Xylem Reports Fourth-Quarter and Full-Year 2023 Results

Rhea-AI Summary

Xylem Inc. reported fourth-quarter and full-year 2023 results, with orders of $2.0 billion, revenue of $2.1 billion, and earnings per share of $1.10. Full-year highlights include revenue of $7.4 billion, earnings per share of $2.79, and an initiation of 2024 full-year revenue guidance of $8.4 to $8.5 billion. Net income was $266 million, or $1.10 per share, with a net income margin increase of 270 basis points to 12.6 percent. Xylem forecasts full-year 2024 revenue of approximately $8.4 to $8.5 billion, up approximately 14 to 15 percent on a reported basis and up approximately 3 to 5 percent on an organic basis.

Positive

• Orders of $2.0 billion, up 42% on a reported basis and 10% organically
• Revenue of $2.1 billion, up 41% on a reported basis and 9% organically
• Earnings per share of $1.10, up 34%; $0.99 on an adjusted basis, down 1%
• Full-year revenue of $7.4 billion, up 33% on a reported basis and 12% organically
• Earnings per share of $2.79, up 42%; $3.78 on an adjusted basis, up 20%
• Initiating 2024 full-year revenue guidance of $8.4 to $8.5 billion, up 3% to 5% organically

Negative

• None.

Insights

Financial Analyst

The reported increase in orders and revenue for Xylem Inc. reflects a robust demand for water technology solutions. The organic growth of 10% and 9% respectively, indicates that the growth is not solely reliant on acquisitions or currency fluctuations, which is a positive sign for sustainability of the business. The earnings per share (EPS) increase of 34% on a reported basis signifies strong profitability, although the slight decrease on an adjusted basis suggests that there are costs and investments that may be affecting the net income.

Looking ahead, the initiation of 2024 full-year revenue guidance with an expected increase of 3% to 5% organically, alongside an adjusted EPS range of $4.00 to $4.20, provides a clear expectation of continued growth. However, it is important to note that this projected growth rate is lower than the previous year's, which could be indicative of market saturation or increased competition. The forecasted free cash flow conversion of approximately 115% is a strong indicator of the company's ability to convert income into cash, an important metric for assessing financial health and potential for shareholder returns.

Market Research Analyst

The water technology industry is experiencing a surge in demand, likely driven by global challenges such as water scarcity and infrastructure needs. Xylem's performance, including a significant margin increase and an EBITDA margin of 19.6%, suggests operational efficiency and effective cost management. The margin expansion, driven by productivity savings and strong price realization, is particularly noteworthy as it exceeds the impact of inflation and strategic investments, which have been a concern for many industries in recent times.

Furthermore, the successful integration of Evoqua and the resulting expanded offerings suggest that Xylem is effectively leveraging its acquisitions to enhance its market position and address a broader range of customer needs. This strategic move could potentially create a competitive advantage and drive future growth. The dividend increase by 9% also signals confidence in the company's financial stability and commitment to delivering shareholder value.

Economist

The positive financial results from Xylem Inc. and the optimistic guidance for 2024 may have a ripple effect on the broader economy. As a leading company in the water technology sector, Xylem's performance can be seen as a barometer for the industry's health and potential for innovation and job creation. The company's focus on operational performance and strategic investments suggest a favorable outlook for the sector's contribution to economic growth.

However, it is important to monitor the potential impacts of macroeconomic factors, such as inflationary pressures and interest rate changes, on Xylem's cost structure and capital expenditure. Additionally, the company's ability to maintain its margin in the face of these challenges will be critical in assessing its long-term economic resilience and its capacity to continue investing in innovation and infrastructure development.

Fourth-Quarter Highlights

• Orders of $2.0 billion, up 42% on a reported basis and 10% organically
• Revenue of $2.1 billion, up 41% on a reported basis and 9% organically
• Earnings per share of $1.10, up 34%; $0.99 on an adjusted basis, down 1%

Full-Year Highlights

• Revenue of $7.4 billion, up 33% on a reported basis and 12% organically
• Earnings per share of $2.79, up 42%; $3.78 on an adjusted basis, up 20%
• Initiating 2024 full-year revenue guidance of $8.4 to $8.5 billion, up 3% to 5% organically, and adjusted earnings per share range of $4.00 to $4.20

WASHINGTON--(BUSINESS WIRE)-- Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported fourth-quarter and full-year 2023 results. The Company’s total revenue of $2.1 billion surpassed prior guidance, on continued strong execution and demand. Fourth-quarter earnings exceeded Xylem’s previous guidance.

“The team delivered an outstanding fourth quarter, fueling momentum as we enter 2024,” said Matthew Pine, Xylem president and CEO. “Revenue, margin and earnings per share all exceeded expectations, driven by strong execution on healthy demand across our business. In a transformational year for Xylem, the team stayed focused on serving our customers and delivered strong results on both the top and bottom lines.”

“That discipline and focus, paired with continuing resilient underlying demand, gives us confidence in further growth and margin expansion in the year ahead. Our integration of Evoqua is ahead of schedule, and our team is taking full advantage of the breadth of our combined offering to solve even more of our customers’ water challenges.”

Net income was $266 million, or $1.10 per share. Net income margin increased 270 basis points to 12.6 percent. These results are driven by strong operational performance and non-recurring tax benefits, partially offset by higher acquisition and integration costs related to the Evoqua transaction, purchase accounting intangible amortization, special charges, and restructuring and realignment costs. Adjusted net income was $239 million, or $0.99 per share, which excludes the impacts of special charges, purchase accounting intangible amortization, and restructuring and realignment costs.

Fourth-quarter adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) margin was 19.6 percent, reflecting a year-over-year increase of 90 basis points. Productivity savings, strong price realization and higher volume drove the margin expansion, exceeding the impact of inflation and strategic investments.

The Board of Directors of Xylem has declared a first-quarter dividend of $0.36 per share, an increase of 9 percent. The dividend is payable on March 20, 2024, to shareholders of record as of February 21, 2024.

Outlook

Xylem forecasts full-year 2024 revenue of approximately $8.4 to $8.5 billion, up approximately 14 to 15 percent on a reported basis and up approximately 3 to 5 percent on an organic basis.

Full-year 2024 adjusted EBITDA margin is expected to be approximately 19.4 to 19.9 percent, an increase of 50 to 100 basis points from Xylem’s 2023 adjusted results. Full-year free cash flow conversion to net income is expected to be approximately 115 percent.

Further 2024 planning assumptions are included in Xylem’s fourth-quarter 2023 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.

Supplemental information on Xylem’s fourth-quarter 2023 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 the world’s critical water challenges with innovation and expertise. Our 23,000 diverse employees delivered combined pro forma revenue of $8.1 billion in 2023. 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 and Let’s Solve Water.

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. 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, interest rates, inflation 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 ongoing and possible escalation of the conflicts involving between Russia and Ukraine, and the Middle East, as well as regulatory, economic and other risks associated with our global sales and operations, including those related to domestic content requirements applicable to projects receiving governmental funding; 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 connected products and services; lack of availability or delays in receiving parts and raw materials from our supply chain, including electronic components (in particular, semiconductors); disruptions in operations at our facilities or that of third parties upon which we rely; uncertainty related to the realization of the benefits and synergies from our acquisition of Evoqua; safe and compliant treatment and handling of water, wastewater and hazardous materials; failure to successfully execute large projects, including with respect to meeting performance guarantees and customers’ budgets, timelines and safety requirements; our ability to retain and attract leadership and other diverse and key talent, as well as competition for overall talent and labor; defects, security, warranty and liability claims, and recalls with respect to our products; uncertainty related to restructuring and realignment actions and related costs and savings; our ability to execute strategic investments for growth, including related to acquisitions and divestitures; availability, regulation or interference with radio spectrum used by certain of our products; volatility in served markets or impacts on our business and operations due to weather conditions, including the effects of climate change; risks related to our sustainability commitments and related disclosures; fluctuations in foreign currency exchange rates; difficulty predicting our financial results; risk of future impairments to goodwill and other intangible assets; changes in our effective tax rates or tax expenses; financial market risks related to our pension and other defined benefit plans; failure to comply with, or changes in, laws or regulations, including those pertaining to our business conduct, operations, products and services, including anti-corruption, data privacy and security, trade, competition, the environment, climate change and health and safety; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; matters related to intellectual property infringement or expiration of rights; and other factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 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 press release. 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
CONSOLIDATED INCOME STATEMENTS (Unaudited)
(In Millions, except per share data)
Year Ended December 31,	2023				2022			2021
Revenue from products	$	6,291			$	4,978		$	4,684
Revenue from services		1,073				544			511
Revenue		7,364				5,522			5,195
Cost of revenue from products		3,817				3,002			2,831
Cost of revenue from services		830				436			389
Cost of revenue		4,647				3,438			3,220
Gross profit		2,717				2,084			1,975
Selling, general and administrative expenses		1,757				1,227			1,179
Research and development expenses		232				206			204
Restructuring and asset impairment charges		76				29			7
Operating income		652				622			585
Interest expense		49				50			76
U.K. pension settlement expense		—				140			—
Other non-operating income, net		33				7			—
(Loss) Gain on sale of businesses		(1	)			1			2
Income before taxes		635				440			511
Income tax expense		26				85			84
Net income	$	609			$	355		$	427
Earnings per share:
Basic	$	2.81			$	1.97		$	2.37
Diluted	$	2.79			$	1.96		$	2.35
Weighted average number of shares:
Basic		217.0				180.2			180.2
Diluted		218.2				181.0			181.5

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Millions, except per share amounts)
December 31,	2023				2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,019			$	944
Receivables, less allowances for discounts, returns and credit losses of $56 and $50 in 2023 and 2022, respectively		1,617				1,096
Inventories		1,018				799
Prepaid and other current assets		230				173
Total current assets		3,884				3,012
Property, plant and equipment, net		1,169				630
Goodwill		7,587				2,719
Other intangible assets, net		2,529				930
Other non-current assets		943				661
Total assets	$	16,112			$	7,952
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	968			$	723
Accrued and other current liabilities		1,221				867
Short-term borrowings and current maturities of long-term debt		16				—
Total current liabilities		2,205				1,590
Long-term debt, net		2,268				1,880
Accrued post-retirement benefit obligations		344				286
Deferred income tax liabilities		557				222
Other non-current accrued liabilities		562				471
Total liabilities		5,936				4,449
Stockholders’ equity:
Common stock — par value $0.01 per share:
Authorized 750.0 shares, issued 257.6 and 196.0 shares in 2023 and 2022, respectively		3				2
Capital in excess of par value		8,564				2,134
Retained earnings		2,601				2,292
Treasury stock – at cost 16.0 shares and 15.8 shares in 2023 and 2022, respectively		(733	)			(708	)
Accumulated other comprehensive loss		(269	)			(226	)
Total stockholders’ equity		10,166				3,494
Non-controlling interest		10				9
Total equity		10,176				3,503
Total liabilities and stockholders’ equity	$	16,112			$	7,952

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions) (Unaudited)
Year Ended December 31,	2023				2022				2021
Operating Activities
Net income	$	609			$	355			$	427
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		193				111				118
Amortization		243				125				127
Deferred income taxes		(79	)			(64	)			10
Share-based compensation		60				37				33
Restructuring and asset impairment charges		76				29				7
U.K. pension settlement expense		—				140				—
Loss (gain) from sale of businesses		1				(1	)			(2	)
Other, net		—				(4	)			8
Payments for restructuring		(30	)			(11	)			(25	)
Contributions to post-retirement benefit plans		(25	)			(19	)			(29	)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables		(87	)			(192	)			(70	)
Changes in inventories		41				(147	)			(167	)
Changes in accounts payable		22				117				81
Changes in accrued liabilities		(4	)			57				7
Changes in accrued and deferred taxes		(109	)			57				(9	)
Net changes in other assets and liabilities		(74	)			6				22
Net Cash — Operating activities		837				596				538
Investing Activities
Capital expenditures		(271	)			(208	)			(208	)
Proceeds from the sale of property, plant and equipment		1				4				3
Acquisitions of businesses, net of cash acquired		(476	)			—				—
Proceeds from sale of businesses		105				1				10
Cash received from investments		1				5				—
Cash paid for investments		(1	)			(11	)			—
Cash paid for equity investments		(57	)			(3	)			(5	)
Cash received from interest rate swaps		38				—				—
Cash received from cross-currency swaps		28				28				14
Settlement of currency forward agreement		—				(10	)			—
Other, net		4				3				3
Net Cash — Investing activities		(628	)			(191	)			(183	)
Financing Activities
Long-term debt issued, net		278				—				—
Long-term debt repaid, net		(160	)			(527	)			(600	)
Repurchase of common stock		(25	)			(52	)			(68	)
Proceeds from exercise of employee stock options		62				8				19
Dividends paid		(299	)			(217	)			(203	)
Other, net		(13	)			(2	)			(3	)
Net Cash — Financing activities		(157	)			(790	)			(855	)
Effect of exchange rate changes on cash		23				(20	)			(26	)
Net change in cash and cash equivalents		75				(405	)			(526	)
Cash and cash equivalents at beginning of year		944				1,349				1,875
Cash and cash equivalents at end of year	$	1,019			$	944			$	1,349
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	69			$	76			$	99
Income taxes (net of refunds received)	$	211			$	91			$	83

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 U.S. 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, amortization of acquired intangible assets, 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 and other non-recurring, significant non-cash impacts, such as 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.

"Adjusted Free Cash Flow" defined as free cash flow adjusted for significant cash items for which the corresponding income statement impact does not occur within

the same fiscal year.

“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		2023 v. 2022			2023 v. 2022						FX Impact			Adj. 2023 v. 2022			Adj. 2023 v. 2022
	2023		2022
Year Ended December 31
Xylem Inc.	7,501		6,257		1,244			20	%		(1,220	)		41			65			1	%		21	%
Water Infrastructure	3,060		2,607		453			17	%		(352	)		23			124			5	%		18	%
Applied Water	1,770		1,794		(24	)		(1	%)		-			18			(6	)		(0	%)		(0	%)
Measurement and Control Solutions	1,803		1,856		(53	)		(3	%)		-			-			(53	)		(3	%)		(3	%)
Integrated Solutions and Services	868		-		868			N/A			(868	)		-			-			N/A			N/A
Quarter Ended December 31
Xylem Inc.	2,044		1,439		605			42	%		(451	)		(17	)		137			10	%		41	%
Water Infrastructure	820		622		198			32	%		(130	)		(9	)		59			9	%		30	%
Applied Water	420		400		20			5	%		-			(2	)		18			5	%		5	%
Measurement and Control Solutions	483		417		66			16	%		-			(6	)		60			14	%		14	%
Integrated Solutions and Services	321		-		321			N/A			(321	)		-			-			N/A			N/A
Quarter Ended September 30
Xylem Inc.	2,031		1,419		612			43	%		(547	)		(18	)		47			3	%		42	%
Water Infrastructure	850		594		256			43	%		(163	)		(10	)		83			14	%		41	%
Applied Water	422		409		13			3	%		-			(4	)		9			2	%		2	%
Measurement and Control Solutions	375		416		(41	)		(10	%)		-			(4	)		(45	)		(11	%)		(11	%)
Integrated Solutions and Services	384		-		384			N/A			(384	)		-			-			N/A			N/A
Quarter Ended June 30
Xylem Inc.	1,856		1,684		172			10	%		(222	)		23			(27	)		(2	%)		12	%
Water Infrastructure	751		731		20			3	%		(59	)		13			(26	)		(4	%)		5	%
Applied Water	445		480		(35	)		(7	%)		-			6			(29	)		(6	%)		(6	%)
Measurement and Control Solutions	497		473		24			5	%		-			4			28			6	%		6	%
Integrated Solutions and Services	163		-		163			N/A			(163	)		-			-			N/A			N/A
Quarter Ended March 31
Xylem Inc.	1,570		1,715		(145	)		(8	%)		-			53			(92	)		(5	%)		(5	%)
Water Infrastructure	639		660		(21	)		(3	%)		-			29			8			1	%		1	%
Applied Water	483		505		(22	)		(4	%)		-			18			(4	)		(1	%)		(1	%)
Measurement and Control Solutions	448		550		(102	)		(19	%)		-			6			(96	)		(17	%)		(17	%)
Integrated Solutions and Services	-		-		-			N/A			-			-			-			N/A			N/A

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		2023 v. 2022		2023 v. 2022						FX Impact			Adj. 2023 v. 2022			Adj. 2023 v. 2022
	2023		2022
Year Ended December 31
Xylem Inc.	7,364		5,522		1,842		33	%		(1,177	)		25			690			12	%		34	%
Water Infrastructure	2,967		2,364		603		26	%		(362	)		14			255			11	%		26	%
Applied Water	1,853		1,767		86		5	%		-			10			96			5	%		5	%
Measurement and Control Solutions	1,729		1,391		338		24	%		-			1			339			24	%		24	%
Integrated Solutions and Services	815		-		815		N/A			(815	)		-			-			N/A			N/A
Quarter Ended December 31
Xylem Inc.	2,118		1,506		612		41	%		(459	)		(17	)		136			9	%		40	%
Water Infrastructure	871		668		203		30	%		(137	)		(9	)		57			9	%		29	%
Applied Water	457		455		2		0	%		-			(4	)		(2	)		(0	%)		(0	%)
Measurement and Control Solutions	468		383		85		22	%		-			(4	)		81			21	%		21	%
Integrated Solutions and Services	322		-		322		N/A			(322	)		-			-			N/A			N/A
Quarter Ended September 30
Xylem Inc.	2,076		1,380		696		50	%		(540	)		(22	)		134			10	%		49	%
Water Infrastructure	803		574		229		40	%		(172	)		(14	)		43			7	%		37	%
Applied Water	465		458		7		2	%		-			(3	)		4			1	%		1	%
Measurement and Control Solutions	440		348		92		26	%		-			(5	)		87			25	%		25	%
Integrated Solutions and Services	368		-		368		N/A			(368	)		-			-			N/A			N/A
Quarter Ended June 30
Xylem Inc.	1,722		1,364		358		26	%		(178	)		19			199			15	%		28	%
Water Infrastructure	704		589		115		20	%		(53	)		12			74			13	%		22	%
Applied Water	478		429		49		11	%		-			4			53			12	%		12	%
Measurement and Control Solutions	415		346		69		20	%		-			3			72			21	%		21	%
Integrated Solutions and Services	125		-		125		N/A			(125	)		-			-			N/A			N/A
Quarter Ended March 31
Xylem Inc.	1,448		1,272		176		14	%		-			45			221			17	%		17	%
Water Infrastructure	589		533		56		11	%		-			25			81			15	%		15	%
Applied Water	453		425		28		7	%		-			13			41			10	%		10	%
Measurement and Control Solutions	406		314		92		29	%		-			7			99			32	%		32	%
Integrated Solutions and Services	-		-		-		N/A			-			-			-			N/A			N/A

Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income ($ Millions)
		Q1					Q2					Q3					Q4					YTD
		2023		2022 (1)			2023		2022 (1)			2023		2022 (1)			2023		2022 (1)			2023		2022 (1)
	Total Revenue
	• Total Xylem	1,448		1,272			1,722		1,364			2,076		1,380			2,118		1,506			7,364		5,522
	• Water Infrastructure	589		533			704		589			803		574			871		668			2,967		2,364
	• Applied Water	453		425			478		429			465		458			457		455			1,853		1,767
	• Measurement and Control Solutions	406		314			415		346			440		348			468		383			1,729		1,391
	• Integrated Solutions and Services	-		-			125		-			368		-			322		-			815		-
	• Corporate/ Other	-		-			-		-			-		-			-		-			-		-
	Operating Income (Loss)
	• Total Xylem	131		111			119		146			191		168			211		197			652		622
	• Water Infrastructure	70		74			106		108			128		104			115		132			419		418
	• Applied Water	83		59			84		61			73		77			70		61			310		258
	• Measurement and Control Solutions	20		(10	)		26		(5	)		27		(2	)		40		19			113		2
	• Integrated Solutions and Services	-		-			(7	)	-			(3	)	-			18		-			8		-
	• Corporate/ Other	(42	)	(12	)		(90	)	(18	)		(34	)	(11	)		(32	)	(15	)		(198	)	(56	)
	Operating Margin
	• Total Xylem	9.0	%	8.7	%		6.9	%	10.7	%		9.2	%	12.2	%		10.0	%	13.1	%		8.9	%	11.3	%
	• Water Infrastructure	11.9	%	13.9	%		15.1	%	18.3	%		15.9	%	18.1	%		13.2	%	19.8	%		14.1	%	17.7	%
	• Applied Water	18.3	%	13.9	%		17.6	%	14.2	%		15.7	%	16.8	%		15.3	%	13.4	%		16.7	%	14.6	%
	• Measurement and Control Solutions	4.9	%	(3.2	%)		6.3	%	(1.4	%)		6.1	%	(0.6	%)		8.5	%	5.0	%		6.5	%	0.1	%
	• Integrated Solutions and Services	N/A		N/A			(5.6	%)	N/A			(0.8	%)	N/A			5.6	%	N/A			1.0	%	N/A
	• Corporate/ Other	N/A		N/A			N/A		N/A			N/A		N/A			N/A		N/A			N/A		N/A
	Special Charges
	• Total Xylem	25		1			67		1			24		13			22		1			138		16
	• Water Infrastructure	-		-			12		-			6		-			11		-			29		-
	• Applied Water	-		-			-		-			-		-			-		-			-		-
	• Measurement and Control Solutions	2		-			-		1			1		12			1		1			4		14
	• Integrated Solutions and Services	-		-			7		-			9		-			5		-			21		-
	• Corporate/ Other	23		1			48		-			8		1			5		-			84		2
	Restructuring & Realignment Costs
	• Total Xylem	11		4			37		8			34		6			24		16			106		34
	• Water Infrastructure	3		1			3		3			3		3			13		4			22		11
	• Applied Water	3		1			2		2			6		1			3		9			14		13
	• Measurement and Control Solutions	5		2			3		3			6		2			6		3			20		10
	• Integrated Solutions and Services	-		-			7		-			8		-			-		-			15		-
	• Corporate/ Other	-		-			22		-			11		-			2		-			35		-
	Purchase Accounting Intangible Amortization Adjustment
	• Total Xylem	18		18			36		18			66		18			56		18			176		72
	• Water Infrastructure	1		1			8		1			15		1			25		1			49		4
	• Applied Water	-		-			-		-			-		-			-		-			-		-
	• Measurement and Control Solutions	17		17			17		17			16		17			16		17			66		68
	• Integrated Solutions and Services	-		-			11		-			35		-			15		-			61		-
	• Corporate/ Other	-		-			-		-			-		-			-		-			-		-
	Adjusted Operating Income (Loss)
	• Total Xylem	185		134			259		173			315		205			313		232			1,072		744
	• Water Infrastructure	74		76			129		112			152		108			164		137			519		433
	• Applied Water	86		60			86		63			79		78			73		70			324		271
	• Measurement and Control Solutions	44		9			46		16			50		29			63		40			203		94
	• Integrated Solutions and Services	-		-			18		-			49		-			38		-			105		-
	• Corporate/ Other	(19	)	(11	)		(20	)	(18	)		(15	)	(10	)		(25	)	(15	)		(79	)	(54	)
	Adjusted Operating Margin
	• Total Xylem	12.8	%	10.5	%		15.0	%	12.7	%		15.2	%	14.9	%		14.8	%	15.4	%		14.6	%	13.5	%
	• Water Infrastructure	12.6	%	14.3	%		18.3	%	19.0	%		18.9	%	18.8	%		18.8	%	20.5	%		17.5	%	18.3	%
	• Applied Water	19.0	%	14.1	%		18.0	%	14.7	%		17.0	%	17.0	%		16.0	%	15.4	%		17.5	%	15.3	%
	• Measurement and Control Solutions	10.8	%	2.9	%		11.1	%	4.6	%		11.4	%	8.3	%		13.5	%	10.4	%		11.7	%	6.8	%
	• Integrated Solutions and Services	N/A		N/A			14.4	%	N/A			13.3	%	N/A			11.8	%	N/A			12.9	%	N/A
	• Corporate/ Other	N/A		N/A			N/A		N/A			N/A		N/A			N/A		N/A			N/A		N/A
	(1) 2022 amounts have been recast to adjust for historical purchase accounting intangible amortization.

Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
		Q4 2023												Q4 2022 (1)
		As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
	Total Revenue		2,118				-				2,118				1,506				-				1,506
	Operating Income		211				102		a		313				197				35		a		232
	Operating Margin		10.0	%							14.8	%			13.1	%							15.4	%
	Interest Expense		(14	)			-				(14	)			(13	)			-				(13	)
	Other Non-Operating Income (Expense)		14				-				14				5				-		b		5
	Gain/(Loss) From Sale of Business		(1	)			1				-				-				-				-
	Income before Taxes		210				103				313				189				35				224
	Provision for Income Taxes		56				(130	)	c		(74	)			(40	)			(2	)	c		(42	)
	Net Income		266				(27	)			239				149				33				182
	Diluted Shares		242.5								242.5				181.3								181.3
	Diluted EPS	$	1.10			($	0.11	)		$	0.99			$	0.82			$	0.18			$	1.00
	Year-over-year currency translation impact on current year diluted EPS	$	0.02			$	0.00			$	0.02
	Diluted EPS at Constant Currency	$	1.08			($	0.11	)		$	0.97
		Q4 YTD 2023												Q4 YTD 2022 (1)
		As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
	Total Revenue		7,364				-				7,364				5,522				-				5,522
	Operating Income		652				420		a		1,072				622				122		a		744
	Operating Margin		8.9	%							14.6	%			11.3	%							13.5	%
	Interest Expense		(49	)			-				(49	)			(50	)			-				(50	)
	Other Non-Operating Income (Expense)		33				-				33				7				4		b		11
	UK Pension Buyout Settlement		-				-				-				(140	)			140				-
	Gain/(Loss) From Sale of Business		(1	)			1				-				1				(1	)			-
	Income before Taxes		635				421				1,056				440				265				705
	Provision for Income Taxes		(26	)			(205	)	c		(231	)			(85	)			(50	)	c		(135	)
	Net Income		609				216				825				355				215				570
	Diluted Shares		218.2								218.2				181.0								181.0
	Diluted EPS	$	2.79			$	0.99			$	3.78			$	1.96			$	1.19			$	3.15
	Year-over-year currency translation impact on current year diluted EPS	$	0.02			$	0.00			$	0.02
	Diluted EPS at Constant Currency	$	2.77			$	0.99			$	3.76
	(1) 2022 amounts have been recast to adjust for historical purchase accounting intangible amortization.
a	Quarter-to-date:
	Restructuring & realignment costs: 2023 - $24 million and 2022 - $16 million
	Special charges: 2023 - $19 million of acquisition & integration cost, $1 million of asset impairment and $2 million of other special charges; 2022 - $1 million of asset impairment charges
	Purchase accounting intangible amortization: 2023 - $56 million and 2022 - $18 million
	Year-to-date:
	Restructuring & realignment costs: 2023 - $106 million and 2022 - $34 million
	Special charges: 2023 - $126 million of acquisition & integration related costs, $8 million of other special charges and $4 million of asset impairment charges; 2022 - $14 million of asset impairment charges and $2 million UK pension plan charges
	Purchase accounting intangible amortization: 2023 - $176 million and 2022 - $72 million
b	Quarter-to-date and Year-to-date: 2022 - Special non-operating charges consist of charges related to the UK pension plan exited as part of a buy-out of $0 million and $4 million, respectively
c	Quarter-to-date: 2023 - Net tax impact on pre-tax adjustments (note a) of $23 million and other tax special items of $107 million; 2022 - Net tax impact on pre-tax adjustments (notes a and b) of $7 million and other tax related special items of $(5) million
	Year-to-date: 2023 - Net tax impact on pre-tax adjustments (note a) of $90 million and other tax special items of $115 million; 2022 - Net tax impact on pre-tax adjustments (notes a and b) of $51 million and other tax related special items of $(1) million

Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow ($ Millions)
		Q1						Q2						Q3						Q4						Year-to-Date
		2023			2022			2023			2022			2023			2022			2023			2022			2023			2022
Net Cash - Operating Activities		($19	)		($81	)		$28			$113			$373			$202			$455			$362			$837			$596
Capital Expenditures - PP&E		(33	)		(31	)		(42	)		(30	)		(57	)		(37	)		(76	)		(41	)		(208	)		(139	)
Capital Expenditures - Software		(16	)		(18	)		(12	)		(16	)		(17	)		(16	)		(18	)		(19	)		(63	)		(69	)
Capital Expenditures		(49	)		(49	)		(54	)		(46	)		(74	)		(53	)		(94	)		(60	)		(271	)		(208	)
Cash paid in excess of tax provision for R&D law change adoption		33			-			-			-			-			-			-			-			33			-
Free Cash Flow		($35	)		($130	)		($26	)		$67			$299			$149			$361			$302			$599			$388
Cash paid by Xylem for Evoqua's pre-close transaction costs		-			-			70			-			-			-			-			-			70			-
Cash paid for Idrica distribution agreement		-			-			60			-			-			-			-			-			60			-
Adjusted Free Cash Flow		($35	)		($130	)		$104			$67			$299			$149			$361			$302			$729			$388
Net Income		$99			$82			$92			$112			$152			$12			$266			$149			$609			$355
Gain/(Loss) from sale of business		-			1			-			-			-			-			(1	)		-			(1	)		1
Restructuring Charges - non-cash stock acceleration		-			-			(14	)		-			(11	)		-			(2	)		-			(27	)		-
Significant non-cash tax benefit/(charge)		-			-			-			-			-			-			70			-			70			-
U.K. pension buyout settlement - non-cash release from AOCI		-			-			-			-			-			(140	)		-			-			-			(140	)
U.K. pension buyout settlement - non-cash tax release from AOCI		-			-			-			-			-			23			-			-			-			23
Special Charges - Inventory step-up		-			-			(15	)		-			(5	)		-			(5	)		-			(25	)		-
Special Charges - non-cash impairment		(2	)		-			-			(1	)		(1	)		(12	)		(1	)		(1	)		(4	)		(14	)
Net Income, excluding gain/(loss) on sale of businesses and non-cash restructuring and special charges		$101			$81			$121			$113			$169			$141			$205			$150			$596			$485
Operating Cash Flow Conversion		(19	%)		(99	%)		30	%		101	%		245	%		1683	%		171	%		243	%		137	%		168	%
Free Cash Flow Conversion		(35	%)		(160	%)		86	%		59	%		177	%		106	%		176	%		201	%		122	%		80	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
2023
		Q1			Q2			Q3			Q4			Total
Net Income		99			92			152			266			609
Net Income margin		6.8	%		5.3	%		7.3	%		12.6	%		8.3	%
Depreciation		28			41			63			61			193
Amortization		32			51			84			76			243
Interest Expense (Income), net		2			5			6			8			21
Income Tax Expense		27			22			33			(56	)		26
EBITDA		188			211			338			355			1,092
Share-based Compensation		12			15			18			15			60
Restructuring & Realignment		11			36			33			23			103
Special Charges		25			67			22			22			136
Loss/(Gain) from sale of business		-			-			-			1			1
Adjusted EBITDA		236			329			411		0	416			1,392
Revenue		1,448			1,722			2,076			2,118			7,364
Adjusted EBITDA Margin		16.3	%		19.1	%		19.8	%		19.6	%		18.9	%
2022
		Q1			Q2			Q3			Q4			Total
Net Income		82			112			12			149			355
Net Income margin		6.4	%		8.2	%		0.9	%		9.9	%		6.4	%
Depreciation		28			28			27			28			111
Amortization		30			32			31			32			125
Interest Expense (Income), net		11			10			7			6			34
Income Tax Expense		16			24			5			40			85
EBITDA		167			206			82			255			710
Share-based Compensation		9			9			10			9			37
Restructuring & Realignment		4			8			6			16			34
U.K. Pension Settlement		-			-			140			-			140
Special Charges		2			3			14			1			20
Loss/(Gain) from sale of business		(1	)		-			-			-			(1	)
Adjusted EBITDA		181			226			252			281			940
Revenue		1,272			1,364			1,380			1,506			5,522
Adjusted EBITDA Margin		14.2	%		16.6	%		18.3	%		18.7	%		17.0	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Water Infrastucture
2023
		Q1			Q2			Q3			Q4			Total
Operating Income		70			106			128			115			419
Operating Margin		11.9	%		15.1	%		15.9	%		13.2	%		14.1	%
Depreciation		12			14			14			15			55
Amortization		2			10			16			27			55
Other non-operating expense, excluding interest income		-			1			-			2			3
EBITDA		84			131			158			159			532
Share-based Compensation		2			5			3			5			15
Restructuring & Realignment		3			3			3			13			22
Special Charges		-			12			6			11			29
Adjusted EBITDA		89			151			170			188			598
Revenue		589			704			803			871			2,967
Adjusted EBITDA Margin		15.1	%		21.4	%		21.2	%		21.6	%		20.2	%
2022
		Q1			Q2			Q3			Q4			Total
Operating Income		74			108			104			132			418
Operating Margin		13.9	%		18.3	%		18.1	%		19.8	%		17.7	%
Depreciation		11			11			11			11			44
Amortization		2			3			1			3			9
Other non-operating expense, excluding interest income		(4	)		1			-			(1	)		(4	)
EBITDA		83			123			116			145			467
Share-based Compensation		1			-			-			1			2
Restructuring & Realignment		1			3			3			4			11
Adjusted EBITDA		85			126			119			150			480
Revenue		533			589			574			668			2,364
Adjusted EBITDA Margin		15.9	%		21.4	%		20.7	%		22.5	%		20.3	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Applied Water
2023
		Q1			Q2			Q3			Q4			Total
Operating Income		83			84			73			70			310
Operating Margin		18.3	%		17.6	%		15.7	%		15.3	%		16.7	%
Depreciation		5			4			6			4			19
Amortization		-			1			-			1			2
Other non-operating expense, excluding interest income		(1	)		-			-			(1	)		(2	)
EBITDA		87			89			79			74			329
Share-based Compensation		1			-			1			2			4
Restructuring & Realignment		3			2			5			3			13
Adjusted EBITDA		91			91			85			79			346
Revenue		453			478			465			457			1,853
Adjusted EBITDA Margin		20.1	%		19.0	%		18.3	%		17.3	%		18.7	%
2022
		Q1			Q2			Q3			Q4			Total
Operating Income		59			61			77			61			258
Operating Margin		13.9	%		14.2	%		16.8	%		13.4	%		14.6	%
Depreciation		5			4			4			4			17
Amortization		-			1			-			1			2
Other non-operating expense, excluding interest income		(1	)		-			(1	)		-			(2	)
EBITDA		63			66			80			66			275
Share-based Compensation		1			1			2			-			4
Restructuring & Realignment		1			2			1			9			13
Adjusted EBITDA		65			69			83			75			292
Revenue		425			429			458			455			1,767
Adjusted EBITDA Margin		15.3	%		16.1	%		18.1	%		16.5	%		16.5	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Measurement and Control Solutions
2023
		Q1			Q2			Q3			Q4			Total
Operating Income		20			26			27			40			113
Operating Margin		4.9	%		6.3	%		6.1	%		8.5	%		6.5	%
Depreciation		7			9			8			8			32
Amortization		27			26			26			28			107
Other non-operating expense, excluding interest income		-			-			(1	)		(3	)		(4	)
EBITDA		54			61			60			73			248
Share-based Compensation		2			2			2			1			7
Restructuring & Realignment		5			2			6			5			18
Special Charges		2			-			1			1			4
Loss/(Gain) from sale of business		-			-			-			1			1
Adjusted EBITDA		63			65			69			81			278
Revenue		406			415			440			468			1,729
Adjusted EBITDA Margin		15.5	%		15.7	%		15.7	%		17.3	%		16.1	%
2022
		Q1			Q2			Q3			Q4			Total
Operating Income		(10	)		(5	)		(2	)		19			2
Operating Margin		(3.2	%)		(1.4	%)		(0.6	%)		5.0	%		0.1	%
(Loss)/Gain from sale of business		1			-			-			-			1
Depreciation		9			8			8			8			33
Amortization		25			26			27			26			104
Other non-operating expense, excluding interest income		-			(1	)		(1	)		-			(2	)
EBITDA		25			28			32			53			138
Share-based Compensation		1			2			2			1			6
Restructuring & Realignment		2			3			2			3			10
Special Charges		-			1			12			1			14
Loss/(Gain) from sale of business		(1	)		-			-			-			(1	)
Adjusted EBITDA		27			34			48			58			167
Revenue		314			346			348			383			1,391
Adjusted EBITDA Margin		8.6	%		9.8	%		13.8	%		15.1	%		12.0	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Integrated Solutions and Services
		Q1		Q2			Q3			Q4			Total
Operating Income		-		(7	)		(3	)		18			8
Operating Margin		-		(5.6	%)		(0.8	%)		5.6	%		1.0	%
Depreciation		-		8			30			27			65
Amortization		-		12			36			17			65
EBITDA		-		13			63			62			138
Share-based Compensation		-		3			3			1			7
Restructuring & Realignment		-		7			8			-			15
Special Charges		-		7			9			5			21
Adjusted EBITDA		-		30			83			68			181
Revenue		-		125			368			322			815
Adjusted EBITDA Margin		-		24.0	%		22.6	%		21.1	%		22.2	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205187558/en/

Media

Houston Spencer +1 (914) 323-5723

houston.spencer@xylem.com

Investors

Andrea van der Berg +1 (914) 260-8612

andrea.vanderberg@xylem.com

Source: Xylem Inc.

FAQ

What were Xylem Inc.'s fourth-quarter orders in 2023?

Xylem Inc.'s fourth-quarter orders in 2023 were $2.0 billion, up 42% on a reported basis and 10% organically.

What was Xylem Inc.'s full-year revenue in 2023?

Xylem Inc.'s full-year revenue in 2023 was $7.4 billion, up 33% on a reported basis and 12% organically.

What is Xylem Inc.'s 2024 full-year revenue guidance?

Xylem Inc. has initiated a 2024 full-year revenue guidance of $8.4 to $8.5 billion, up 3% to 5% organically.

What is Xylem Inc.'s forecast for full-year 2024 revenue?

Xylem Inc. forecasts full-year 2024 revenue of approximately $8.4 to $8.5 billion, up approximately 14 to 15 percent on a reported basis and up approximately 3 to 5 percent on an organic basis.