Xylem (XYL) 4 May 232023 Q1 Earnings call transcript

Welcome to the Xylem First Quarter 2023 earnings conference call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions]

I would now like to turn the call over to Andrea Van der berg, Vice President of Investor Relations. Please go ahead.

Operator. you, Thank and everyone, Xylem quarter first Good welcome earnings. XXXX morning, to Officer; are Chief Chief Pine. today me Patrick Operating Chief Matthew and With Rowland, Executive Decker, Sandy Financial Officer; Officer; and on outlook. first-quarter perspective and their provide second quarter will XXXX They results discuss the full-year Xylem's

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

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

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

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

turn to X. Slide Please

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

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

CEO, over I Slide call the Patrick please and X, to to will Now Decker. turn turn our

good and everyone. Andrea, Thanks, morning

growth per our in first earnings we press volume very revenue, driven cost Revenue chain productivity operational the exceeding significant mix. we strong well on and this EBITDA improvements, margin as grew performance delivered was margin, Earnings operating quarter, our the price by share delivered up XX% and on share. healthy XX%. and release efficiency, indicated modest per morning, expectations expansion, supply team a as in As

growth notably all X%, Western in commercial. U.S., Africa, growth revenue key Europe and most as across regions, China. And markets, and We alongside America double-digit of the growth utilities, Latin such saw backlog organic and industrial emerging

year healthy chain results The evidenced competitive in The improvements supply into position book-to-bill team by $X.X and has secure advantages segment, came growth on than the each demand, underlying backlog, customer momentum good resilient segment. and billion greater and each as very in with our sequential our capitalized our to a convert and backlog. one reflect orders ratio

operating demand we the water, our the intensifying and are long-term solutions growth trends momentum outlook. Given for continued secular confident team's in our the about and discipline,

full-year single-digits raising that, we So guidance mid-single-digits. to from our are high based on revenue organic

And guidance. we're our raising EPS

Of some second the uncertainty in broader course, economy, we'll year. the to monitor continue for of macro the demand half trends, especially given

and confident in for our remainder we beyond. year remain the of So, the position

is well-advanced, planned. quarter's ahead progress made approval all Evoqua. of moving planning and combination and great this the Alongside as Xylem also Integration necessary we've are processes towards performance,

We end as continue our moment, close well a as more detail to culmination Evoqua by expect in the on color on mid-year. outlook We'll and the transaction more give regions, to markets

to the me review But it quarter's to now first, results. Sandy let over hand

Patrick. Thanks,

our first-quarter results. Please turn to Slide X, and I'll cover

look each the coming in at segment. Western exceeded by and U.S. Revenue of quarter another on and expansion. performance XXXX into moment, As margin segment and single-digit In growth led growth detailed by expectations. double-digit healthy double-digits our the growth with team our in in Europe Patrick, short, But XX% and Year-over-Year, momentum a high highlighted emerging grew built grew markets. we'll

chip with M&CS, of revenues supply strength largest and XX% Industrial, our market, as approximately, as end robust is, strong Europe. solid OpEx grew by well XX% particularly with regions, in across Infrastructure. in continued up Western improvements which demand the in Water driven XX%, was Utilities, price all in demand price and U.S., realization

of in revenues is, which with, to revenues due approximately, XX% XX%, was And down. up market approximately, U.S. our backlog continued the X% end modestly mainly was our Commercial, smallest of residential, execution

performance EBITDA price AWS prior year, and cost X%, the was points resilient. high up XX% and were down expected volumes XXX as and overall orders supply-chain On Infrastructure, X%. dynamics. to Orders favorable remains a up of XX.X%, margin was due was unusually Water from times. was function demand last growth better underlying than down orders year. basis higher M&CS of XX% lead

in the $X.XX, XX% over year EPS quarter up was Our year.

but performance Please and revenue by test not quarter's detail. supply. including driven businesses, in growth, but by I'll XX%. segment by of double-digit growth M&CS, across metrology, saw measurement recovery performance was strong X our in Slide more only bit and regions, assessment turn up M&CS chip services. across U.S. all the was pipeline better-than-expected over There review We XX%, a to and

for Robust inflation backlog segment conversion, As and productivity more mix. margin expansion and sequentially. for up remains mentioned, the basis M&CS the but our offsetting quarter, unfavorable prior in than the down Demand points, year the XXX price up on incrementals. M&CS, healthy drove versus is volume and versus the was X% offering strong orders year. realization AMI our in EBITDA prior up were $X.X billion

across and markets. in to our regions revenues of And cover now, and versus with and let's our up guide Growth stronger-than-expected XX% Infrastructure turn the demand our to price were double-digits realization due emerging business. portfolio, end all Infrastructure single-digits, up Water globally Slide in high better exceeded revenues Water I'll expectations X, markets.

Europe Emerging was OpEx strong low America, utilities XX%, demand utilities strong backlog U.S. demand Western up in driven realization and Latin China. with execution. grew Africa on and robust double-digits, in XX% markets the up demand also with price Geographically, was OpEx and by industrial.

due last unfavorable year. versus and mix price margin EBITDA the basis down in investments offset solution growth strategic the up partially selling, segment year double-digit digital points, Orders quarter over were in by favorable and was X% cost up sequentially for and to primarily dynamics. year, XX

grew an realization Geographically, was commercial strong of and execution to Europe Applied demand. The commercial AWS. due XX% backlog and for XX%, U.S. price driven turn particularly and Western chain. revenues price XX%, Water overview please realization, to industrial backlog the healthy and was supply improved in up up strong Slide And execution on by X market.

strong year growth Europe. in markets was Emerging lapping while Eastern the due productivity, inflation. more driven low-single last digits, margin and one. than X% was expected was than it the realization East EBITDA down Middle to Segment was in by basis XXX price and were and primarily orders offsetting down continued notably than And quarter, points greater double-digit stronger up the book-to-bill quarter, in

of cash and And Slide now, position. the for an X turn financial let's flows overview Company's to

is Our Net-debt as of robust, leverage to liquidity position EBITDA available $X.X the time. financial exit quarter we with remains and billion. cash $XXX over in one million

negative Due but free flow cash came quarter to seasonality, than in expected. was the in better

are us, While supply working in behind on remain not challenges progress capital, confident of we made significant chain our and we've XXX% guidance yet conversion. full-year

to back Slide to Patrick. XX, Please and hand I'll it turn

Sandy. Thanks,

resilient We'll in investment to capabilities presence reinforcing trends better discipline demand. look coming out increasing quarter, global confidence year, long-term early industrial momentum have the addressing end still growth the and thanks we the be and it's of for markets. are in very first as And even attractive positioned market we critical with of forward strategy. strong foundation combine to with portfolio continued Evoqua's Although water the team's Xylem's we our the drive in continuing market-leading challenges, operating

also phase on growth. meeting focused remains team upcoming more our next for delivering ensuring preparing favorably which been and us Xylem's combination marketplace the customer Evoqua, execution, been we've we've operational with the While positions winning our in of for needs, even on

combination scale. transformative global platform the As companies solving importance, of in challenges for and a water two communities' water at most these risk customers critical creates

prove even more the opportunities, preserves margin As out the cost attractive combined to stronger cost positioned growth, significant On robust company addition and in and synergies. this, optionality financial is combination recurring on we which an sheet, January, balance resilient alone. synergies said revenues supported very foundational future. expansion by But our importantly, the top economics the position a for of for in is increasing and deal the

the company principles. simple team, staff working had of Since been set comprising from companies, in senior of up transaction, planning for the success. our four an rooted integration announcement The to both January is integration

and distraction deliver our avoid XXXX First, plans.

deliver synergies. committed and on Second, cost revenue

lastly, the Third, motivate cultures And retain, and develop talent each bring from company. both the of combined company. key best to

potential delivering competence excitement of and the and have year. Evoqua we just ago. on both remaining synergy for grow. the to Based focused plans the on seen about their sure clear respective and results days advance our announced its many earnings And As combination quarter of Evoqua's serving second I'm customers two relates strong momentum, you continues process, have integration our the on our in Xylem

and solid It's foundation our in outlook of first confident for at a also year, XX water intensifying addition strategy. In the to the of to one March, held evidence its conference trends In continue United many attention leaders delegation development. with water's Xylem role and sustainable see of secular the Nations the over water quarter to years. improving we particularly in indicators the is on engage the role in and world, water of to the and the technology around agencies government global from security. innovation development shift of and on focus

common and government language. inhabit, sustainability worlds, different a the the NGOs Despite is powerful sector, often private

sustainability them For considerable XX% their at to that It's able management work emissions. management goal of XXXX their discussion was released greenhouse globally. emissions report on of focus this gas water significantly drives, customers, ahead reduce see our in Xylem be achieving and helping there we've footprint, example, as COX XXXX well sustainability plan. And our roughly, particular water about emissions, conference the to specific as with reduce you'll month, a customers

meaningful more long sector in water step, broadly. a to but That's decarbonizing a way go the there's

their by of we're in driven achieve their reduced the carbon and operating deploying that both more to affordable efficient purpose Fortunately, our that That and are more water we technologies net-zero ultimately is emissions privileged do. for work goals helping making position motivated communities. cost, commercially customers

the XXXX sustainability days. attention across goals. coming sustainability of the of it's And and released one when Our give report your full it our we've every made progress the suite you I full in each details invite also to

our that, Matthew over with to market provide end on it outlook. turn a Now I'll view to

Patrick. you, Thank

outlook, rest we progress initiatives, a across to productivity on through to I expansion. continue expectations market of Overall, this and leading made dive quarter. want year. end I congratulate the into the on the margin to great our board well-positioned momentum team healthy the We are the exceeded on Before great building

taken outlook. ahead, Looking in our approach a we have balanced

monitoring closely are environment, XXXX some Given underlying particularly strong resilient, continues we to markets end the in leading largest cyclical providing our guide. and and dynamics our raise indicators macroeconomic the That developed more businesses, our said, in of are our be to backlogs demand markets. confidence of

expect We rest are markets recovery continued as steady a year. in China, optimistic of the about the emerging and demand in did gradual

largest end low which up single-digits. now market Utilities, continues teens from healthy, makes to in the up in XXXX, growth and expect high be we

the up growth growth. wastewater single-digit from we expect high mid-single-digit On side,

We emerging expect spend developed markets as CapEx global steady will in demand. continued OpEx markets, well strength as result in in

clean for increase water is This low-teens. growth we allowing early-on improvements demand solutions AMI quarter the side, On anticipate at continued as outlook in seen one, supply chip execution. from up in driven through for robust XXXX, our by our in backlog in high-teens,

on We infrastructure our pipeline service businesses, our and measurement, and in continue momentum healthy challenges. focus to test due foresee assessment climate and increasing to

value benefits early Americas. bear, to our progress the team of Xylem's seeing offerings utility great to best The the in also customers, are unification solutions our We challenges. has our the selling solving made and team bringing from highest commercial customers' of

market, expect demand Looking at end to steady solutions, our we mid-single-digits the for industrial on globally. grow

supported softening U.S. markets XXXX, backlog. that offset in emerging production our by be industrial back-half we were growth estimates While by point-to-potential to the in expect of and

addition, markets, in see business continues from dewatering and And Latin benefiting made our America. our demand particularly strategic In investments fleet. it's we've emerging in strong to mining from

ABI and driven new by would out up the by low QX and construction. We expect now replacement half other anticipate mid-single-digit business index execution, indicators continued closely. and our on We given moderation the partially offset results second backlog solid to performance, commercial growth, single-digits. growth Moving expect to monitoring emerge institutional we in from

of due orders digit our by healthy about demand to resilience continued continue residential, our to end a backlog momentum. resiliency we expect demand, we normalizing markets. low-single Overall, feel partially emerging U.S., in decline, smallest In offset given confident the in market, and

through Now, I it to Sandy turn walk will guidance. over to our you updated

you, Thank Matthew.

Turning XX. to Slide

with combination excludes As stand-alone guidance a on reminder, our the a Evoqua. basis is and

organic for revenue our As Patrick and are full-year growth mentioned, adjusted increasing we guidance EPS.

chain primarily We X% This increase our the driven to X%. earlier-than-expected to supply by organic full-year realization in are up revenue stronger and was price X%, X% growth raising to from year. improvements

high our $X.XX. In lifting to $X.XX, previous as by guidance addition, from down with solid EPS we Applied The follows. commercial, low first from $X.XX segment in industrial, adjusted single-digit industrial up mid-single-digit of growth growth growth digits growth guidance Infrastructure, are teens revised in guidance growth wastewater both and in High up and low-single to full-year and by breaks from mid-single-digit up growth, in in Water $X with to utilities partially teen, M&CS, residential. offset Water,

we've of provided EBITDA number full-year to flow We XX.X% mentioned, as to also to XXXX, XXX% is For adjusted other your And with expect range the guidance on cash conversion this of supplement net free to $X.XX And assumptions a our EPS you slide an XX%. be income. yields of $X.XX. still models.

down we growth. to growth revenues be anticipate Infrastructure high-teens range we quarter, of will Applied segment, and in company organic drilling total Water XX% in Water. now and second the single-digit expect the high on for By And growth M&CS XX%

expect of to and range over XX.X% and productivity by the We the prior to year, of XXX improvement be versus driven gains. represents points in which volumes realization basis margin EBITDA higher price continued second-quarter XX%,

back that comments. to the over and turn call Slide Patrick And closing turn for with I'll XX, to

Thanks, Sandy.

serving I'm strong continuing and dedication proud communities team's very customers the performance, very demonstrating and of to results. delivering our

executing We be that forward of company. once combined combination performance and will momentum, to Looking you also a look we're Evoqua closes. call, opportunity updating focused in ahead, earnings anticipate the next on that I our deal we integration when the on of successful continuing our while outlook presenting

over the questions. turn back you I'll to for operator, Now, call

Instructions] [Operator Thank you.

will Markets. first RBC with Our question from come Deane Capital Dray

is Your now open. line

Good morning, everyone.

Deane. morning, good Hi,

Hi, Deane.

you for revenue takes lowest question especially, growth was numbers I timing And out color. additional like organic But that segment. digital. hoping you this company that the margins, seasonally the Water - me margins, total if these. mix, know the is maybe these some factors to And and are Infrastructure, investments projects I some on three impressive but Thanks. size first on in and And called of could margin give in

Yes, Deane. Great, great question.

highlighted really think you points. I some of important

XX basis, all-in really gross it all, margins. QX of product we quarter an margin Water mix, or some quarter. were down three is bps just really quarter our modestly that bit this First typically On we lowest It's typically of And to EBITDA for mix, little Infrastructure essentially one, comes about business. items two down geographic a - lower had and this larger-scale projects profit. carries

year, we talks rest selling make to year our optimism our the this about really in you increasing and through we're those that our digital of the come momentum the are then, continuing of our when and investment focused It seeing And in the Water to on Infrastructure segment. some in have selling prospects, margins investments seasonality. have - investments long-term forward rest been to going and capabilities. And rebound growth. of And with solution think proof orders in been QX we the line to I look and typical think that its

All right. then what. looking I exactly was for. was That second And -

also supportive we Deane, Improvement those offer - of hi, is Deane. off and that Patrick just upside this is - that I backlog. Yes, have I would margin. in just - would what

based support day improvement that are these margins. So investments in orders continued one, that on these

it the most that a so and from be playing water a the it's I for these first kind exactly everywhere, me accentuated dependent was it shortages. when a But just chip next would that's smart standpoint, And you it remember chip that it on and to at supply semiconductors. Xylem time said is, gradual was uncertain, surfaced, everyone when on was and question great. supply. been And supply. of point the That's And - getting And that the all this improvement M&CS the takes how Patrick, it out. expectations gradual

- kind expect past we does you year? in look, can but today, improvement chips, terms the the backlog consistent So where balance this Thanks. is how due for and of just stand of M&CS gradual the of of like

I'll Matthew to the it. I'm, for color thanks on hand more Sure, question. over give to it

Hi. it in in morning, supply results Good Yes, but to better-than-expected The for move be is point. your sure, continuing continues a QX had, at chip we Deane. lumpy, metrology. to to pace, incremental steady

managing of in we're that backlog business in momentum to that we've to improvement, well. the as due, continued Because in continues quarter continue supply. and M&CS, last and Our be so seen to still we're XX% X% this up in going the expect metrology orders modest past variation was

thing. out, remember, lot a industrial of book-to-bill the as point the still And is chips plus you and I is automotive one one. would probably for

the working more We're side, on So a bit we're little you're seeing kind still this problem. through of consumer relief.

to So we're M&CS. guide we'll modest to with And for low-teens those the over up high-teens we've those our goes improvements. coming going from for be modest taken just quarters, steady improvements, see it and as XXXX

would And hold our I backlog, just continued that that been - to to as all one, of well cancellations. we on deals there offer no have and

going the as continued be that's as and so, say really to to deliver. chip strong certainly as see we're Matthew good continue pointed supply sign we then And market to out, deliver to challenges. wins, And despite a demand we

and So of I course the the more. it's get the past confidence grown year over

really Thank that's you. helpful. Great,

you. Thank

Our next will from come with question Nathan Stifel. Jones

open. now is line Your

everyone. morning, Good

Hi. Good Nate. morning,

morning. Good

guidance chip mid-teens to the guidance - much etcetera, pretty quarter. considers outperformance going supply, the cetera. et from That to high-teens, just first in I'm the the on going follow-up M&CS mean I

really quarters. better doesn't chip have available remaining use it If Is come guys the still approach you have that for that just chips coming the you revenue conservative back the three model improvements start M&CS, in out dollars bit you're to redesigns guidance third plus saying supply, know you more product of the about a product given I change to overly probably little it of half. each there redesigns for the talked in quarter, think out, maybe a quarter? that I the

Yes, Nate.

Let me give give that - me a let shot. a that

of year. all, got of perspective really saw, from with gate a start in and what fast pleased the we're this we're QX, - we First delivery with out

When in we think we actually what look we looks the for quarter very QX. similar M&CS, at to next it experienced

that But together, metrology. businesses in business QX when we similar. in services, strong all pretty good and look QX analytics assessment also it comes the other So and have

And when supply got embedded year, then not half perfect the back ramp-up modest in half. our at of we continue we've chip the situation, is it a yet. look to the monitor back operationally guide, the got And to we've in

Yes, and commits I I of we come back it the the prudent look, miracle, don't just Sandy's call the guide the and we're trying would be manage do to To have point still daily outs just and we're push in visibility. just half. in the to the - add, trying ins we're guide. managing - be chips half, second and we're prudent with good We

customers XX% makes go ready whatever and the that to down Maybe to supply 'XX, backlog, progression level actually How going following-up that down the that as this just here, finding could past backlog you more backlog Okay, sense. and take, your along? better, these of normal of past think year becoming do is that go a at I is some 'XX, working significantly on things. of the labor sorry, the get manufacture be - past bottleneck about of at these install probably we to chip due be likely with going utility year, you some to than likely to are anticipate point and XX%

to more be our chip is the - progressively planning sure capacity. but work not 'XX end through as deployment. customers something To - out customers projecting make we're down in Yes, bottleneck bottleneck to working the have through be and now to supply, will the 'XX chips that is of with it going we'll be next not for and right really lining fluid. to capacity became point, on be your capacity, or getting in the to ahead they really and the the The our - with really deployment it's backlog and now going bottleneck our that's up looking

sure we're that with So make up. our we've customers got set lockstep to that

does through we a through supply not improve, chip throttle XXXX. bottleneck continues XXXX become of the as in the As to the the that a end deployment move and capacity through

that I would Nate, offer as as up, well this -

Thank you, Mike.

going know, for part utility Nate, begin once the of at development to was there's progress the these get are happen. utilities main probably they the that And is no as a and these approval so that approved level, installation As in but the to the by is regulators deployments years chip process. to them, concern of you nature not there deal supply, an concerns actually steady whether ever a

deployment, issue as not will long bottleneck major labor once, steady the a showing as in So slowdown. and you're improvement a of terms major be

And good be will a so, steady it progression.

Okay.

So, taking it my I'll Thanks pass on. for questions.

Thank you.

Nate. Thanks,

you. Thank

Giordano with next from Joe question come will TD Cowen. Our

Your line open. is now

Hi, morning guys. good

morning, Good Joe.

morning, Joe. Good

guess through first being and of talking customer lot a earnings I companies a season, than bit patterns, going we've was. trends changing heard quarter little about average So what of buying the the April worse maybe in this

talking on the there. am there. if I than to probably So say side have more on just like - I'm you utility anything curious side industrial the

has nothing Joe, out be out QX. surprising nothing closing mean, the for saw coming Obviously, change that process results. to there Yes. we're jumped I our of out-of-the-ordinary what month, but of we in or we April from books saw the in

growing pipeline hearing of bidding Joe, very think there, talk track, terms bidding partners health inventory you of channel the one safe is Matthew, to say industrial could also we in things that only not our but levels. the pipeline. good probably in across I so our on you're another healthy to be indicator. their continues to entire consistently, that And and the what it's portfolio And of

Yes.

because not view, our we I'd relationship and healthy, good with overall, So levels from channel have excess visibility channel partners. a of they're point really we a are do sitting have say, - inventory. on And strong inventories from

seen lot front, really order. demand On the and strong to of But markets we a it's order configured and industrial have industrial. the first resilient good area, that emerging inventory, not specifically in was there's quarter in engineered to in

through in past vertical given specifically in wastewater that's healthy, months, Utilities, XX really the our segment. integration resilient OpEx, really that been and

On the commercial part front, constraints to continued levels still our we're XXXX back and we challenges that in commercial not supply the of feel the business. given

is lastly, portion then the our business, it's moderation of is of smallest and bit And well-stock, which there. resi we're seeing little a

just I to then you internally, know not like you're this kind about what what you done Fair it's anything any enough. what or you - say for on around And currently then, of at not whole can And Patrick a what on is waiting Evoqua, but on? - what's just can are been waiting say - you're you - are can't I know lot, you've you in? timing approval. like coming for there update prepare all - sitting

little So what height insight a - it what can into what - - give maybe you us .

Sure.

- getting for the this? organization prepped

Sure, No, thanks yes. here.

just the their mean both jobs. of as work in a from transaction on of So goes companies, is day the into mean, our with really the - I I I'm our team. doing I that people in comments, said itself, ton while progress. proud this pleased

there. progress of lot a great So

typically, expect China. is which, days. what through a review, several call, were approval. issues beyond countries. In has accepted short-form all China, clearance obviously, and any required for, There that our We've takes we filing no we're The in remaining there. U.S., been that, don't achieved And well moving country of the more XX than countries, only those

so, up And XXth, coming we've shareholders. set on both our of got shareholder May votes

reasons, week. expect next this we get again, through will we mid-year. to close all to by So those And continue that for

So that's transaction the closure. on - on that's

time got of leadership We've of we've CEO Matthew a his and I've many, right, spent with Ron team. their You're considerable time with them Keating, dedicated has planning had well. spent considerable integration meetings. team. amount many as planning integration a amount

we simple after sight committed that items, million before, but going line We're as is after years quickly side, $XXX the not And going big straight to here. didn't what I of are but three those simple, being forward as easy, on simple, clear possible. and cost say, they're we very in deliver and rabbits areas. to

synergy. And excited the we've been about what most gross again, is always

approvals, And so, even somewhat regulatory limited teams standpoint. right, much from a how the you're have out looking until there, get - have on more But detail into, synergies we're we growth the as about worked there can excited there. that are are competitive together, we we final top-line

- integrated mentioned opportunity within their excited we've As a both that through take expand can most combined before, our but the about we also they side, penetration deepen portfolio, of and their utilities our industrial to products the of business to the internationally, are international their channels treatment services solutions on number internationally.

in different world. our leverage to in synergy in as We of there's the there to be platform well around that R&D opportunity both the around have And as serve going and of our to some efforts for sets opportunities needs innovation, going customer on digital and services area. enhancements solutions combined areas and then portfolio

transaction And you going that, be we'll these enhanced Obviously, to than position a Joe, in some of sooner you the company. and we get new the an give synergies thinking of later. growth materialize once more clarity on closed how about rates call that, upcoming we're know, as are to in of in terms

Thanks, guys.

Joe. Thanks,

Thank you. you. Thank

Mike Halloran from Baird. come will question with next Our

now Your line open. is

Hi, morning, everyone.

So

Good morning.

Good morning, Mike.

think a first So Nate's and I little question. following-up bit

the side call that and deployments steady have was the in impacted good seen side. improvement in a expecting the and on of here, the seems that deployments - some - some So It of like that sound period back-half on and sequential you Doesn't bottom visibility. you quarter first time - there's think about of delays here deployments saw M&CS lag you're like here order over years, deployments nice the called, cadence. give pretty the couple next steady some year well you've should which

here think customers thought I'd the that perspective you guess fill then together, time how visibility the a I what period looking piece are process put little back over like about like, pipeline you like, those bit what to the with that and about the of looks side? deployment when two on from understand how pipeline a going? the and conversations that next is And

Yes. Hi, Mike. It's Matthew. it. bullish We feel really on

You a adoption if can at growth in you it's our XX% around just AMI and back QX only was U.S., look X%. step take total for orders today. the in see Maybe

proposition on. the that's in And value their in to strong very more I started through business. really make them capability. a general, digital, onto And something, laser-focused pandemic, this there's productive offering and partners and utility our say they've coming even ramp-up would efficient with for And to have more gotten latched for really their

we're very still will more kind more bullish and term over of over the the the innings in in. So of kind be early We're long - that XX% adoption.

when a adoption AMI the you decade of take networks. parts and globe, other and or of then the look world around step-back a behind And U.S. the

So the and in is improve work on to as and up starting how international opportunities really we're which is water also can U.S. the not focus that for Europe. the very we there we, picks subsidies front to out non-revenue only U.K., and metering are of marketplace to coming now some in our the the funding similar U.S., smart

to utilities talked what announced because - maybe early win. Matthew, side update digital it'd haven't that want we're we speaks seeing - worth terms earnings also an and partnership And, around you we the doing what in of really are Idrica call, if give to that there the be Mike, about last

in, what and headquartered to have it's SaaS for not folks we point a these leader it They're applications singular need on to the exclusive - the the and And customers, biggest business I our all It just hear leader data integrate a that Spain. lot call, mean commercial we Yes, reframe a to were utility well, platform partnership Idrica - as talking pain of in to their from is data. they're of call, last partners, management is Valentia, model, is worldwide. a analytics. just a

I It's utility an been actually which like deployed application systems. built a that information, XXX-plus passwords, iOS platform They this they proven utility what over for a as applications, us logins, really gives operator utilities. lot, have all these They I disparate multiple all smartphone like with knowledge What much in platform. we the it's a by It's coupled understand and siloed is integrate to - important, utilities, OEM. in workflows, really like have platform. say our

a making building significant also to are momentum. this in pull talked of three Xylem commercial months. deploy especially the that built it solution content. a significant And we're investments to and teams amount really Our past selling funnel we've And over through globe, it's about - investments Sandy strong around Europe, us on the enables platform. digital

the I XX Now, much it next over of matures say be on next on detail a the position we'll call, get in that, as days. some better would kind to into

side pump core And then for the Thanks conversation maybe necessarily domestic utility in component and of to the international pieces there. similar versus the a treatment the momentum with similar the that. maybe pipeline, the thoughts, on infrastructure deployment a obviously, but the conversation, about business, maintain bidding ability

Yes.

very the So that is utility around say, obviously, business, - Water OpEx Infrastructure, world. the I'd strong in

haven't in seen a We either. CapEx slow-down really

making they they're wedded you to think Europe CapEx. their about spend sure If really specifically,

and to programs to not six in there months, demand the online that Resiliency although, European of bill, but you've And and and utility got start other with that these the world, XX and drip signal the the both go the around buoy start next coming the XX anywhere to sector. from the the going for of AMP to hole in Water like down lift cycle Recovery I'm rabbit months U.K. support are really to - And months U.S. Act, all and long-term demand out will the the over Infrastructure, really time provide space in infrastructure

proof be of couple might points. It

indicating bidding very Infrastructure utilities. So levels the strong treatment indicator grow, pipeline bidding leading at And of there to in the offer the pipeline, the that and - because treatment health look XX% much we health quarter, that to in side of that's Water part continues up the the our business. itself so really wastewater of backlog record a for that was

Really Thanks. Great. appreciate everyone.

Thank you.

Thank you.

you. Thank

Davis Scott will with next come question Melius Our from Research.

now open. is line Your

team. Good morning,

Good morning, Scott.

kind so the just the and algorithm that how about stuff there's could much including of of When have that's you base of kind the flows, ebbs probably. industrial think production indicators I I long-term versus was of and. industrial think point, fabs. on lot I be this a of pulled lot talk guys growth installed curious guys At pretty all high projects would a there's Inefficient. about and some intensity you out like we projects, these mega new semi imagine about content.

IP two or there of times quantify to X.X. about. kind any three times or or is way So Growing think

think how terms. curious of guys Just kind about in you

question. Scott. Yes, Great

more through how close synergies with, I once to company targeting. also So say we caveat we're put upfront transaction be we'll but at that outlook growth The the their revenue the able much talk both a view around growth we I'll and outlook. combined stand-alone, the

into look just But base. would GDP in of manufacturing burning industrial they're up we for and I Because facilities our of two the respective we of facilities good that business, piece be Tends into kind the sell of business. to good at the steady. what of replacement more through pumps we running, Xylem. selling currently various industrial of long the participation business periphery the we're into and sell as as nature the types a so are as take of

low-single growth. Mid-single-digit, growth to digit in the the But services and they're there, look water, and with sometimes of historically called you Mid-single-digit of that providing making which kind will and be of have the bulk one water typically drives When water going that where at industrial Dan into up than uses because do of different depending what they we what is in that it it's so sure the operations believe this very their at has the management running. growth into broader GDP us, kind those where outpace increased higher even supply is upon they is sustainable to not access to are users demands keep if coming least around and cycle

price when and value and them they them number for revenue areas not value water the stressed don't it's of they a stoppage not damage, they or have leader, water gallon and operating to lost the it's big pay-per production margin. is in it water The they are they don't have

their increased is so, reputational. discharge and they have making The manage Concerns sure penalties, of second them citizens and fines, on wastewater, is regulatory responsible the also they're to but in community. seeing the pressure

right we that we in pressures that the can now the call we generic. that really demand are the part are industrial what of see those driving see So sector, and water

That's going TAM you assume guys. a super am Patrick, correct large that helpful. semiconductor fab to pretty have a for to I is

That is Yes. correct.

you. it Thank on. pass I'll Okay,

Scott. Thank you

Thank you.

Kaplowitz will with Our Andy come next question Citigroup. from

now open. line is Your

Good everyone. Hi. morning,

morning. Good

Andy. Hi,

Probably initiatives for working Xylem's know on of enhance nicely revenue guidance you've Matthew. raised I been for productivity. number a to Xylem Obviously, 'XX.

I your think you kept margins.

and on the just making would color you're there? more what see you progress So maybe forward going you

I'll start turn up. Sandy see driving us Andy, then of off. maybe to Yes, kind momentum over productivity, But wrap I it in mean. this to we the that different really portfolio, it's we several out. reducing factories in business. doing And our long-tail moving in across the our simplifying that, There's addressing areas and efficient really build whether we making and SKUs, were more good what

point continued after factory - I has footprint, at. rationalizations, there getting we're we Also move in obviously as within forward, another to mean that productivity - of terms continue M&CS business In that businesses, our looking kind of of area X.X%, focus that around kind which need it's a to get X.X% been the is is typical, we - two of other And X.X%, a ours spend. has segments. been of up

area focus big another well. that's as So

the of nice drop the too, and provide mix within high-caliber through margin. pick backlog, will kind M&CS to if unpack shift water over water in some And - up also you time the

of combination we're sure, margin that a time, momentum a across it's we at, the build make sequential in the looking holistically, continue to over line. So business things to

obviously, margin set add - for margin XXXX goals it the and are is, of - contemplated what we for I significant - that, organization on we're Yes, expansion Andy, what our I'd expansion. top on very focused

think a gotten good I of there. out the start with we've gate

you the work margins period a incremental we we're on and XX% a items most if what year, rest mix, incremental at continuing we're have where at optimal the the that look like? thinking our about And investments And period are of the look of is margins the where of guide what focused deployment. the one as on time contemplates don't make to we we're

we're focused costs So I on we remain the that focused going to we're feel to to on the discretionary going through think good our rest of sure tight. we year, continue and be landed making about where and productivity be

feel to run drive hard means, Yes, up to saying again, this to year. by responsible Obviously, guide point responsible this we - we we're, yet be is prudent those it's - we're no to we're with where - more. not, satisfied Andy going even are are at time. even margins we continue But going in

a that Seems better then little I of guys. And and Europe seeing helpful, bit are performance terms near-term out talked in a forward. in drag in the you you think Very going on your the QX. region China's bit of in what U.S., the little Patrick, been past. regions, but like about a a of But

an emerging - I've Andy. last for overall And Thanks bright investment are the no. on lot challenging pretty bull given five there about numbers been It the year. Yes, a really water question, they in that hasn't just long-term on because absorbed talked is - it from and some spot cycle, in China, the a the for we us standpoint. where

both would faster happening high QX I our So, recover backlog are to and our set Really what's and and the the bidding say revenue piece China and second industrial standpoint pipeline seeing a recovery the upon than from by GDP utilities that were reopening orders we're us single-digit we in commercial market But utilities. strong a half. in in a there. of sets outperformed up there, there. for really based and pretty encouraged up the across year. It

And funnel remains further a very for there. that's tailwind us. healthy the So again,

be So, it tailwind this encouraged by go, we way still a expect to to it, but a year. long

Helpful color. Thank you.

Thank you.

you. Thank

of would Q&A I the over Decker Patrick to floor additional Thank now you. or portion like to back today's call. concludes the any remarks. closing for This turn

see the now support. again, and you of everybody, And continued and you Look our call. for interest earnings with to conferences between at Well, forward various questions on I'm thanks, many then. your catching next and sure up we'll

to forward look speaking you And again. safe. I stay always, to As

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