Xylem (XYL) 1 Nov 222022 Q3 Earnings call transcript

Welcome to Xylem's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Andrea van der Berg, Vice President of Investor Relations.

Thank you, operator. Good morning, everyone and welcome to Xylem's third quarter 2022 earnings conference call. With me today are Chief Executive Officer, Patrick Decker; and Chief Financial Officer, Sandy Rowland. perspective fourth third outlook. quarter their and XXXX provide the discuss and will on quarter Xylem's results They full year

our to call. will information we question and please prepared related and one Following the then follow-up to return keep address to covered queue. ask I'll questions the a that the you on remarks,

call section number a will note replay presentation available slide reminder, by accompanied a A midnight until this As available or the www.xylem.com. the be call of Investors on are of Please website, and today's is our webcast X. +XXXX-XXX-XXXX. our in November +XXXX-XXX-XXXX replay

will Additionally, heading call section Events. of playback website be the via Investor the Slide Investors available for to Please the under turn our X.

today's or occur future Form described such references and on on most forward-looking differ We note any Please statements as that call, future. or including and developments recent could XX-K undertakes risks events factors the those annual SEC. we may or will subject events make in will the are uncertainties, those anticipate from X. These reflect update to forward-looking future company that to Xylem's some reports to Please subsequent actual no in obligation turn publicly events and to or report the to results subsequent circumstances with anticipated. Slide materially statements statements filed in

GAAP and with you provided metrics. a summary including of non-GAAP have both performance We key our metrics,

in today's section basis, for financials the reconciled of the purposes references have be non-GAAP unless included adjusted of and For all And and Appendix are presentation. you will indicated. an on call, otherwise organic been

call X our and please Patrick Executive to Now, over Decker. Chief to I’ll turn Officer, Slide the turn

Strong nature and actions Their long-term a in effectively and our services driven our also That continuing our strong growth Water. entirely with by constraints. to discipline channel strong The focus paid quarter inflation very also our margin offset second year. of organic exceeded EBITDA and above previous drove significantly our revenue basis but points. XXX expectations, delivered end to earnings margins commitment on share strong of the of per half our margins by and price distributors, essential of cost with by high improve and solutions quarter, revenues very And accretive to above well the largest posting intensifying tremendous the on with half through segments guidance chip our grew everyone. our the third demand resilient for year. growth. board, Demand the Thanks, we We're all at continued double-digit right exceeded X Europe markets in and very first our Overall, delivered mid-teens. continuing by Across bidding came M&CS growth. our expectations of Regionally, in with strong announce our and backlogs XX% the mid-teens Water and strong to Andrea end of the of regions and infrastructure XX%. momentum see from with the quite healthy were and business Applied morning, expectations a good percentage revenue markets margin Water operational delivered in This growth $X.XX. from target beating the the earnings be expansion. performance, third pipeline. end fastest trends emerging team quarter high each widest supply at Americas, this by partners up Western manage in all factories guidance Margins team, performance. points. grew pleased off

up markets Applied continue to some were M&CS Water are sharply markets down face more Backlogs residential strong. markets our resilient expand. in the headwinds our as key cyclical, proportion been solutions know, of our digital pattern backlogs our and the to continue Water those soft. are such end in Infrastructure remain to that year-over-year expected of up to continue in of end smaller to continue. we consistently within said, orders expect all have was very be underlying demand macroeconomic That segment. solidly. you quarter and As the and Orders be

Looking to into remains especially quarter. the said supply, consistent On the quarter the what last with continue we dynamics supply, chip third of XXXX. anticipate forward, we outlook demand

As improved, expected, we has have forecasting meaningful of reliability the not chip supply But of constraints. seen visibility easing has as deliveries.

We the before. gradually we've as exit are expect to outlined year Things improving.

more growth raising guidance. dynamics revenue I’ll we’ll of $X.XX me operational also adjusted earnings along third water our detail now XX%. Given vitality the cycle. resilient expect become this We and to through they serving between track seeing X% discuss we’re different the current $X.XX the markets, full invest some organic end with touch face let we share strong hand demand we’re full to quarter. the to more our a intensifying the you and as in In first, profile, offer our some per challenges. team’s on the how environment, in Sandy over record business on year communities to of But of between to in on trends our year minutes, resilience are it be few

Please delivering on a X. with job on Patrick. commercial great turn to commitments strong over disciplined Thanks, execution Slide The did demand. continuing and team operational

was by strong up expectations. segment. and X%, exceeding strength Geographically, and and demand. M&CS conversion driven in driven than Emerging across U.S. EBITDA utilities Europe. Africa, a up as strong and and growth was year in U.S. up up versus in Western XX% Residential robust performance on demand by in market the expectations. markets continued fundamentals, up double chain. from up improved. in grew and in led demand. well low Adjusted Western supply Growth strong XXX geographies, Please U.S. East year. by Infrastructure commercial markets The Water emerging driven markets on low the growth robust, robust to were as in As in backlog continued by digits, to activity X%. and development Infrastructure transport remained dewatering XX% up across realization Western teens, teens and and remains and review quarter on Western healthy in a by Europe China grew result, high as Growth U.S. organically treatment demand. up execution quarter due high end strength and performance revenues industrial was supply emerging Markets grew globally, led by as markets down Industrial Emerging the due XX% Africa. revenue revenues XX%, commercial across America Water Europe the strong U.S. in That But said, in grew led in teens, AWS Applied Middle Patrick expectations. the continued was And increased supply driven U.S. In OpEx and and orders realization with Water both up markets, mentioned, with quarter, led improvements Markets short, offset emerging and our and U.S.; by X execution was impacted strong in across continued X Latin last the and teens offset above a strength improved. in X% high was in particularly was segment, some all mid-teens, Geographically, third detail the in up EPS led markets, basis period emerging Western margin in Infrastructure Western exceeding favorable Europe. the Western mix XX the grew also were the turn mid-teens price demand was Please Industrial was SPXXX end I'll organically, the X% quarter teens high up price was emerging U.S. X% in XX%, down third backlog by utilities X% Commercial backlog was quarter the EBITDA In segment. year but modestly quarter's or price in demand in in organically the in Global price margin the growth the by Europe, was strategic up strength XX%, strengths in organic to points points the basis with offset all constraints organically in Europe especially greater. with more prior XX%, $X.XX, up as M&CS. Residential I'll was moment, chain growth sequentially dewatering utilities turn execution each line by Page business mainly to the modest in down inflation Europe. moderation by same continued high in chains Slide Orders Segment dewatering. XX% in U.S. the also and with and broad-based, Orders wastewater price investments. was inflation. demand unfavorable utility with teens robust all in largely in X. end almost down was XX.X%, our up were industrial, up prior Water by strong and markets by

modest strong end Residential, the and cyclical played inflation, prior to more was realization, of As expansion with chip basis with by sequentially. improvement EBITDA points prior a in price & our XXX reminder, and expected, basis Measurement overall than for the X And up market, up Slide revenue Solutions driven Margin with segment organically, supplemented is cover turn business. as XX% was our out X% to as points margin our offsetting only continued most revenue. I'll savings. compared M&CS about productivity our supply let's Control was now, XXX line sequentially. guidance year

demand AMI U.S. digits, availability in revenue, organically quarter, growth our year up strength versus in remains versus We XX% growth orders XX% year pipeline test price our declined the realization. single business. orders our X% a the favorable of improved outpace Europe driven Pipeline more Geographically, Western the Services compare Assessment up orders also and on growth. backlog high prior and saw and was strong Markets XX% Emerging continue for assessment prior year. tough than by applications prior up to businesses. chip was Underlying yielding mid-teens lapping Test strong and of in the offerings and services M&CS was

$X basis margin sheet. free be margin In higher and backlog overview we sequentially to conversion, capital. points expanded constrained balance continue third let's The supply. chip for partially flow even by and the prior though levels. income improvement, Segment a quarter, cash EBITDA job And driven driving working million, generated great XXX billion. year M&CS Our in by turn quarter to team flows is of the offset volumes approaching cash alone now exceeds Slide now $XXX an our X by of did

short-term that, levels about below customers $X.X position levels historical note working I'll with said debt-to-EBITDA and and are XX as back this elevated days will some chosen gradually our $X serve supply liquidity XX our X.Xx. available billion extra color metrics to can financial while capital we inventory. Having remains our our of in investment. we've are communities of are to it underlying chains is Please to that Patrick on demand. strong And turn to delivery You and carry by and cash net improving, give billion and leverage hand making best Slide

Thanks, in the healthy marketplace end Sandy. in quarter's earnings described economic have impact demand past our Those markets. What headwinds. respond what in over macroeconomic we cycles. how now In markets repeated with we demand our seeing then call, is underlying to largest different end patterns last we're

we climate Since trends is What experienced this our like one. playing we manage an operations out So how and community they local, environment in at patterns water level. communities a those all more inform to upgrades. change. isn't anxiety and selling and increasing the more is They're then economic from confronting finding task infrastructure up their impact major of seeing the aging we're

longer-term But in in demand. in driver and are which crisis investing communities too So Infrastructure to are bigger will of our resilience. response is happening know be both frequently. there much we all underlying the customers investment also have near-term short-term

That we already our were so and commitments. many communities communities advanced cut periods crisis can in are And And value respond Florida, water cities and like promote of Southeastern only customer respond so capability waste future even our water treatment worst aging effects were For off of in storm portfolio. and days building emissions more at less metering municipal it wastewater the of is on our to the storm With lines pipes clear storms much of and optimization community running cost that costs place hallmark water more They are will brink U.S. scarcity ahead more into our level. into been drought. and in without benefits change interruption, a a the capability when making [indiscernible] and customers equation event conventional Within increases The at have value durable sewer helping withstand that Helping resilience unique infrastructure, shocks climate net important that more while prevent of the that amongst its steadily fundamental far additional part portfolio, of to But crisis more make groundwater the deliver hit an problem that water long-term network Those city's making are Ian Xylem wastewater challenges in digital across they that repairs. mission. to their affordably mini attack collapse. game-changing our call, recover To AMI digital immediate we are driving damage, stresses. instantly help city economic fast. of are AMI. of strength provide zero Solutions resilience. leaching all build the is the as a source, conservation with isn't compelling cities the economics. solutions every through recycling, recent part to to conventional already approaches. example, city us of of Xylem meter and networks. others, their headlines example, Hurricane than the dewatering community delivered the One rapid It's make capability than than extending to pumps in months needs. and greater called

month this world which our Our zero help at reduce XX around I you so Several carbon their is Last and the water set leading have with communities. my technologies, speaking low how Webtech trade than Xylem of can utilities water believe showing important events operational can quickly promote the proud already good one net footprint. for communities or of am the opportunity colleagues boosting Egypt is team dramatically utilities the targets. on largest for utilities of to the own to topic at even each customers, same time. More of meetings later the topic will our existing emissions cost while money. for in at the good our year, of shared With leading customers cut The emissions the business. time. at month, research reduce we is be is our we which COPXX upcoming their and saving way this discussion efficiency message climate for good our most water

to Sandy provide outlook Now, I’ll for our guidance turn and detail it the on back over to year. increased

across the Thanks, remains with presentations, increase Patrick. in improved an guidance, with our The commercial key for previous XXXX with Consistent previous line we year largely provided facts each end end markets appendix. backlog outlook upon execution. market in full our our in

business particularly the water. outlook new strength emerging with carry development, in with across outlook year both healthy and utility continued underlying of In expect supply aging CapEx the of OpEx growth infrastructure will for see wastewater supported clean our continued and continued is by through modernization demand we and wastewater, markets. improvements modest the on We chain. The remainder remains in unchanged mid-single-digit

utilities, we expect supply modest easing supply For continued constrained, do chip clean although sequentially. remains chip a of water

to momentum continue businesses We expect on assessment and and focus our also to increasing in climate test pipeline challenges. infrastructure due

In demand teens. backlog and in strong Europe. at growth, for the to smallest previous of end execution Looking deliver in lifted realization from and and demand our the strong drive market, to We double-digit growth single backlog for end and by expect on we high single-digit dewatering low our now global to expect single mid-single market, continued the commercial the end expect price continued double-digit from low driven we to U.S. to market high digits growth, industrial underlying high demand a double-digit high low growth solutions Western range Residential, execution. strong up now

XX% As and of walk And exposure is Slide guidance. and revenue. our approximately now total Residential a replacement-driven updated turn let's largely Commercial through you reminder, to our our and is XX I'll

raise us to of our gives to $X.XX performance adjusted $X.XX year out from for to to $X.XX, up range guidance a continued Our confidence EPS full $X.XX.

driven guidance execution backlog demand. by stronger and raised continued underlying Our is price,

full end to organic revenue low our XX%, from are now growth, X% year lifting to X% We the XX%. up of also

on a largely due to reported revenue basis Our is unchanged outlook headwinds. FX

segment, expect in Applied Water. high we growth and growth Water in low single-digit Looking Infrastructure by double-digit

to and mid-single to measurement improve. control modestly as expect digits chip solutions We up continues be supply

lower we raising XXXX, cash XX%. our are working than to earlier. previous largely higher free to conversion expect income. For of I due margin outlook, approximately referenced to XX% adjusted be net is EBITDA This outlook We levels as now capital flow approximately our

our about needed inventory, an backlog. of requirements we’re to aligned month our the carrying fulfill While with position fully is extra

assumptions fourth which growth appendix. our This inventory XX% supply have XXX% basket company currency revenues as free found anticipate the number models bring quarter, cash and chain drilling the our And consistently conversion M&CS to on and to down, organic as assumptions will down in flow can As well in return of of latest includes Water the year least of we stabilize, be prior mid-XX%. in provided in XX%. with now Applied also on on done be of you supplement to exposures full years. at other a enabling up mid-single-digit mid-teens us Infrastructure, we Water We’ve total growth growth as we slide your will

to be that, XX please We in expect And the Patrick call turn closing for fourth quarter the XX.X%. EBITDA I’ll turn adjusted over XX.X% Slide range to to and comments. to margin of with back

business and delivered to And quarter commercial do value team proud over said of do. great team's us the confidence discipline environment overdelivered, the of of we in our the continuing macro uncertainty, very overall. growth and our thanks long run. past the our model an performance of our in creation we to what gives continued and significant momentum Even discipline. Sandy. indeed, operational would team durability strong Thanks, We by the I'm results this

to a the product, of Digital Chief Danaher just digital Before executive appointing that in solutions to of us to you to joins important Xylem's capabilities appointments Xylem's to leadership made, and we've first of portfolio. an accelerating extensive extending Xylem's call step digital to last of and simple strategy He'll we look over adding senior a our process, turn questions, leadership sector. I'd like team referred He experience powerful taken customers be to him across Earlier, the Officer. couple further in build our I We've our platform and strength bench. growing industrial your [Indiscernible] share introducing I even services with team working future week, for businesses the out in conversations. bringing communities. joined digitized forward solutions further in just

Tom stay Before I He's been sharing recent to agility of for Supply durability is be excellence time operational ensure advantage. at through a benefit he transition. agreed a time improvement and is give and excellence our Supply of leading at services he foundation for our excellence letting our our Chain but laid, stay XX-plus center operations operations experience Officer. appointment, recognize but remit for operational Tom to the that of our built of has many him going while retire of Tony to start to continuous to to us take chain, will level. looking colleague the when Officer, sustainability for on Power industrial core chain build second [indiscernible] in helping smooth graciously pleased chains Chain years welcome made Tony the want into created and Tony supply from very Chief and sectors. joined to of a guide contributions next operations to Generac company on Tony appointed the His the while a safety Chief supply has challenges know. culture of on finally a and and to brief continue and advantage. years Xylem's a his week competitive and coming Systems Operations of has Milando next the foundation the competitive stakeholders our We're us global put first we've to We're you to many continue supply Xylem's a brings To that a retirement a pandemic. good and come. part

it operator, that, Q&A. open let's So now up for with

Instructions] first Dray We'll from [Operator Markets. Deane take RBC Capital with our question

-- He’s best. along. I wish Can I the all want all tremendous with start been to Tony a help

X him the well. we’ll wish but to leaders, and Tom So him welcome And [indiscernible]. miss new

been him you, sure. on -- on. Thank and to a run. Tony have it's to Deane. with emotions see board Happy move mixed But great yes, for

right. All

and question really numbers first here, growth. So good good look,

standout. get visibility has look quarter, fourth So -- to I’d forward the demand? about that October talk -- and talk is like and in earnings What backlog a just did terms all kind of about how how for the is conversion, the of off

Yes. Deane, there. let me start

momentum year. throughout the had I year, think along. the strong we've built had growth we've We've -- good all orders throughout

QX. it think what good have envisioning QX. I we into that like is in it looks The way we're visibility we kind printed just of very much

strong QX growth, the little catch-up typically a stronger margins slight end completed that get So mix. of of and little difference we'll through AWS. QX work from the a bit ramp doing A in to in of maybe strong supply a towards some EBITDA some of top line orders chain to Water bit the saw were a this year They Infrastructure year. that very and QX has when see in M&CS. we are to moderation the projects step-up similar

chip more half, talked supply of XXXX As the -- sometimes situation. prior comes on when see calls, the back we're second online, more we've And the about work some the supply a step-up in continuing modest on bigger a you'll redesign see ramp. then and to towards half

similar. All our that's pretty to half for we've we're think line stronger our long much QX and So along, out short, to compared report playing story half. very first expectations. a QX our happy that And in I back our called look with really

percent basis backlog, on what on versus specifically And quarter? this conversion what expecting be the a would backlog typical you’re XQ

bit look year-over-year, about other than the up When than higher some in M&CS It's that you lower the color Yes. businesses. a and a I'll XX%. X backlogs the in we around little that are little backlog. give

backlogs So all remain around, elevated. Deane,

we not because we're the much backlog still short. falling would so And production levels because of elevated. in periods. as remain have other And able It's backlog that's just to not as convert are

did I past Water is coming just would And least what month up Applied offer normally Deane, almost our this backlog at this we into that like or quarter, more a than we work would supply of -- see -- That's We're going going off to. to and QX going that have visibility chain in begin because we're constraints to to demand. into QX.

And historical will you're going to of to normalize so on utility chip is that gotten very given M&CS the in the still again, the of at Water conversion But Applied supply and margins. down attractive come back demand continued deals its be to levels on. strength Infrastructure going Water really we've resilience the which because and attractive through where is see

real a That’s here, just tweak follow-up, And adding cash then inventory. as helpful. more on flow, understand the free completely

the And are us, there? maybe Sandy, XX precision, We’re with adding trending? has weave Are close to how seeing does segments? on times square an extra How suppliers? [ph] across But days, for times they your beginning lead anything -- how share maybe the heavy how those that elsewhere. lead that normalization like in

question. great Yes,

our have supply I elevated in other supply a is where think, AWS China businesses. Deane, more global in that our more is from all, first of And most do dependency, chain, we our chain dependency perspective than inventory segment. we within

we've as where that's And as well. seen disruptions so more --

make that done I higher say about a put with a we've exactly of and that's very seeing some scrubbing that. we perspective that, inventory that we levels. very, sure would backlog feel where from good lot inventory aligns we're to what So

with from We'll question Nathan Jones our next Stifel. take

price tailwind was up we and margins to Can It to even trends? the read good price will year-over talk -- an more X quarters? see offset price trends, pricing inflation through? more couple to we becomes ramp off price cost very cost. the see moderate? quarter. of continue price And this maybe over the inflation Should I than see so the Should or start next over inflation on I’ll price next you the as start bigger maybe to X quarters about

Yes.

that done obviously, on these commercial I in line teams And important the good with applaud been increases really year our something securing been all has this our work long. price have inflation. think, focused Nate, I have teams to that get really

that couple cost and In quarter, we year-to-date price a So we're perspective now, cost the basis a On from a were on perspective a expect We both perspective. a price in percentage calling of that, be ahead anniversary and to secured the price expansion that part said will where the of price quarters QX of that's we some tailwind we dollar milestones. Having a year-over-year start for. we're margin neutral. still momentum.

we cost in than year. we so we happen a in QX as starts certainly as little this a into were XXXX, And that going But perspective think QX. bit to go we'll price and a into I more move be in from better spot

anniversary probably the inflation time, the to comps same right? of at start you worst the And

Yes.

we've of for look perspective the inflation say we commodity look is transitory, more in more Europe. labor When is I that's seen year. in compared inflation in XX%. out came think from inflation all slight moderation XX% we there. permanent. would into headwinds And at but probably there still We And to the we're what is like run on running a that's inflation, both And so when thinking inflation labor energy, some still seeing around I or areas inflation, guided we sort initially definitely mid-teens. increase this year inflation an in year, the would particularly not

need line are and we're strategies they seeing a be pricing with perspective. our in So dynamic what to and costing experiencing from

is it pricing in should where see forward. lowest. we probably as And looks It’s the the segment we improve M&CS through would I coming think the like go pricing

backlog. prices have that pick doesn’t to tell you a when bit repriced. some that, all of that backlog hard pass-through I of customers raising your that Some you’re it’s get would

we M&CS price see more in segment that? the of read So start in XXXX we should through as clear some to

Yes. matched seen -- -- we've price Yes, we've seen highest where where sort it's levels. -- seen think the our I of we've inflation

that's if past perspective, Having we've couple AWS, drop starting that of ordering through. and to look of what an our we're so been And our increases at that, from quarters, M&CS. you M&CS the see said in implemented price some Infrastructure

have quarters. made And next in good through saw think we couple momentum to there why from improvement still quarter M&CS a so sequential And that that's you'll a significant part And EBITDA think of we also pricing rate. continue see perspective. I the of I the

what backlog. us regulatory those the associated And long around cancellations the inflation are not is do deals. these we I they responsible and we’re environment customers with just side, them. inflationary these of we’ve M&CS that are lead deals and just they understand. them installed. to And that would understand And think with we’re I most now, AMI specifically, on disciplined. negotiated Nate, in that high the can so meters the deals economics and approval important I offer continue operating seen very being we’re goes and that the get great being time fairly think, impact to transparent right chips news get of a important understand the is economics got any And deals. them, Again, and our in They’ve thing And good

to But we course. tend wish again, of require on we don’t So good. projects We had planning feel backwards deals. utilities multiyear and chips, these more go these

next question our Baird. Halloran with take We'll from Michael

couple So here. a

But little of on this -- utility kind any the the -- made the X dovetails comments you just pie? what’s the is what’s cycle technology-oriented more the a for Patrick. of adoption of that’s bit of what building level point? frontlog at like there, part utility the at and update the pieces And then utility and look underlying kind suppose today? First, secondarily, question just which And the the thought I that on looks of what process

Yes.

you in -- of demand know, So as OpEx. roughly so Mike, the XX% our is utilities

change. So stable. replacement, probably If and of it's it's I repair climate aging anything, say because overcharged right would very now, infrastructure just

the know, So not this close lead our really can the frontlog -- is now. keep on very to to not it see in we're expansion if the if the very spend and a on yet. road. in on wastewater see later to slowdown that's receipts, the U.S., which and is growth down side. residential in to a see strong. a we've bidding right That's a XX% historically right if right tend reduction we've CapEx be it roughly eye mean the one it what were cycles. years strong is pipeline see the muni-tax throughout prolonged now in slowdown that's do that strong were it'd we would those seeing not which we right a just but that the so is our But And we to as number, look We're to there. were global I is couple seen Mike -- frontline -- things you driver now, we tended CapEx one U.S. what cycle, for seeing of we be

diversified we of more the cycle now short that Now space tend if historically, it broader aside recessions set and and oil you much past from gas mining, even business be around the were dewatering kind muni away more would a which to But the of industrial and see the pure we during there. space. for in moment does part world,

of single-digit a it. ultimately infrastructure but that seen this in at point haven't if were to recession our we've kind time. not water would maybe see we And frontlogs in growth low a We seen see we

close keeping in a on trying and we're it eye prudent be we're and to our planning responsible So here.

Great.

European resilient the seems on point. side of from just this things. awfully one, It at Second you

you’re trends that the seeing on on side. thoughts some Just

-- our at basis. results, seeing very, look year-to-date kind and And Mike, think and benchmark also Europe I when the to growth, they're Europe the from we orders spend to see very strong. on a resilient historically and I look We especially market. be very tends one very good -- other, Yes. you And disciplined in region We're European steady. the so European of think

a industrial on the either. slowdown not side, we're So seeing

so it. far, -- staying in hanging constant contact there. commercial We're very in it's with close frequently So with customers. But our who we're are to talking our teams

with Our Research. question next from comes Davis Scott Melius

seems a great and in sheet prices a we bit. is your coming pipeline down bit and Can it just M&A your talk little about and shape are balance asset

would be some just that helpful. on So color

Sure. Yes.

not Scott, We're We got $X So sheet. got strong hesitate I of going got we've billion mean a if as balance really $X of presents you billion. we've liquidity. opportunity north firepower probably said, to the larger also we've really out number there, utilities combination space But robust. space. are in a It's opportunities small, itself. of opportunities. but the got services Pipeline of that a medium-sized remains mainly industrial the in

And so be to we're disciplined. going to continue

on takes that discipline and well our nothing's space. But to our valuations tango. in know, you changed As always two view it in

guys that of a FX, just big you on clearly than different can with help [indiscernible], different net-net these companies in moves really then what all means And moves Sandy, guys us of bit FX most Okay. Helpful. the remind you for you cover. us, But and have the we can in guys? little situation had we’ve extreme the you

Yes.

of mean, shake I a we're from $X.XX. I the look volatile. would because past perspective, compared you the EPS We'll year FX we've fourth rates at seeing from when when negative sort an year-over-year we're by been quarter overcome significant we actually -- headwinds in challenges of of our about and really That's see months, stand the started over the say ultimately things I I look proud it's out think think have to the budget, been But of we the where been So to the an perspective. sort one to FX where today. team. we able $X.XX even

year at into quarter ratio the quarter. below a X:X last example, the planning down end started assumption for Just we and as for of X.XX, dipping an a euro this

So can controlling and control. good overcome, to disciplined work that we what we've able continue been to stay

next Giordano Cowen. from our with take Joe question We'll

like of build the about Digital the top your buy platform interesting kind a a on was like you versus it on Can thought role new platform? I for true of proposition Officer. talk Chief digital for AMI

Sure. That's a Joe. great question,

So not certainly digital is new.

foundation So we've organically as a as a we've we've both number acquisitions already well of built, that through done. got the great

really solid in comes foundation. that [indiscernible] building So on

look join combination, about really what much internally is as front focused he But mix. and technologies is on pipeline opportunities. and Joe, his us at And to standpoint and which sees [indiscernible] the build calls opportunity both very from to M&A solutions an continuing adding are our much We on those other talent capability, still selling on to I and our M&A. us. perspective forward of the opportunities to of between share the upcoming one having But a in it's organic commercializing, look

it's like see Okay, picture. I know happy are at know that where to with great. I look, the margins good M&CS but big you're progress not --

what you to this a like there? M&CS, margin on exiting looks can happen we're at where things kind of XX% like from year us what So to get like walk have EBITDA, to

Yes.

digital taking catalyst revenue talked XX% when backlog back looking teens, margins $XXX our quarter, M&CS revenues initiatives we And I great north backlog Joe. our benchmark, on the role EBITDA has million We've well. in To we there see volume high the up side. around, big a to an get steps as be plays $XXX pricing course, our are of opportunities think mid-teens. been the per question, a get we're that into you'll margins and the we've And revenue up certainly to productivity in focused and to pricing the need hard working obviously, level And of historically million incremental you'll higher mix. really then, in get -- see important of at we are per that. quarter. disciplined

so And margins. naturally bring will higher that with it some

some a half news of we'll then to expect the QX and bit a in kind of is uptick continued the back So factors it's year. combination moderation seen little that and step from and good real of up flattening another more the next a in of revenue, QX we've

that move of things there not our to to costs were time that away be customers chips improvement. Joe, support this that. to punctuated added we support resources installations our we along, able going And the add the classic one At redirect the were in from redesign through had to is as continuous just our we've time, would I really of we to same in help these past through P&L that engineering challenging some productivity, the

win out through we working expect to the you year. and that, we expect the the But in we're laid that. margin we've that quarter the see expansion despite So for next and that year that

take So I us. the just for just the expect long care of right we're because making from now customers, for to make choices our here but they not like want sure strategic run value the future, that's to

And last That for quick just all makes me. sense.

when -- of levels, this there get progress starts price to points, when the is we about backlog think normalize price Just business given orders like backlog it's like I of in about made do to at how but shorter are down cycle coming AWS lot scenario? X,XXX basis think the how is, and kind extended shortest just and a I know And quarter throughout to just You deleveraging reasonable that starts we more there. margin do that what like company.

of that much how to kind be of volumes to down? hold on able you So do expect to come as

Yes.

is past increases important quarters, not inflation. were back to with our think thing line you one look the that few remember in is price if I

getting and back to point now incremental we're more drive levels can a margin through expansion we're at where So productivity and growth. our historical margins we

place that back that we're a happen. of business and work good to to lot that's think I and for a getting So healthy make

in market we those what products because spend and that our higher got that M&CS of portfolio, increases know to innovation offerings see also much I make Joe, continue, Water growth make we kind we and within years. over R&D new few the replacing. and more the segment they’re to of R&D continue kind to gotten that investments And headline Infrastructure. segments last and rates in in But they’ve of our within than refreshment bring margin that has we

of on continues both segments. to a So it’s those to important that go note in that there’s refresh

question from We'll Kaplowitz with take next Citigroup. Andrew our

over you’ve elevated last bit Water, you the more a a this little mention instance. difficult of U.S. down and second, just in Patrick, decelerated of quarters. pipeline slower for orders just comps. I did that a I on have you strong really they Applied said focusing But couple for it’s know but backlog a quarter, opportunities know

So will decelerate color orders about to whether could you us you’re in think give continue 'XX? going into into and orders seeing believe or what to how more some orders you

Sure.

back that demand lines Water for treatment and see the trend And our the Applied whether on what side. whether bidding again, healthy a terms the around like demand AMI, we wastewater our demand. be be channel about that in that question good feel look which precursor even we of within So frontlogs to goes is partners, pipeline, on

issue. a really year-over-year is comp it So

really If end the not rest was lockdown by would change China XX% you no -- the of our we've say has our year-to-date there. China look a in China. we overcome on on with to in there example. haven't outlook of to long-term it it's been to restrictions is up our the of public be X% the utilities China meaningful I is the we're revenue. and But because But the right it's or year-to-date, demand next We've but recovery until revenue. across market. revenue talked there our in probably year. expect it utility going pushed And a at be we that still I later plan part varies China, in that obviously is quarter. portfolio. in quarter would up orders there and funding tough X% But of for third again, the say comp third still that, a

are So the there. fundamentals

We all We've our track, KPIs that short-cycle in especially the are our we got businesses. signs. watching

part other small of We seen small our very have a our slowdown moderation, seen couple Sandy which in of some some business. in pieces of as Residential a said business. earlier, is We've

of all our it's this, when we part close in. which the keep mean strong ABI, north on keeping it. strength commercial, eye Andy. of in that again, But the still to And not see in we're even Architectural yet. we'll growth of eye XX. a indicates north XX, close a continued Index, on I of out woods that So Billing segment But is at we're the

raised And the Patrick. what industrial industrial and low dewatering staying do those growth your teens orders to positive maybe question. on Very your just if but into up ‘XX? you could follow telling in you are I a of similar I Kind about opportunities see customers know And you helpful, dewatering your dewatering? business.

seeing good Andy, in and conversion there. good Yes, we're seeing strong momentum We're dewatering revenue both question. orders

little on a earlier referenced think Patrick the I bit call.

Seeing our couple like that I years really think to our if you includes at growth, there business are looked note a look some than good growth, important emerging focus of dewatering. today what equipment America Put good business that of and And ago. good a paybacks. markets sales things to it our revenue. markets We're seeing where on business our the lot out on activity. are have customers as in those absolutely of of all there. fast of one fleet And are projects our global to understanding on need -- seeing side converting made investments rental good markets It basis. end continue the in to they're the one seeing returns, that what well still We've a there order -- seeing is of equipment Latin resiliency on some on. right important really and shorter in the we cycle is we're businesses up those

been that's far, pretty so resilient. but -- So

I and that of can dewatering, actually see then the direct, nervous if on very they part the very then that that own customers channel part our we fleet and that where have partners things, rental handle all just back channel our there cycle. they then we there's fleet replenish happen And when add the past, have are fleet they are if fleet. quickly -- turn the would and their around our in and replenishing Andy, business that that the we rental we short is their and predominantly, thing get they partners that say U.S. local pull their can

get And far, they're the economy and feeling but are strong resilient keep would them calls how a in to Thus now. very about that we on. a macro for feel it's that's close general with so right we the eye area regular

from We'll Sachs. take our Brian Lee next Goldman with question

than one. that earlier in in cadence terms a question to on XXX sounded see starting It up I Price comments price. following guess maybe had of just this basis first XQ. like by I peaking Sandy’s on more an sort quarter based of points you’re almost out read

and more of starting correctly. we a are into the year, early low year? that wanted ‘XX, as price head lap just increases some we to past kind a next heard So sure the typical price cadence of And I of year are make I that to like thinking price of over into just the get year sense we single-digit next start

touched think a really hitting year, I the QX Yes, bit impact our some see is in Brian, little of earlier. we price on starting revenue. where Last increases, it I of started to our

tougher little start next get quarter. to the compares a bit absolutely, So tougher,

materials, the pricing not be going make expansion obviously decision for then we're margin very I see dynamic. we think to at buy need inputs the from the calling one commodities still key And the of costs product. on everything the should point freight has strong one that drivers the pricing. become take deliver seeing for. all continue We of all we the It's in we're to time. a of from different we're components you're our to bill It -- to to

price like we So I'm as go into at XXXX much in around price we're to time. not our going position 'XX share cost. for Certainly, what from perspective this looks on a much, an better realization equilibrium

much increase across a know imply I Absolutely. from of XQ a I meaningful a term. nothing for years a Seasonally, operating EBITDA, flattish normal revenue, short metrics, if typically metrics. of XQ, focus you it the key across pretty Yes, about XQ I sort those here on at does just the have too the makes lot to headline been And pretty of but here, past performance margin. to follow-up guidance But guess couple look has sense.

through, So just anything in impacting You here? kind off XQ there seasonality the working model backlog more us near-term kind than in of walk is of expected. you

Just why see you years? than bit XQ year, typically a is little sense maybe of this lighter XQ any in past to

Yes.

I Brian. think you touched of bit it, a on

at we drop-off our QX. If to water infrastructure much We why this of higher. a was see typically big look QX part year. business, revenue particularly didn't see in a bigger our you That as that came

QX of not we step-up see a Water result dramatic. Infrastructure on a as that, of flattening -- see so a as QX more still And to bit but of a we going into little

we improvement bit little got some a line. projects across finish of and see the -- is that more of some supply And did we chain

we're expecting. full the the half were line yes, step-up and for So with QX right we year, and first the It's look good. a QX year in what saw from in big what exiting we

other have the this to think, things year little would mentioned the in regionally, seeing the shifting -- Brian, say I in a And X we Yes. Europe. mean, I the And just past. we’re the areas things China. I differently than uncertainties I earlier, right we out that that again, in bit playing have

QX. And so build outlook we think to that our it’s just for into prudent

next our from Saree question take with Boroditsky Jefferies. We'll

lot covered differential decline big been strong call on and a Water between but between the orders. the growth there in Applied A is the growth order has

since think into So work year, this the down to as expect XXXX? growth you we you do head how through about backlog

that Applied Water? Is specifically for

Yes for Applied Water.

a Yes, elevated backlog I’ll We very take obviously it. have in AWS.

we the backlog have any typically more one We quarter. in than doubled have than

that down. backlog of work I so some actually And -- think able we to are

little to bit business operating a real look work that positive term patterns. we supply into longer that in low our longer-term portfolio. sort But chains our exactly a that it’s when are we lot grower time And levels of backlog. the think It’s portfolio. are I over us. to reverting business it’s our back a a basis, see it’s take that’s and do revert to business delivers the that term, typical of It And as we But good ordering cash. those grower sign improving, at lowest of through to mid-single-digit a in will fitting how customers for longer it portfolio. more probably

that GDP some share always I And at itself historically comes we our through by and mean have through as R&D. we beat that global a growth look basis. investments to that look market is on of innovation part gain. And portfolio in

of what backlogs the And we're for also continue upcoming is as 'XX. that elevated into portfolio. outlook chain We'll refresh we'll call, XXXX. but normalize one segment constraints. We by due our lay Sandy's go our demand out But to supply off point, in see to to coming we

advanced put then this And the does helpful. build seeing to strong place revenues? you out you then AMI. show orders? in How in book and long customers when their And That’s Great. up obviously, are

AMI X -- selling out utilities a anywhere very is cycle. working years. go RFPs -- big the long to from on to for It's it's decision a we're make that X

M&CS. in backlog big a have We

about If you X/X it look still today, past of due. have we that's

pipeline chip start winning to going proposition that the of supply awards. good as we're so excited very percentage most value through And We're is recover. working strong. is What And that sound. we're remains about very, the those a

in alone conversion to We the large of U.S. the are let utilities across still medium-sized utilities. smaller- early AMI the to

why these are market we’re bidding to the log, But that’s so the take pleased deals we long-term front confident. pipeline negotiate across the So a looks and why remain and attractive that’s with while position. our that

have any It will to appears closing now questions we the for over program remarks. back at Patrick or no turn I this that further additional time. Decker

earnings support. for with Well, safe a Really us for to it. Thank the person. next interest meet and Look forward have and to in Between now know safe you. you now call, morning of appreciate and many continued thanks, I chance you. everyone, and seeing travels. this joining between then, and stay your we’ll

quarter at third conference your call. have and Xylem line XXXX earnings today's concludes Please disconnect day. This wonderful a you. Thank time this