Xylem Reports Second Quarter 2021 Results

Rhea-AI Summary

Xylem Inc. (NYSE: XYL) reported second quarter 2021 revenue of $1.35 billion, reflecting a 16% increase. Adjusted EBITDA margin rose 200 basis points to 17.3%. Net income stood at $113 million or $0.62 per share. The company raised its full-year organic revenue growth guidance to 6-8% and adjusted EPS expectation to $2.55-$2.70. Strong demand across all segments, driven by productivity and recovery from COVID, sustained momentum. Xylem also advanced sustainability goals, linking business strategies to environmental initiatives.

Positive

• Revenue growth of 16% to $1.35 billion.
• Adjusted EBITDA margin increased by 200 basis points to 17.3%.
• Raised full-year organic revenue growth guidance to 6-8%.
• Net income reported at $113 million, or $0.62 per share.

Negative

• Ongoing inflation and supply chain challenges may offset growth.

Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported second quarter 2021 revenue of $1.35 billion. Revenues grew 16 percent on a reported basis, and 11 percent organically, reflecting strong underlying demand across all segments.

Second quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin grew 200 basis points to 17.3 percent. The margin expansion was driven by productivity, mix and volume leverage from strong underlying demand. Xylem generated net income of $113 million, or $0.62 per share, and adjusted net income of $119 million, or $0.66 per share, which excludes the impact of restructuring, realignment and special charges.

“Our team capitalized on robust global demand for our offerings, driving revenues above expectations, and fuelling exceptional growth in new orders and backlog,” said Patrick Decker, Xylem’s president and CEO. “That commercial momentum puts us in a strong position for the second half and beyond, as we continue to invest in sustainable growth. We expect the team to build on continuing market recovery, giving us confidence in lifting full-year guidance.”

“During the quarter we also reported progress toward our 2025 sustainability goals – including moving major facilities onto renewable energy, and helping customers recycle more than a trillion gallons of water,” continued Decker. “The report demonstrates the strong link between our business and sustainability strategies. We partner with customers to provide more resilient infrastructure, drive affordability, and create a more sustainable water sector. That’s our purpose and our business. As climate change drives water challenges in communities around the world, we intend to be part of the solution.” (Download Xylem’s 2020 sustainability report.)

Updated Outlook

Xylem now expects full-year organic revenue growth to be in the range of 6 to 8 percent, and 9 to 11 percent on a reported basis. This represents an increase from the Company’s previous full-year organic revenue guidance of 5 to 7 percent, and 8 to 10 percent on a reported basis. Full-year adjusted earnings per share is now expected to be in the range of $2.55 to $2.70. The increased guidance reflects commercial momentum from the first half, as well as continuing demand and price realization in the second half, partially offset by incremental inflation and supply chain challenges.

Second Quarter Segment Results

Water Infrastructure

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

• Second quarter 2021 revenue was $569 million, up 14 percent on a reported basis, and up 6 percent organically, compared with the same period in 2020. Modest growth in utilities was driven by opex demand in Western Europe and the U.S. Industrial end markets were up double-digits driven largely by Emerging Markets mining demand.
• Second quarter adjusted EBITDA margin was 19 percent, flat versus the prior year period. Reported operating income for the segment was $93 million and adjusted operating income, which excludes $4 million of restructuring and realignment costs, was $97 million. The segment reported operating margin was 16.3 percent, up 170 basis points versus the prior year period. Adjusted operating margin rose 80 basis points to 17 percent. Strong productivity savings and volume offset inflation and investments.

Applied Water

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

• Second quarter 2021 revenue was $414 million, up 23 percent on a reported basis, and up 18 percent organically, compared with the same period in 2020. Growth was driven by strong demand across industrial, residential and commercial end markets driven by broad recovery from COVID challenges in the prior year.
• Second quarter adjusted EBITDA margin was 17.4 percent, up 200 basis points from the prior year period. Reported operating income for the segment was $64 million and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was $66 million. The segment reported operating margin was 15.5 percent, up 330 basis points versus the prior year period. Adjusted operating margin rose 250 basis points to 15.9 percent. Strong volume leverage and productivity more than offset inflation.

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.

• Second quarter 2021 revenue was $368 million, up 14 percent on a reported basis, and up 11 percent organically, compared with the same period in 2020. Growth was driven by volume in water applications from large metrology contract deployments, and by strong demand in water quality testing applications globally.
• Second quarter adjusted EBITDA margin was 13.9 percent, up 460 basis points from the prior year period. Reported operating income for the segment was $13 million and adjusted operating income, with no restructuring and realignment costs in the quarter, was $13 million. The segment reported operating margin was 3.5 percent, up 1780 basis points versus the prior year period. Adjusted operating margin rose 510 basis points to 3.5 percent. Strong productivity savings, favorable mix, and volume leverage more than offset inflation and investments.

Supplemental information on Xylem’s second quarter 2021 earnings and reconciliations for certain non-GAAP items are 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 more than 16,000 diverse employees delivered revenue of $4.88 billion in 2020. 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," “project,” “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; 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 the coronavirus (“COVID-19”) pandemic. 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: overall industry and economic conditions, including industrial, governmental and private sector spending and the strength of the residential and commercial real estate markets; geopolitical, regulatory, economic and other risks associated with international operations; continued uncertainty around the COVID-19 pandemic’s magnitude, duration and impacts on our business, operations, growth, and financial condition, as well as uncertainty around approved vaccines and the pace of recovery when the pandemic subsides; actual or potential other epidemics, pandemics or global health crises; manufacturing and operating cost increases due to inflation, prevailing price changes, tariffs and other factors; fluctuations in foreign currency exchange rates; disruption, competition and 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; availability of products, parts, electronic components and raw materials from our supply chain; availability, regulation and interference with radio spectrum used by some of our products; our ability to retain and attract senior management and other key talent; uncertainty related to restructuring and realignment actions and related charges and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; risks relating to products, including defects, security, warranty and liability claims, and recalls; difficulty predicting our financial results, including uncertainties due to the nature of our short- and long-cycle businesses; volatility in our results due to weather conditions; our ability to borrow or refinance our existing indebtedness and 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, 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, 2020 ("2020 Annual Report") and in subsequent filings we make with the Securities and Exchange Commission (“SEC”).

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
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)
(in millions, except per share data)
	Three Months								Six Months
For the period ended June 30,	2021				2020				2021				2020
Revenue	$	1,351			$	1,160			$	2,607			$	2,283
Cost of revenue	831				726				1,597				1,440
Gross profit	520				434				1,010				843
Selling, general and administrative expenses	304				288				605				585
Research and development expenses	53				44				103				93
Restructuring and asset impairment charges	3				48				9				50
Operating income	160				54				293				115
Interest expense	21				18				42				34
Other non-operating expense, net	(3		)		(1		)		(1		)		(4		)
Gain from sale of business	2				—				2				—
Income before taxes	138				35				252				77
Income tax expense	25				4				52				8
Net income	$	113			$	31			$	200			$	69
Earnings per share:
Basic	$	0.63			$	0.17			$	1.11			$	0.38
Diluted	$	0.62			$	0.17			$	1.10			$	0.38
Weighted average number of shares:
Basic	180.1				180.0				180.2				180.1
Diluted	181.3				180.6				181.4				181.0

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except per share amounts)
	June 30, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,840			$	1,875
Receivables, less allowances for discounts, returns and credit losses of $41 and $46 in 2021 and 2020, respectively	975				923
Inventories	642				558
Prepaid and other current assets	166				167
Total current assets	3,623				3,523
Property, plant and equipment, net	626				657
Goodwill	2,841				2,854
Other intangible assets, net	1,058				1,093
Other non-current assets	637				623
Total assets	$	8,785			$	8,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	599			$	569
Accrued and other current liabilities	760				787
Short-term borrowings and current maturities of long-term debt	600				600
Total current liabilities	1,959				1,956
Long-term debt	2,466				2,484
Accrued post-retirement benefits	501				519
Deferred income tax liabilities	264				242
Other non-current accrued liabilities	546				573
Total liabilities	5,736				5,774
Stockholders’ equity:
Common Stock – par value $0.01 per share:
Authorized 750.0 shares, issued 195.3 shares and 194.9 shares in 2021 and 2020, respectively	2				2
Capital in excess of par value	2,063				2,037
Retained earnings	2,029				1,930
Treasury stock – at cost 15.2 shares and 14.5 shares in 2021 and 2020, respectively	(656		)		(588		)
Accumulated other comprehensive loss	(398		)		(413		)
Total stockholders’ equity	3,040				2,968
Non-controlling interests	9				8
Total equity	3,049				2,976
Total liabilities and stockholders’ equity	$	8,785			$	8,750

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
For the six months ended June 30,	2021				2020
Operating Activities
Net income	$	200			$	69
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	59				58
Amortization	65				68
Share-based compensation	17				16
Restructuring and asset impairment charges	9				50
Gain from sale of business	(2		)		—
Other, net	6				18
Payments for restructuring	(18		)		(12		)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables	(66		)		48
Changes in inventories	(89		)		(63		)
Changes in accounts payable	36				(86		)
Other, net	(11		)		13
Net Cash – Operating activities	206				179
Investing Activities
Capital expenditures	(80		)		(95		)
Proceeds from sale of business	2				—
Other, net	9				7
Net Cash – Investing activities	(69		)		(88		)
Financing Activities
Short-term debt issued, net	—				359
Short-term debt repaid	—				(422		)
Long-term debt issued, net	—				987
Repurchase of common stock	(68		)		(60		)
Proceeds from exercise of employee stock options	9				5
Dividends paid	(102		)		(95		)
Other, net	(1		)		—
Net Cash – Financing activities	(162		)		774
Effect of exchange rate changes on cash	(10		)		(12		)
Net change in cash and cash equivalents	(35		)		853
Cash and cash equivalents at beginning of year	1,875				724
Cash and cash equivalents at end of period	$	1,840			$	1,577
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	58			$	45
Income taxes (net of refunds received)	$	60			$	11

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" reflects 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 pension costs.

“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		2021 v. 2020		2021 v. 2020				FX Impact		Adj. 2021 v. 2020		Adj. 2021 v. 2020
	2021		2020
Six Months Ended June 30
Xylem Inc.	3,198		2,493		705		28%		8		(123)		590		24%		23%
Water Infrastructure	1,250		1,112		138		12%		-		(68)		70		6%		6%
Applied Water	963		698		265		38%		-		(33)		232		33%		33%
Measurement & Control Solutions	985		683		302		44%		8		(22)		288		42%		41%
Quarter Ended June 30
Xylem Inc.	1,660		1,232		428		35%		1		(74)		355		29%		29%
Water Infrastructure	639		598		41		7%		-		(41)		-		0%		0%
Applied Water	486		326		160		49%		-		(20)		140		43%		43%
Measurement & Control Solutions	535		308		227		74%		1		(13)		215		70%		69%
Quarter Ended March 31
Xylem Inc.	1,538		1,261		277		22%		7		(49)		235		19%		18%
Water Infrastructure	611		514		97		19%		-		(27)		70		14%		14%
Applied Water	477		372		105		28%		-		(13)		92		25%		25%
Measurement & Control Solutions	450		375		75		20%		7		(9)		73		19%		18%

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		2021 v. 2020		2021 v. 2020				FX Impact		Adj. 2021 v. 2020		Adj. 2021 v. 2020
	2021		2020
Six Months Ended June 30
Xylem Inc.	2,607		2,283		324		14%		5		(110)		219		10%		9%
Water Infrastructure	1,078		939		139		15%		-		(60)		79		8%		8%
Applied Water	807		675		132		20%		-		(29)		103		15%		15%
Measurement & Control Solutions	722		669		53		8%		5		(21)		37		6%		5%
Quarter Ended June 30
Xylem Inc.	1,351		1,160		191		16%		3		(66)		128		11%		11%
Water Infrastructure	569		501		68		14%		-		(36)		32		6%		6%
Applied Water	414		337		77		23%		-		(18)		59		18%		18%
Measurement & Control Solutions	368		322		46		14%		3		(12)		37		11%		11%
Quarter Ended March 31
Xylem Inc.	1,256		1,123		133		12%		2		(44)		91		8%		8%
Water Infrastructure	509		438		71		16%		-		(24)		47		11%		11%
Applied Water	393		338		55		16%		-		(11)		44		13%		13%
Measurement & Control Solutions	354		347		7		2%		2		(9)		-		0%		(1%)

Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income ($ Millions)
	Q1				Q2				YTD
	2021	2020			2021	2020			2021	2020
Total Revenue
• Total Xylem	1,256	1,123			1,351	1,160			2,607	2,283
• Water Infrastructure	509	438			569	501			1,078	939
• Applied Water	393	338			414	337			807	675
• Measurement & Control Solutions	354	347			368	322			722	669
Operating Income (Loss)
• Total Xylem	133	61			160	54			293	115
• Water Infrastructure	71	39			93	73			164	112
• Applied Water	66	47			64	41			130	88
• Measurement & Control Solutions	9	(12	)		13	(46	)		22	(58	)
• Total Segments	146	74			170	68			316	142
Operating Margin
• Total Xylem	10.6%	5.4	%		11.8%	4.7	%		11.2%	5.0	%
• Water Infrastructure	13.9%	8.9	%		16.3%	14.6	%		15.2%	11.9	%
• Applied Water	16.8%	13.9	%		15.5%	12.2	%		16.1%	13.0	%
• Measurement & Control Solutions	2.5%	(3.5	%)		3.5%	(14.3	%)		3.0%	(8.7	%)
• Total Segments	11.6%	6.6	%		12.6%	5.9	%		12.1%	6.2	%
Special Charges
• Total Xylem	2	-			-	11			2	11
• Water Infrastructure	-	-			-	-			-	-
• Applied Water	1	-			-	-			1	-
• Measurement & Control Solutions	-	-			-	10			-	10
• Total Segments	1	-			-	10			1	10
Restructuring & Realignment Costs
• Total Xylem	8	9			6	43			14	52
• Water Infrastructure	5	5			4	8			9	13
• Applied Water	1	2			2	4			3	6
• Measurement & Control Solutions	2	2			-	31			2	33
• Total Segments	8	9			6	43			14	52
Adjusted Operating Income (Loss)
• Total Xylem	143	70			166	108			309	178
• Water Infrastructure	76	44			97	81			173	125
• Applied Water	68	49			66	45			134	94
• Measurement & Control Solutions	11	(10	)		13	(5	)		24	(15	)
• Total Segments	155	83			176	121			331	204
Adjusted Operating Margin
• Total Xylem	11.4%	6.2	%		12.3%	9.3	%		11.9%	7.8	%
• Water Infrastructure	14.9%	10.0	%		17.0%	16.2	%		16.0%	13.3	%
• Applied Water	17.3%	14.5	%		15.9%	13.4	%		16.6%	13.9	%
• Measurement & Control Solutions	3.1%	(2.9	%)		3.5%	(1.6	%)		3.3%	(2.2	%)
• Total Segments	12.3%	7.4	%		13.0%	10.4	%		12.7%	8.9	%

Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
	Q2 2021												Q2 2020
	As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
Total Revenue		1,351				-				1,351				1,160				-				1,160
Operating Income		160				6		a		166				54				54		a		108
Operating Margin		11.8	%							12.3	%			4.7	%							9.3	%
Interest Expense		(21	)			-				(21	)			(18	)			-				(18	)
Other Non-Operating Income (Expense)		(3	)			3		b		-				(1	)			2		b		1
Gain/(Loss) From Sale of Business		2				(2	)			-				-				-				-
Income before Taxes		138				7				145				35				56				91
Provision for Income Taxes		(25	)			(1	)	c		(26	)			(4	)			(14	)	c		(18	)
Net Income Attributable to Xylem		113				6				119				31				42				73
Diluted Shares		181.3								181.3				180.6								180.6
Diluted EPS	$	0.62			$	0.04			$	0.66			$	0.17			$	0.23			$	0.40
Year-over-year currency translation impact on current year diluted EPS	$	0.05			$	-			$	0.05
Diluted EPS at Constant Currency	$	0.57			$	0.04			$	0.61
	Q2 YTD 2021												Q2 YTD 2020
	As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
Total Revenue		2,607				-				2,607				2,283				-				2,283
Operating Income		293				16		a		309				115				63		a		178
Operating Margin		11.2	%							11.9	%			5.0	%							7.8	%
Interest Expense		(42	)			-				(42	)			(34	)			-				(34	)
Other Non-Operating Income (Expense)		(1	)			4		b		3				(4	)			3		b		(1	)
Gain/(Loss) From Sale of Business		2				(2	)			-				-				-				-
Income before Taxes		252				18				270				77				66				143
Provision for Income Taxes		(52	)			3		c		(49	)			(8	)			(20	)	c		(28	)
Net Income Attributable to Xylem		200				21				221				69				46				115
Diluted Shares		181.4								181.4				181.0								181.0
Diluted EPS	$	1.10			$	0.13			$	1.23			$	0.38			$	0.25			$	0.63
Year-over-year currency translation impact on current year diluted EPS	$	0.09			$	0.02			$	0.11
Diluted EPS at Constant Currency	$	1.01			$	0.11			$	1.12

a	Quarter-to-date: Restructuring & realignment costs of $6 million in 2021 and $43 million in 2020, as well as special charges of $11 million ($10 million of intangible asset impairment and $1 million of other charges) in 2020.
	Year-to-date: Restructuring & realignment costs of $14 million and $52 million in 2021 and 2020, respectively; special charges of $2 million ($1 million of intangible asset impairment charges and $1 million of other charges) and $11 million of special charges in 2020 ($10 million of intangible asset impairment charges and $1 million of other charges).
b	Quarter-to-date: Special non-operating charges consist of $3 million in 2021 and $2 million in 2020, of pension costs related to the UK pension plan that is going to be part of a buyout.
	Year-to-date: Special non-operating charges consist of $4 million in 2021 and $3 million in 2020, of pension costs related to the UK pension plan that is going to be part of a buyout.
c	Quarter-to-date: Net tax impact on restructuring & realignment costs of $1 million in 2021 and $10 million in 2020; and $1 million of tax on special tax items in 2021 and $3 million of tax on special tax items in 2020; $1 million positive adjustment in 2021 from tax related special charges and $1 million of negative adjustment from tax related special benefits in 2020, respectively.
	Year-to-date: Net tax impact on restructuring & realignment costs of $3 million and $12 million in 2021 and 2020, respectively; $1 million and $3 million of tax impact on special charges in 2021 and 2020, respectively; and $7 million of positive adjustment from tax related special charges in 2021 and $5 million of negative adjustment from tax related special benefits in 2020, respectively.

Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow ($ Millions)
		Q1						Q2						Year-to-Date
		2021			2020			2021			2020			2021			2020
Net Cash - Operating Activities		$(26	)		$(2	)		$232			$181			$206			$179
Capital Expenditures - PP&E		(22	)		(32	)		(25	)		(24	)		(47	)		(56	)
Capital Expenditures - Software		(17	)		(19	)		(16	)		(20	)		(33	)		(39	)
Capital Expenditures		(39	)		(51	)		(41	)		(44	)		(80	)		(95	)
Free Cash Flow		$(65	)		$(53	)		$191			$137			$126			$84
Net Income		87			38			113			31			200			69
Gain/(Loss) from sale of business		-			-			2			-			2			-
Restructuring & Realignment Charges - non-cash impairment		(1	)		-			-			(17	)		(1	)		(17	)
Special Charges - non-cash impairment		(1	)		-			-			(10	)		(1	)		(10	)
Net Income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items		$89			$38			$111			$58			$200			$96
Operating Cash Flow Conversion		(30	%)		(5	%)		205	%		584	%		103	%		259	%
Free Cash Flow Conversion		(73	%)		(139	%)		172	%		236	%		63	%		88	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
2021
		Q1			Q2			Q3			Q4			Total
Net Income		87			113									200
Income Tax Expense		27			25									52
Interest Expense (Income), net		19			19									38
Depreciation		30			29									59
Amortization		32			33									65
EBITDA		195			219			-			-			414
Share-based Compensation		9			8									17
Restructuring & Realignment		8			6									14
Loss/(Gain) from sale of business		-			(2	)								(2	)
Special Charges		3			3									6
Adjusted EBITDA		215			234			-			-			449
Revenue		1,256			1,351									2,607
Adjusted EBITDA Margin		17.1	%		17.3	%								17.2	%
2020
		Q1			Q2			Q3			Q4			Total
Net Income		38			31			37			148			254
Income Tax Expense		4			4			13			10			31
Interest Expense (Income), net		14			16			20			20			70
Depreciation		29			29			30			29			117
Amortization		35			33			33			33			134
EBITDA		120			113			133			240			606
Share-based Compensation		8			8			3			7			26
Restructuring & Realignment		9			43			15			10			77
Special Charges		1			13			71			1			86
Adjusted EBITDA		138			177			222			258			795
Revenue		1,123			1,160			1,220			1,373			4,876
Adjusted EBITDA Margin		12.3	%		15.3	%		18.2	%		18.8	%		16.3	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Water Infrastructure
2021
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		70			92									162
Interest Expense (Income), net		(1	)		(1	)								(2	)
Depreciation		11			11									22
Amortization		2			2									4
EBITDA		82			104			-			-			186
Share-based Compensation		1			-									1
Restructuring & Realignment		5			4									9
Adjusted EBITDA		88			108			-			-			196
Revenue		509			569									1,078
Adjusted EBITDA Margin		17.3	%		19.0	%								18.2	%
2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		37			71			85			116			309
Interest Expense (Income), net		-			(1	)		-			-			(1	)
Depreciation		11			11			11			11			44
Amortization		4			5			2			2			13
EBITDA		52			86			98			129			365
Share-based Compensation		-			1			-			1			2
Restructuring & Realignment		5			8			8			7			28
Adjusted EBITDA		57			95			106			137			395
Revenue		438			501			524			616			2,079
Adjusted EBITDA Margin		13.0	%		19.0	%		20.2	%		22.2	%		19.0	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Applied Water
2021
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		66			65									131
Interest Expense (Income), net		-			-									-
Depreciation		5			5									10
Amortization		1			1									2
EBITDA		72			71			-			-			143
Share-based Compensation		1			1									2
Restructuring & Realignment		1			2									3
Loss/(Gain) from sale of business					(2	)								(2	)
Special Charges		1			-									1
Adjusted EBITDA		75			72			-			-			147
Revenue		393			414									807
Adjusted EBITDA Margin		19.1	%		17.4	%								18.2	%
2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		47			42			55			60			204
Interest Expense (Income), net		-			-			-			-			-
Depreciation		5			5			6			5			21
Amortization		1			-			1			1			3
EBITDA		53			47			62			66			228
Share-based Compensation		1			1			-			1			3
Restructuring & Realignment		2			4			2			1			9
Adjusted EBITDA		56			52			64			68			240
Revenue		338			337			364			395			1,434
Adjusted EBITDA Margin		16.6	%		15.4	%		17.6	%		17.2	%		16.7	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Measurement & Control Solutions
2021
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		16			12									28
Interest Expense (Income), net		-			-									-
Depreciation		9			10									19
Amortization		27			27									54
EBITDA		52			49			-			-			101
Share-based Compensation		1			2									3
Restructuring & Realignment		2			-									2
Adjusted EBITDA		55			51			-			-			106
Revenue		354			368									722
Adjusted EBITDA Margin		15.5	%		13.9	%								14.7	%
2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax (Loss) Income		(13	)		(46	)		(62	)		14			(107	)
Interest Expense (Income), net		-			-			-			-			-
Depreciation		9			8			9			9			35
Amortization		27			26			27			27			107
EBITDA		23			(12	)		(26	)		50			35
Share-based Compensation		2			1			1			1			5
Restructuring & Realignment		2			31			5			2			40
Special Charges		-			10			69			-			79
Adjusted EBITDA		27			30			49			53			159
Revenue		347			322			332			362			1,363
Adjusted EBITDA Margin		7.8	%		9.3	%		14.8	%		14.6	%		11.7	%

 

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FAQ

What were Xylem Inc.'s second quarter earnings for 2021?

Xylem reported second quarter 2021 revenue of $1.35 billion, with net income of $113 million or $0.62 per share.

How much did Xylem adjust its revenue growth forecast for 2021?

Xylem increased its full-year organic revenue growth guidance to 6-8%.

What is Xylem's expected adjusted EPS for 2021?

Xylem expects adjusted earnings per share to be in the range of $2.55 to $2.70.

What factors contributed to Xylem's revenue growth in Q2 2021?

Strong underlying demand across all segments and productivity enhancements drove revenue growth.

What sustainability initiatives did Xylem report on in Q2 2021?

Xylem reported progress in moving major facilities onto renewable energy and helping customers recycle over a trillion gallons of water.