

71

 

108

 

93

 

104

 

101

 

286

 

265

 

• Applied Water  

59

 

66

 

61

 

64

 

77

 

60

 

197

 

190

 

• Measurement & Control Solutions  

(10

)

9

 

(5

)

13

 

(2

)

7

 

(17

)

29

 

• Total Segments  

123

 

146

 

164

 

170

 

179

 

168

 

466

 

484

 

   
Operating Margin  
• Total Xylem  

8.7

%

10.6

%

10.7

%

11.8

%

12.2

%

12.0

%

10.6

%

11.5

%

• Water Infrastructure  

13.9

%

13.9

%

18.3

%

16.3

%

18.1

%

18.5

%

16.9

%

16.3

%

• Applied Water  

13.9

%

16.8

%

14.2

%

15.5

%

16.8

%

15.0

%

15.0

%

15.7

%

• Measurement & Control Solutions  

-3.2

%

2.5

%

-1.4

%

3.5

%

-0.6

%

2.2

%

-1.7

%

2.8

%

• Total Segments  

9.7

%

11.6

%

12.0

%

12.6

%

13.0

%

13.3

%

11.6

%

12.5

%

   
Special Charges  
• Total Xylem  

1

 

2

 

1

 

0

 

13

 

1

 

15

 

3

 

• Water Infrastructure  

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

• Applied Water  

0

 

1

 

0

 

0

 

0

 

1

 

• Measurement & Control Solutions  

0

 

0

 

1

 

0

 

12

 

0

 

13

 

0

 

• Total Segments  

0

 

1

 

1

 

0

 

12

 

0

 

13

 

1

 

   
Restructuring & Realignment Costs  
• Total Xylem  

4

 

8

 

8

 

6

 

6

 

2

 

18

 

16

 

• Water Infrastructure  

1

 

5

 

3

 

4

 

3

 

1

 

7

 

10

 

• Applied Water  

1

 

1

 

2

 

2

 

1

 

2

 

4

 

5

 

• Measurement & Control Solutions  

2

 

2

 

3

 

0

 

2

 

(1

)

7

 

1

 

• Total Segments  

4

 

8

 

8

 

6

 

6

 

2

 

18

 

16

 

   
Adjusted Operating Income (Loss)  
• Total Xylem  

116

 

143

 

155

 

166

 

187

 

155

 

458

 

464

 

• Water Infrastructure  

75

 

76

 

111

 

97

 

107

 

102

 

293

 

275

 

• Applied Water  

60

 

68

 

63

 

66

 

78

 

62

 

201

 

196

 

• Measurement & Control Solutions  

(8

)

11

 

(1

)

13

 

12

 

6

 

3

 

30

 

• Total Segments  

127

 

155

 

173

 

176

 

197

 

170

 

497

 

501

 

   
Adjusted Operating Margin  
• Total Xylem  

9.1

%

11.4

%

11.4

%

12.3

%

13.6

%

12.3

%

11.4

%

12.0

%

• Water Infrastructure  

14.1

%

14.9

%

18.8

%

17.0

%

18.6

%

18.6

%

17.3

%

16.9

%

• Applied Water  

14.1

%

17.3

%

14.7

%

15.9

%

17.0

%

15.5

%

15.3

%

16.2

%

• Measurement & Control Solutions  

-2.5

%

3.1

%

-0.3

%

3.5

%

3.4

%

1.9

%

0.3

%

2.9

%

• Total Segments  

10.0

%

12.3

%

12.7

%

13.0

%

14.3

%

13.4

%

12.4

%

12.9

%

 
Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
   
  Q3 2022 Q3 2021
  As Reported Adjustments Adjusted As Reported Adjustments Adjusted
Total Revenue  

 

1,380

 

 

1,380

 

 

1,265

 

 

1,265

 

Operating Income  

 

168

 

 

19

 

a

 

187

 

 

152

 

 

3

 

a

 

155

 

Operating Margin  

 

12.2

%

 

13.6

%

 

12.0

%

 

12.3

%

Interest Expense  

 

(12

)

 

0

 

 

(12

)

 

(21

)

 

0

 

 

(21

)

Other Non-Operating Income (Expense)  

 

1

 

 

1

 

b

 

2

 

 

2

 

 

1

 

b

 

3

 

UK Pension Buyout Settlement  

 

(140

)

 

140

 

b

 

0

 

 

0

 

Gain/(Loss) From Sale of Business  

 

0

 

 

0

 

Income before Taxes  

 

17

 

 

160

 

 

177

 

 

133

 

 

4

 

 

137

 

Provision for Income Taxes  

 

(5

)

 

(28

)

c

 

(33

)

 

(19

)

 

(2

)

c

 

(21

)

Net Income Attributable to Xylem  

 

12

 

 

132

 

 

144

 

 

114

 

 

2

 

 

116

 

Diluted Shares  

 

181

 

 

181

 

 

182

 

 

182

 

Diluted EPS  

$

0.07

 

$

0.72

 

$

0.79

 

$

0.63

 

$

0.00

 

$

0.63

 

   
Year-over-year currency translation impact on current year diluted EPS  

$

0.03

 

($

0.17

)

($

0.14

)

Diluted EPS at Constant Currency  

$

0.04

 

$

0.89

 

$

0.93

 

 
a Quarter-to-date: Restructuring & realignment costs of $6 million in 2022 and $2 million in 2021, as well as special charges of $13 million in 2022 ($1 million UK pension plan charges and $12 million asset impairment charges) and $1 million in 2021 for UK pension plan charges.
b Quarter-to-date: Special non-operating charges consist of $141 million in 2022 related to UK pension plan charges and buyout settlement and $1 million in 2021 for costs related to the UK pension plan.
c Quarter-to-date: Net tax impact on restructuring & realignment costs of $1 million in 2022 and $1 million in 2021; net tax impact on special charges of $25 million in 2022; and $2 million in 2022 and $1 million in 2021 of negative impact from tax related special benefits to GAAP tax, respectively.
 
Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow ($ Millions)
 

Q1

 

Q2

 

Q3

 

Year-to-Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

 
Net Cash - Operating Activities

($81

)

($26

)

$113

 

$232

 

$202

 

$112

 

$234

 

$318

 

 
Capital Expenditures - PP&E

(31

)

(22

)

(30

)

(25

)

(37

)

(33

)

(98

)

(80

)

Capital Expenditures - Software

(18

)

(17

)

(16

)

(16

)

(16

)

(14

)

(50

)

(47

)

Capital Expenditures

(49

)

(39

)

(46

)

(41

)

(53

)

(47

)

(148

)

(127

)

Free Cash Flow

($130

)

($65

)

$67

 

$191

 

$149

 

$65

 

$86

 

$191

 

Net Income

82

 

87

 

112

 

113

 

12

 

114

 

206

 

314

 

Gain/(Loss) from sale of business

1

 

0

 

0

 

2

 

0

 

0

 

1

 

2

 

Restructuring & Realignment Charges - non-cash impairment

0

 

(1

)

0

 

0

 

0

 

0

 

0

 

(1

)

UK pension buyout settlement - non-cash release from AOCI

0

 

0

 

0

 

0

 

(140

)

0

 

(140

)

0

 

UK pension buyout settlement - non-cash tax release from AOCI

0

 

0

 

0

 

0

 

23

 

0

 

23

 

0

 

Special Charges - non-cash impairment

0

 

(1

)

(1

)

0

 

(12

)

0

 

(13

)

(1

)

Net Income, excluding gain on sale of businesses, non-cash impairment charges and non-cash pension buyout settlement

$81

 

$89

 

$113

 

$111

 

$141

 

$114

 

$335

 

$314

 

 
Operating Cash Flow Conversion

-99

%

-30

%

101

%

205

%

1683

%

98

%

114

%

101

%

Free Cash Flow Conversion

-160

%

-73

%

59

%

172

%

106

%

57

%

26

%

61

%

 
Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
 
 

2022

Q1 Q2 Q3 Q4 Total
 
Net Income

82

 

112

 

12

 

206

 

Net Income margin

6.4

%

8.2

%

0.9

%

5.1

%

Depreciation

28

 

28

 

27

 

83

 

Amortization

30

 

32

 

31

 

93

 

Interest Expense (Income), net

11

 

10

 

7

 

28

 

Income Tax Expense

16

 

24

 

5

 

45

 

EBITDA

167

 

206

 

82

 

455

 

Share-based Compensation

9

 

9

 

10

 

28

 

Restructuring & Realignment

4

 

8

 

6

 

18

 

UK Pension Settlement

-

 

-

 

140

 

140

 

Special Charges

2

 

3

 

14

 

19

 

Loss/(Gain) from sale of business

(1

)

-

 

-

 

(1

)

Adjusted EBITDA

181

 

226

 

252

 

659

 

Adjusted EBITDA Margin

14.2

%

16.6

%

18.3

%

16.4

%

 

2021

Q1 Q2 Q3 Q4 Total
 
Net Income

87

 

113

 

114

 

113

 

427

 

Net Income margin

6.9

%

8.4

%

9.0

%

8.5

%

8.2

%

Depreciation

30

 

29

 

31

 

28

 

118

 

Amortization

32

 

33

 

31

 

31

 

127

 

Interest Expense (Income), net

19

 

19

 

20

 

11

 

69

 

Income Tax Expense

27

 

25

 

19

 

13

 

84

 

EBITDA

195

 

219

 

215

 

196

 

825

 

Share-based Compensation

9

 

8

 

8

 

8

 

33

 

Restructuring & Realignment

8

 

6

 

2

 

6

 

22

 

Special Charges

3

 

3

 

2

 

4

 

12

 

Loss/(Gain) from sale of business

-

 

(2

)

-

 

-

 

(2

)

Adjusted EBITDA

215

 

234

 

227

 

214

 

890

 

Adjusted EBITDA Margin

17.1

%

17.3

%

17.9

%

16.2

%

17.1

%

 
Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Water Infrastructure
 

2022

Q1 Q2 Q3 Q4 Total
 
Operating Income

74

 

108

 

104

 

286

 

Depreciation

11

 

11

 

11

 

33

 

Amortization

2

 

3

 

1

 

6

 

Other non-operating expense, excluding interest income

(4

)

1

 

-

 

(3

)

EBITDA

83

 

123

 

116

 

322

 

Share-based Compensation

1

 

-

 

-

 

1

 

Restructuring & Realignment

1

 

3

 

3

 

7

 

Adjusted EBITDA

85

 

126

 

119

 

330

 

Adjusted EBITDA Margin

15.9

%

21.4

%

20.7

%

19.5

%

 

2021

Q1 Q2 Q3 Q4 Total
 
Operating Income

71

 

93

 

101

 

122

 

387

 

Depreciation

11

 

11

 

11

 

10

 

43

 

Amortization

2

 

2

 

1

 

3

 

8

 

Other non-operating expense, excluding interest income

(2

)

(2

)

1

 

(2

)

(5

)

EBITDA

82

 

104

 

114

 

133

 

433

 

Share-based Compensation

1

 

-

 

1

 

-

 

2

 

Restructuring & Realignment

5

 

4

 

1

 

2

 

12

 

Adjusted EBITDA

88

 

108

 

116

 

135

 

447

 

Adjusted EBITDA Margin

17.3

%

19.0

%

21.2

%

21.7

%

19.9

%

 
Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Applied Water
 

2022

Q1 Q2 Q3 Q4 Total
 
Operating Income

59

 

61

 

77

 

197

 

Depreciation

5

 

4

 

4

 

13

 

Amortization

-

 

1

 

-

 

1

 

Other non-operating expense, excluding interest income

(1

)

-

 

(1

)

(2

)

EBITDA

63

 

66

 

80

 

209

 

Share-based Compensation

1

 

1

 

2

 

4

 

Restructuring & Realignment

1

 

2

 

1

 

4

 

Special Charges

-

 

-

 

-

 

-

 

Loss/(Gain) from sale of business

-

 

-

 

-

 

-

 

Adjusted EBITDA

65

 

69

 

83

 

217

 

Adjusted EBITDA Margin

15.3

%

16.1

%

18.1

%

16.5

%

 

2021

Q1 Q2 Q3 Q4 Total
 
Operating Income

66

 

64

 

60

 

50

 

240

 

Depreciation

5

 

5

 

5

 

5

 

20

 

Amortization

1

 

1

 

-

 

-

 

2

 

Other non-operating expense, excluding interest income

-

 

(1

)

-

 

(2

)

(3

)

EBITDA

72

 

71

 

65

 

53

 

261

 

Share-based Compensation

1

 

1

 

1

 

1

 

4

 

Restructuring & Realignment

1

 

2

 

2

 

2

 

7

 

Special Charges

1

 

-

 

-

 

-

 

1

 

Loss/(Gain) from sale of business

-

 

(2

)

-

 

-

 

(2

)

Adjusted EBITDA

75

 

72

 

68

 

56

 

271

 

Adjusted EBITDA Margin

19.1

%

17.4

%

17.0

%

13.8

%

16.8

%

 
Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Measurement & Control Solutions
 

2022

Q1 Q2 Q3 Q4 Total
 
Operating Income

(10

)

(5

)

(2

)

(17

)

Depreciation

9

 

8

 

8

 

25

 

Amortization

25

 

26

 

27

 

78

 

Other non-operating expense, excluding interest income

-

 

(1

)

(1

)

(2

)

EBITDA

25

 

28

 

32

 

85

 

Share-based Compensation

1

 

2

 

2

 

5

 

Restructuring & Realignment

2

 

3

 

2

 

7

 

Adjusted EBITDA

27

 

34

 

48

 

109

 

Adjusted EBITDA Margin

8.6

%

9.8

%

13.8

%

10.8

%

 

2021

Q1 Q2 Q3 Q4 Total
 
Operating Income

9

 

13

 

7

 

(17

)

12

 

Depreciation

9

 

10

 

11

 

8

 

38

 

Amortization

27

 

27

 

27

 

26

 

107

 

Other non-operating expense, excluding interest income

(1

)

(1

)

-

 

-

 

(2

)

EBITDA

44

 

49

 

45

 

17

 

155

 

Share-based Compensation

1

 

2

 

1

 

2

 

6

 

Restructuring & Realignment

2

 

-

 

(1

)

2

 

3

 

Adjusted EBITDA

47

 

51

 

45

 

21

 

164

 

Adjusted EBITDA Margin

13.3

%

13.9

%

14.2

%

7.1

%

12.3

%

 

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