Xylem (XYL) 2 Aug 232023 Q2 Earnings call transcript

Welcome to Xylem's Second Quarter 2023 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 Second Quarter 2023 Earnings Call. Chief and Patrick Pine. Chief are Officer, Chief today Rowland; Sandy Operating me Executive Decker; Officer, Financial With Officer, Matthew will quarter on and perspective provide quarter They results XXXX Xylem's discuss full and second third year outlook. the their

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

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

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

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

Please turn to Slide X.

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

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

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

a present world on to morning, water describe everyone. just with performance as milestone is different the ago the an growing Thanks, and to pleasure for impact as the Xylem make Andrea, challenges. deals company our significant of than outlook ability as quarter a we we have quite and a society good Today

as The and profoundly stronger combination and Xylem global platform of Evoqua positive shape will communities. our a already that impact on customers begun an even taking has have

We coming our water acute us ever. the help more moment opportunities to focus growth. front are moment When world's our with challenges when this the acquisition responsibility a for the into we capability have than at May, in expanded in to meet of along completed exactly

weeks our create about into confident XX will X enterprises, integration we the are Now, the combined these even with of great value company. we more

are There confidence. underpin X things that that

delivering for am impressive of both the time. for so on potentially both our I team, distracting quarter expectations customers serving momentum at giving proud exceeding significantly First, across us a the performance brisk companies. and and Evoqua a is turned Each in Xylem very team team future. staying legacy focused our

increased integration Second, growth our the us. in confidence and our out we the has on synergies of early cost laid synergies progress previously ahead

simpler, our more of seeking moved to We as parts and on third, affordable challenges sources And them. value. ways across continue of have forward many they society, economy to for intensify our both well customers water tackle are

attention sure positioned We'll markets. now a to we durable attractive, bigger minutes, points quarter come to strong make back needs just and these demand even very also in to increased we I strongly give exposure that the closed. we but are While capture more end to want solve at with those few appropriate

XX%, continuous XX%, revenue on at excluding well in growth improvement pricing strong revenue aimed above team's exceeded It demand per was as our simplifying impact and morning, delivered press and driven was And shared more acquisition. with we the share. focus Organic we EBITDA ongoing margin serve by than our revenue the on the customers. margin at our we growth, continued up we growth of guide of as how XX%. As XX% reported EPS total and this XX%. earnings significantly was release expectations grew well

Organically, grew, U.S. revenue a China. all end by segments contributed pace double-digit regions led of growth in the and in strong solid notably recovery each in markets. all And our

And Our legacy and more then we Evoqua's X $X.X backlog billion, bring added was total of the $X backlog to up than X%. backlog together our billion.

Well, to of great with the we lot X have a integration do these companies.

our one members to commercial deliver year. partners for of the communities. We the us world want around our are every And and guidance day and impact thank they the which our to momentum, our gives what for real have to again, raise team confidence customers I to our strong every doing

color we'll to In going dig But hand to well end more quarter's strong Sandy to it results. markets the our on detail a into as regions. moment, first, over I'm as give on outlook our and

Applied our segments: Patrick. reporting time company, Slide we combined would a performance. have are now Please Thanks, Product product the water into Since to infrastructure, continued treatment X. turn reported & business, I transparency results. is to segment's ISS, the this combining Evoqua's Solutions Evoqua's cover as our or reporting complementary been X first walk as X Technologies you has We immediately Services is own its how on business Integrated we providing integrated through will businesses. like segment,

Solutions Applied Control & Measurement segments, two Water unchanged. and other Our are

out on Evoqua's stated, expectations of organic the are impact previously broken month basis. includes quarter we shared Unless of growth compared and have an shared all about results organic the out to rates our this since laid acquisition. Additionally, results, a otherwise

on back have reported from Xylem's adds basis intangible accounting EPS adjusted And amortization the lastly, we acquisitions. and that purchase Evoqua acquisition noncash an previous

to results. And quarter's now for our amounts We Slide have therefore recast let's turn purposes. XXXX for X comparison

was markets. end margin Each and Western while U.S. by organic Total in strong beating and growth exceeded segments growth growth led revenue of for growth both our expectations in our revenues growth team in we XX% expansion. grew saw Europe delivered all single-digit the emerging double-digit high business performance, XX%, markets. expectations, and double-digit The and and

price price across X% demand And in commercial backlog, and all And X% and up includes realization to as continues XX% Industrial while demand book-to-bill the grew robust as both our and above realization remains M&CS to on demand on quarter, down and billion Infrastructure. Water regions. Evoqua. solutions, highlighted, due organically, XX% which XX%. lastly, X. up was and Utilities building residential strong by Overall, were orders be includes $X.X Patrick resilient now demonstrated grew

EBITDA XX.X%, price higher the margin was up and points dynamics. savings basis prior on favorable year from XXX productivity volumes, cost

was Excluding basis the Evoqua, previous margin exceeding points, XXX of EBITDA expectations. impact our up

detail. $X.XX, impact second turn XX% to quarter was each Our review segment's XX% EPS year-over-year and acquisitions. more in a X, quarter in excluding Please of I'll performance the and up up the Slide bit

by with chip AMI ratio services. of well of billion a offerings. our as demand strong X% Europe is and improved supply and favorable in emerging saw strong Western markets. to M&CS growth, $X.X X.X demand in assessment up as continue pipeline XX% momentum revenue versus for driven Orders we was up see U.S. XX%, continued backlog demonstrating book-to-bill and year, our the grew prior robust

basis and I'll Infrastructure EBITDA let's margin for year now drove Volume segment incrementals. and was the unfavorable strong X, points cover XXX turn than productivity realization conversion, versus the mix. the business. our and up price Slide on Water offsetting inflation And to more prior expansion,

segment across strong markets growth while and Technologies all saw grew demand, and America Latin Growth which Applied double XX% Infrastructure, portfolio, by particularly Developed Product robust a emerging digits driven with and Water applications. markets organically. the includes end Asia XX% driven up reported grew was Evoqua's now by OpEx on markets revenues basis in Pacific. X%,

the segment quarter the and above book-to-bill roughly an X was the X. for and XX of year-over-year, contribution in turn growth year-over-year for was Orders of were Please Applied down EBITDA Water. prior basis up to overview margin when of lapping Evoqua. year excluding X% over points XX%, Slide flat

recovery down in Western and execution. markets in particularly Western be and the And grew Industrial backlog elevated X.X. quarter, strong Europe double Applied levels, emerging is historical resilient digits, mid-single China. in Europe markets, and price orders demand while U.S. both was and book-to-bill Water on revenues emerging to The were X% XX% to grew grew continues continued both digits. our versus realization due backlog while

price quarter coupled basis continued strong with with turn EBITDA offsetting more realization, in was inflation. productivity Segment up XX. margin than Please to Slide XXX the points

stream introduce North access is a and Integrated ISS brings very to Solutions is known as Services ISS & a segment. our recurring diverse dependability leading that bringing highly for reporting to water provider well recurring as attractive services revenue and solution and water newest revenue, XX% I'm approximately treatment industrial mission-critical With our durable and customers. verticals. treatment to a American pleased as expertise

margin the up XX across EBITDA May orders full reported And financial close, was turn was realization revenue XX price industrials overview driven with quarter post $X execution. above only And broad-based quarter, X for utilities. And and nearly was ISS due solid by the ratio of year-over-year. XX%, a Slide to book-to-bill backlog billion company's at grew Backlog strong after now XX% X% adjusted up cash we demand end and Although of a to let's flows and to an position. XX%. close our

retiring adjusted cash quarter the free financial Patrick. in with over I'll our had XX%. hand position exit remains debt closing we XX, we debt-to-EBITDA Evoqua, to $XXX conversion After Slide Please X.Xx solid turn it to with robust over of in of liquidity in of million $X.X million the conjunction the as and $XXX available is Net leverage cash quarter, back second flow over billion. and and of

Sandy. Thanks,

only post close, grown. about the made our great X more progress acquisition little months Just areas. We've a Evoqua has than in excitement X

commitments is performance tell focused to keep story an for a our and performance. stands First and the The We our our that integration began with results overarching near-term delivery. deliver the disrupt continuity business principle, outlook today. business was customers, not and as clear of

demand as us, our brings of opportunities our The second most is, raise our future our largely we're performance healthy to would the combination year market the are. the dimension which disciplined full ahead expect, and and you guide. on a execution about is given reflection our only of to they has But confidence growing. team's us our me potential confidence businesses as is of current excited What underlying which

the combined I'm been we've closed, the early cultural demonstrating the team. leadership momentum announced by and we has And frankly, already When energized strong created. the transaction a fit team

opportunity We expansion. when greater as more the the to have significant visibility on along we announced the are even margin we of coming well outlined operating cost the And synergies to track efficiencies for quarters, integration, in progress further the with realized we deliver be through transaction.

At the I my that's in has the whole dimension profitable about of referred comments. time, And this same always further strategic accelerating been opening growth. our third the combination to rationale

of even strongly streams. are component We end markets with more a significant revenue recurring attractive, now durable positioned in

those the clearly. more Now that see we deeper intersection have and businesses insight of customers, our even opportunities into we

needs Those at is capabilities we combination challenges. So to have right on scale to are time. platform reach customers' have and strongest the now moving Together, differentiated increasing, of the to and the XX. solutions we right critical address Slide This deliver the water globally.

Our teams do already will detailing we that. how are

of especially end in markets. First, utilities, our presence addition Technologies deepen Infrastructure expand industrial Water will industrial, global in leveraging we'll distribution scale penetration, then will our with we of Services use Product Solutions to to power attractive Xylem's well-established our Evoqua's Applied offerings. we business the platform. offering our And our In combined the by

of deliver recurring reinforces Now part access strategy it gains revenues XXXX businesses, the for Day, also The business our on greater exposure expand Infrastructure and performance overall as to our that sets was many Increasing of spending. in Investor our throughout resilience back consistent customer model attractive economic which industrial cycles, laid M&CS complements growth. our end industrial of Water you which utility us and from faster benefit even durability and of ISS, our know, capability presence and long-term we out in of this to delivers combination the markets. the

be combined have on providing industry well Both scheduled regular anticipate in We've to and a XXXX. at light We existing growth are the with likely in attractive offering sciences strong with up secular Day of outlooks already general first customers as basis taken and first and the steps align verticals and you forward part that an longer-term already long-term Investor business. we're industrial our our keeping driven such by a Xylem's targeting portfolio progress life to that trends to outlook look integration to date microelectronics.

to over our with a it more bit market to outlook. about Now that, to say I'm going hand end Matthew

you, Thank Patrick.

Slide XX. to Turning

for year, to outlook our for our cover thank I I Before partners the quarter. want and market the team a great end

outperformance momentum to and continued give beyond. in confidence us deliver Our and XXXX

our dynamic of in attractive proposition value the and a us backlogs record have position in We end puts portfolio macroeconomic in strong even a differentiated environment. markets potentially

resilient signs are We continue in balanced we applications. watching to our demand steady leading That growth industrial in expect for said, indicators a outlook utilities water in take of continued approach and moderation. monitoring and

will basis. outlook from our be of be Utilities, expect turn market, now is on and And XX% approximately mid-teens, healthy organic which our now growth which teens. by revenue to of an to we continue end I'll up low XXXX

On our AMI anticipate low of the on we water from solutions, for backlog robust side, high XXs, supply. demand execution previously improved chip due growth teens clean up to and

In with offerings. and are traction are great addition, bundling on customers we selling seeing in our interested platform digital solution increasingly

side, continue the expect OpEx single-digit as underpin continued we to On high resilient developed CapEx markets demand. growth, spend as markets emerging wastewater well in in will

which Turning revenue, close digits, now we are keeping global end to of but for our is XX% growth a expect market, of of the industrial signs watch moderation. steady mid-single

momentum where developed to utilities. continued somewhat from be growth markets outpace softness industrial any China, emerging by offset to expect in including markets has We

of growth mission-critical is business of momentum as increase to demand XX% The organic and such with the which we business. And our including digits, of large combined solutions, That beyond. of backlog sciences attractive year services about healthy. our further the expect not mid-single durability steady execution. discipline, our solutions Evoqua us and building in and backlogs operating life outlook the the and overall in contribution although for gives our high-growth we driven outlook, of are we commercial rest by verticals revenue, confidence in outlook, Lastly, and remains replacement expect microelectronics

our I'll you to walk it Sandy raised over to Now guidance. the through detail turn of

Matthew. you, Thank

XX. Slide to Turning

incorporating also want take I to EBITDA We you see across now to of are through takes revenue, and and year guidance year. EPS puts a the moment how Evoqua. increasing full walk we and our full the

approximately now up of year XX%, Evoqua and growth X%. We revenue to increase billion around includes from expect to total full $X.X billion $X.X We revenues expect to the guidance. which be another our from organic for in year, X% organic X% revenue

of EPS EBITDA raise from the to lifting by full strong approximately organic outlook back intangible $X.XX are $X.XX of raising $X.XX, midpoint. a and adjustments. of up approximately end Evoqua year and incorporates about legacy guidance share And XX%. $X.XX low are This We $X.XX. acquisition-related $X.XX accounting to adjusted our of we dilution a amortization $X.XX $X.XX purchase of to addition, includes a about from increase guidance in the and at the our offset This to incremental due add contribution partially

great highlighted, Patrick As made integration. we've progress on

rate the and run within we at cost by year end X track years. be on of $XX to expect We deliver the million of million to remain run synergies $XXX synergies of rate cost

Turning to Slide XX.

segment growth organic Water For of mid-single-digit in income. and flow to XXXX, down as at growth and approximately we Water Infrastructure on of in by cash high are growth free XXX% follows: still our M&CS, net revenue in track growth achieve least breaks XX% conversion Applied single-digits

range in to in XX% on of a will with year company the organically. down basis And full you X% of the Slide in provided third X% also on a the growth and we now be reported drilling total XX% anticipate We've number other appendix assumptions quarter, XX. to

expect Water. the teens to and remained mid-single Water By M&CS in high growth segment, flat and revenue in Infrastructure be in in digits Applied we

quarter to be I'll We closing EBITDA XX%, over Slide by realization call gains. comments. with approximately expect turn that, continued to please driven productivity higher third price Patrick and back volumes, turn And and XX, the for to margin

lot We've Sandy. covered a Thanks, here.

your communities. a that, we we But forward and a fundamental questions. customers it to do forward look step and we is want our for is transformational to I Xylem, for reiterate So transformational just This our believe before point.

about strategic We things are evolution, the this most changing. excited are but very about Xylem not important

one those of Our unchanging investment is constants. thesis

on end markets. runway to the strong a intensifying attractive solutions generation that capital with a growth expansion portfolio doing model balance This of multiyear growing with significant creating economic a and portfolio. that water profitable with sheet gives strengthen of further us cash our differentiated in are a value services addresses social foundations sustainable margin and of we're with and challenges. And durable We business and deployment

become serve solutions to only position need It increasingly the water growing, in very needs. the that privileged those world's are we a for apparent challenges and to is has

forward look we now taking So your questions. to

So over operator, the you Q&A. back for call turn let to me

[Operator Instructions].

Dray question Deane coming first is with Our from Markets. Capital RBC

really to all the and moving parts, move all recasting all these we our work comment all mix went heavy market And we perspective, that but the re-segmentation, appreciate the a on, appreciate lifting start, Just the end and the EPS. that sense, to cash financials, from look, new that... makes

parts I around I to that shout this have closing exciting to of that about. the here question, want give talked team been of a do just a -- and but out work, transaction, want midst world and the moving just a appreciate momentum, your pieces the to lot we you all the before of and In recognition. entire not part Deane, that really

I Yes. not the organic the on the That's did Cash just doing. and exactly And beat was intake side so what business. fact you forth. order conversion, of skip a

the that my And So part. go comment now question. I was to

a you is Water customer, of terms stand-alone combining ISS also so re-segmentation, expect with sense on do. interesting technologies, the that APT box. the Infrastructure what side. where check not makes go-to-market because but in that's then the we'd On on go-to-market, the there's That's overlap some much And to

will where question, some is that integration because on. first there's be that So going

effort So synergies? synergies revenue thoughts cost give a is businesses and and on about us sense combining on conceptual integration what any of that anything the those

Yes. Thanks, Deane.

cultural are part a say comment And a the is specific that, us. to would Matthew obvious of that on clear that But that why integration looks start. why assimilation the pleased comment I'm going a of question. I've integration, with your us, and and APT, like for So opportunity and that to efforts let Matthew really Evoqua to more kind by really on of now what I'll the great impressed bit hand it been I and teams. to for off

mentioned Patrick. very the her minutes cost side. And the and remarks, there first complementary they're Deane, revenue a in businesses, Sandy ago as is Thanks, of few and immediate synergies, foremost. on both all, first

are us The in example teams And to products, getting be mentioned. our our gate bundle great utility that's in would an quickly to cross-sell space, So and of will, capability this utilities. treatment solutions industrial bring as the the us able making and out companies both front fast. a the total being progress, of allows Patrick kind We the full us X of Bringing the before. didn't whole across that end. together you walk enables to have the with through beginning door if to train, solution offering that from table. to It

Also, something out are that is technicians, maybe we is our with what AQUApros, as our not call customers. intuitive

a out seeing they products with just points. play already our customer Now portfolio broader portfolio quickly. have recommending other technicians pain that to solve -- new very recommending we're the in And organically

already. that not intuitive, that's may something but So be happening it's as

Evoqua. tremendous has for thirdly, say out-of-the-gate treatment R&D combined the X And beginning. team experience performance say leadership here our and synergies the cost together We bring brought leaders synergies. together. business. I'd leadership He Patrick in mentioned senior will those the Hervé treatment lead over the R&D then very pieces revenue. instrumental I'd the Fages will obviously businesses from and to -- lastly, two be on when bringing There's we we

good really hear. all That's to

I'm and be chip And us supply here, our I and on were is, XXXX. this on real it's improvement asking significantly to then theme conceptually, to is supply. early, XX% number continue still -- And Patrick, is that not so there's an just of a it is, outlook And is and themselves. first, what's Evoqua specific view the question you digital a second path the path revenues know gradual the related And where but update a Xylem, there? just of by for digital. digital been targeting the how Does give

help So you should now this combined, goal. that towards

the just of supply by path So and are on what digital then half chip conceptually, you where revenues timeframe? on

we in I are and on then where we chip Matthew let on and he where on are supply will I'll digital. team tag start

will head a Chip look improvement Great. pickup but continuing to QX. to mentioned, in the end really QX expect redesigns is head as will the We we into of we also a XXXX, into you expected. lot as do like we XXXX and into XXXX. our expect as QX supply chip supply, we coming as the do Deane, moderate improve, also be online

ramp So we'll QX us then that 'XX. gives confidence into that and that see

digital just can Patrick on and up. wrap few a comments then it Maybe

see towards We are backlog. Xylem good goal. revenues it a can was That XX% progress the the making of legacy digital target. in We

We adoption backlog to we release that's digital the get have chip and the a better, content lot better continued of XX get we over M&CS, million. that general AMI, trapped increase the up see supply And electronic just as The next as in backlog. to in this months. will start of X $XXX in with supply you we're quarter the course of

So progress making digital, AMI. on by significant buoyed especially

then that is say, And more through see already lastly, I'd important Idrica it We're because really content. starting pull to the digital to with play partnership out. enables us

good progress. So I'd we're trajectory, all, making say, and a we're in all good in

Yes. would our all, question And with -- it's underpinning differentiation the of raised which key I you and of story is the Deane, because marketplace, up, -- know a wrap I just that overall great why question. in I first

what there the really both print which also our deal of is on exciting would in we confidence in the by out Xylem AMI I'm say kind business. I in by encouraged backlog wins. is adoption high to the really most and see marketplace, So borne heritage continue increased

visits go to improve really the ISS data actually strategy where issues give every really of is That's a for big digitally customer, it the ISS has day, In customer EBITDA talking have to AQUApros of offering that services easier business. been more the leads again, around productivity really predict truck is on to businesses, the more the That rolls, making them. to we're margins path With insights, opportunity making less Evoqua, use The how improve jobs. digital by, team it there, before opportunity enhancement. the more do their portfolio digital. to there within the a the serve digital are, and out the to on do Evoqua the you complementary connectivity they kind and what find do less they margin enabling our of about

a that our to more to Xylem those exciting exciting. for or story, area Evoqua either on are Day share whole there's there at going Investor forward. the that have It's So new the that we'll very

we'll take from with And our Mike next Halloran question Baird.

first moving just question, a everything, straightforward to think, the pieces level many I that given there So I is here how relatively but set question, want are.

So it sounds months like some on Can it little the compare that have this we a guidance those whenever was raised like update. gave both that why call second that organically X, it's as pieces but piece quarter you moved have well if to, Evoqua it, as you higher? ago, your talk higher expectations the X an know broader that. than just expectations outlook, the of I it moved is through of last feels

So you us? line for just those out maybe pieces moving can

Yes.

Mike. a that, at Let me crack take

organically, now at February, time raised look to if -- about by this compared another to raise initial and higher last We $XXX we're where revenue. we spoke you back our $XX million. did it guidance the guide, -- rewind you forecasting our we If quarter we million

good would we're segment. are growth In business. come that expecting thinking now year the And from incremental in in very grow seeing the low teens. somewhere margins that the that M&CS, started business We strong we XX%

upside. encouraging more from as well. X then But momentum. performing They've we that combination been we cost other M&CS the around a of significant we're gotten also and a us other volume wrap metrology. curve ahead it's increases perspective on businesses, they've side sustain the is good -- what's I giving think price the that well. the we're that's seeing a seeing really So combination metrology of And also businesses It's of

And contributing so beat our and it's of raise. portfolio that are really all parts to the

side at about When year. talked we from quarter, billion the I in Evoqua. about $X.X revenue of we the $XXX contributing million Margins there the this for the look about past house, are them on This there for brought of rest you at companies year, and are outlook developing other. our nicely of of if margins -- top implied the look really really each both right Evoqua

sides back on And organic focused it's momentum on goes plan. to see the the strong operating good So the really of deal kept think really both from house. to principles we've it delivering where both teams I

momentum Great. No, Book-to-bill that. the And we the I question, you're seeing second as what work is that's a exactly just looking bit then seems utility maybe talk pieces. year. little utility on side good through was could pretty healthy. Obviously, M&CS Appreciate on next for. you about the

might a some about into not bit released or as from ISS get little about you're funding regulatory visibility the got that Backlog though, think I at contribution looking Maybe side. healthy, and on infrastructure talk here? of drivers wrapping high the that obviously, of piece next there. industrial these the very well, have how just is coming in out the M&CS you might some those of some the in year, is talk the you on pieces

Yes.

hand Mike, So and over I'll then start, Matthew. it I'll to

I One, we're of your AMI, in utilities early again, than U.S. an Just around adoption the space market. see question, more increased ever confident here would utilities, this we win excitement where zooming around going say, remain, we that backlog. and still in that the around the the of our AMI that. ability think our deal And and that our successfully up for shows up speak while compete in cycle. continue where up in shows the numbers to our global is there on out a -- wins. statement in is themselves we And It pipeline. to are I to adoption It utilities shows see in in bidding where

repair know, continued here demand We underlying see and as trend. of age as that you spend, well fundamentals America the world, are to the there Europe. infrastructure And largest increases of -- of -- the North outlook. in in that's around going in the utility And notably also Secondly, replace. OpEx, most given long-term but the part is it's continue a

U.S. the it's on going in at have I one We exciting Evoqua Inflation in, positive and that, whether before, we coming as the Act, demand questions all it sudden profiles obviously And other CEO past of of time. legislation that's think for the switch. just lot that I know reinforces our as Ron, we're not up. with It's around to Reduction it be be get in But of areas adoption focusing and going us. we that's in show over that about Xylem. obviously, Evoqua PFAS It's other of infrastructure said like a the believe very a we think capabilities we've terms has the day beyond here said, the a in tailwind a to area dimmer

So don't you I if to around want commentary my add that. anything to know, that's Matthew, utilities.

that only relationship utility going I customers. with The that past with to we've we for for And based reason muni draft next the add I our showing the think we are have conversations them weather our budgets our over utilities that, had close few don't months, customers, the see be especially growth some would thing year a there's of to any year-over-year. on really slowdown.

and lot to of our the -- we the that's EU back, outside kind customer only globally play very Patrick's a U.K. in revenue cycle. In kind the in globally Obviously, in not both point, we're of the but the public half say feedback the U.S. U.S. of obviously, U.S. I'd with And So China, there's AMP funding then is in of getting. the utilities,

feels good. So pretty

Giordano next TD And our Cowen. from question we'll Joe with take

work if the squishy does just quarter how debt there Western get the Chinese you stimulus of kind for and guys? of and mean on and And went I'm getting in where thoughts directed China? that's a might it little bit. kind where on impact like through talk been curious has Europe you that I Can potential your maybe

Yes. it's Matthew. Joe,

resilient, some over is which Europe. Just on continues be in of just It revenue utilities, maybe comments in to especially Europe. XX% our

With majority being orders OpEx, the just utilities. earlier. were teens Europe in low in We in in that up of Patrick mentioned as

is good which that seeing offset the so solutions news. industrial. that softness side, building on we're is partially more The And was really by

up Europe single orders. Western all, in in All low is digits

you So account. when I'd there all, take the in faring balance well in pretty all there say,

really and revenue in by our in there momentum revenues, were an plus, positive we the QX. team leads work it it China, which both entire X% easier up orders was We compare, and China. was of Shuping who XX% up makes our Lu, which great saw done team although in around

is where Just shifting products resolve more for and of localizing the just of incredible China the into and high-growth areas. China, happening and really slowness getting some in

China. way Industrial weakness of not has utility we're big the led business China little it's building us, where is utility more China, in business in and in our that's space in China for the obviously, of bit space. the commercial a to momentum of in the is, And see XX% starting part centric. in but our a

in we're all, nature water there. -- very in on in outlook, the all confident So really and focus given China, country critical the we in and long-term

government. you been mandate just long-term know And the to listeners, Joe, water and I've because a but bull this environmental the the already, of and the on continues from there rest of a policy underlying demands China top for standpoint of needs be a

team and go to We've look and the like you continue a and our it's with been back when over going that last X couple potential double-digit years, over couple But the here. CAGR that time see weathered we in of of that cycles forward. our of strength portfolio growth, the or You I've of so China offerings. a

us. of China and proud the very I'm optimistic team So about for

That's Idrica. good up on follow just I color. to then And wanted

And Infrastructure. -- just needs beachhead basis? that like what a terms that like happen had for on of where Water a of then, and in become you. core digitalization clarification for scale kind Sandy, kind you within I to to of for one is APT Just

Just organically and revenue basis quarter orders? full that for curious like on how a looked

Idrica. X% performance the Yes, the business take the Evoqua, of can of Matthew of full way let X%. quarter the you knock When Evoqua of at that me organically grew grew APT look then the and out and piece

Great. Yes.

engaged from In terms it's the platform are and that would folks over operator what the integrate They have have really and with with, headquartered bundling have born we really phone really they Idrica globally, funnel the just exclusive worldwide digital partnered fairly Spain. got utilities it's Valencia, built the applications We've singular built may know over synergy that in the of utilities, is reach, for we biggest -- not data. a we that utility wins point and XXX-plus solid have pain an of months. which were partnership to is, good out need the commercial I global platform And with Idrica, a of significant through globe our it's really say X seamlessly that X hear balanced addresses to on all Idrica, we're and their momentum across past solutions. for

is beachhead. drive it say and digital help content is reoccurring revenue, Deane's the pull really through which and question, I us going will the So to become It more important. earlier is would becoming also in beachhead and

platform, the We one Just a platform. U.S. calling Xylem we're digital is you in through we where large example the View give Idrica order. recently AMI pulled leveraged the this I'll which

seeing you're backlog. in the Now

million. saw you by the So backlog grow $XXX

this One enabled we the big synergy pull digital of those was synergy platform due to and wins order. that through

content, to to going recurring revenue, pull but help is it's us with which it's strong. So through going also really

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

Pretty on start by end of targeted synergy the side. XX% the million cost the rate to be cost going of like good I'm run $XX synergy number. at year, the to

think in, for quickly give So on by then where in about that can in run talking And could kind major 'XX, of that that's color any the 'XX, start of just hit rate layering from we $XXX those deal, if this maybe off to buckets how the about you million? 'XX? you kind coming should us

Yes. Sure, Nate.

that me kick off. Let

the have that buckets I changed. not think synergy we transaction the we when outlined cost announced

some costs the first to public So public overlapping costs, as was savings. the SG&A go of company a well as category company after

lion's to up share And XXXX. we're so the in going the making of savings is realize that that

categories going going savings, in two overlap, the other well footprint procurement happen come 'XX. as consolidations the in from And which to start some manufacturing And kick later to site to manufacturing and time. the are site savings to consolidations, savings over as of we that's procurement expect

care because we're have our purposely those taking sure of make we phased customers. want to We

million $XX about So 'XX, when exit that exit rate than double into we'll in more QX we look as be 'XX. I

very all So I $XXX the we're think confident about million. signs,

areas obviously certainly question of [indiscernible], did if obviously that and place. about for just before. long It's where talk more to talked deal them there's in done of to this in big about synergies revenue I the about you questions a early looking I get a probably see synergies. APT there's ask 'XX. potential revenue And one of Not But factor the can or you kind conceptually couple there, first for the I numbers. motivating exact think, those for and combination, those. Water revenue signals you phasing and Infrastructure synergies of mean, want

But in about talking And leveraging the internationally, their any business maybe models to willing channels develop the service-based us with products? more legacy some help things service-based maybe footprint U.S. understand then model Evoqua's talk other you'd be Xylem's like here? to expanding about opportunity business to

Sure.

So Nate, this Patrick. is

highly because to want I these what we're So overarching capture I things we've people back is go motivated to teams special focused revenue to And on. day kind be go the synergy that of go got beyond our place job. X in offer we for would do areas also their incentives to the

the and big well utility other is what around do combination of portfolio our penetration. world, again, are is utility leveraging very position product These alone, really X complement in world. really And deep they're North opportunity. the the They treatment around, our each of comments is not a market-leading that very, companies. So around Xylem's really America

go industrial customer Secondly, there opportunities them there's opportunities. industrial, needs. don't a their we are see that big we that think sets Again, area and we think are scaling of We really customers. our that big call to to solve in number offering

think the you offering is -- third if about expanding well, ISS So the internationally.

diligence whether again, adoption. we than the more Evoqua, a drive be common -- customers cut the market-leading as have the the X whether whether looked it of that roster even impressive when life be in whether we, science, customers it have we because past, be that a to as power, lot and And has able that's in they needed scale had beverage, footprint really areas resources whether where Xylem, food at X really, capability have be Evoqua's have of And it to our microelectronics across it part be to and been especially Evoqua able and international. provide that and of

Joe And question our we'll take from Giordano Jefferies. with next

Operator, I we've from heard think him.

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

Maybe solutions to continued Commercial bit. strong. demand building has a digging into be little

slowdown I think a this is one area that previously. you're anticipating

on update you're an just maybe what there. seeing So

about you Yes. was asked Yes. sorry, I mean bit I'm choppy, commercial? -- it so a little

the going -- strong we see has And in commercial to been continue elevated revenue We've an for year backlog. our the this of are our is growth. with -- resilient back outlook still So seen business pretty year.

So nothing there. has changed materially

bit want segment. terms a were we sure you to in breaking. I and Saree clarify question your choppy of which make

Yes.

I you're anticipating previously. think a slowdown

I think said maybe .

there following are through seeing obviously, update there? positive And but quarter? to maybe just you market guys, trend any that trying small And Just on up building get then solutions. the on an on just that signs residential, -- how you did for

good really revenue made of acquisition, residential. Yes. before we're soft I orders the think that look is and The seeing And in our our the spot up across when portfolio, about base. Saree, portfolio you one X% I mean, momentum book-to-bill. strong

lower even revenue our it's than base. that. of X% or Now It's X%

portfolio. of the yes, weakest our So that part is

of the other slower half a end AWS You're by for resilient have businesses second growth more seeing outlook the such offset that markets as in year, the utilities.

next from Kaplowitz our with Citigroup. And Andy we'll take question

dewatering like but has more remained Patrick, it strong talked up of in about past holding the being So little you for seems it's obviously sort We a guys. it well. cyclical,

of even business. in that maybe So see you can maybe 'XX talk about what going you sort forward, into

Yes.

a of we've the to a that cyclical of historically, market bit of spotlight because downturn. diversify little tend our new there to may capture that. of even Xylem, dewatering handful the the have years movement made businesses. business, been high-margin So story And moves relatively of a would of in it's with been more that number such terms had past of end historically And be over to it those for one had exposure

done now. of on the to work Matthew his of been there's integration where like I'll hand it But we commercial on know acquisition synergy, kind And I'm over even give of of a it's work lot positioned now. are to and before the team the done. stronger kind has certainly of I Evoqua right take proud

were it's say would fleet, into And both a of and couple U.S., and helped things. put bit mixing time really we Yes. bypass Europe needed coming maybe we which and and oil some of dependent. that a done profitable to the XXXX, cyclical. more different less nice bit light is effort in steady the more and of lot past us well of And gas into of too We a Number mini our over has in really job wins. great, two, No, couple are more a construction a I dewatering. segments Patrick. areas the we've We've as out in in and into years, invested Andy. dewatering One diversify capture as

of thing I with couple forth pipeline where and a a with synergies businesses, are organizations, good another, job our us. and And the valve of together whatnot. I driving service assessment the driving key would one business drivers, businesses would service leads that's and helped say done in U.S. passing back maintenance our to our last revenue those the we've say So predominantly really is, our

growth on synergy side well. good drive that's as helped really the So

on in room would by I in, saying, leadership certainly in focusing day, level. this an XX/X. team the happens wrap in the kind working every what just of what of emergency but business, think entire leveraging like that business it's that are area, got like local This, They're area just service strong ISS coming people-driven about We've it's I business. this our together. slight at answer it's They're kind that portfolio. operation. very happens up business a people, It's leadership. a

for terms moment. here. give And so the they here but in what really of done. really an matter They they've the give leadership the in just what -- really, do people And experience hearts applause team matter again, minds of everywhere, I customers and to I

supply I supply chain about go sort the versus but that of the pricing on joined And as the as side has too, sort improving at but what getting talk sort I -- of think, you to you're on of thinking guys. versus I cost so into cost, apologize, late, already helpful, talked price been sort asked, half 'XX. call and better, of a versus this Evoqua Very this any second looking about maybe chain? in about seeing And year you of like markets if differences little maybe you're then price

way Andy. Thanks been it, perspective. development nice continues the -- it's now margin price really the a managed seen question, Yes. from for on it we've tailwind the cost We've us and side, a for

that increases starting We anniversary of took price peaking. we to are inflation the some when was

price And half so the of a the to half. you're the see going tailwind year from not of back in much in that front as you saw

is is in as that half of The first come of little and start we've more year. quarter actually the that this a positive see the inflation thing seen the to back through to results. that we well moderate expect our And would

happen over work that commercial great make to really past teams year. by the So the

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

margins. while. M&CS think it's a you we've think I right since execution bought Kudos these solid Sensus, the levels on don't been question margins after I seen there. on so at super A

target to this a a should we to of And of run think So that potentially maybe sort drove what get reasonable it of just on good what sustainable of full if for point? a thinking a better how year-end. is? then be off basis And rates jumping trying double-digit to that, year getting through is margin at point a back year. sense Is sort next you have this

the a X of XX M&CS months X really, obviously, or not there's us XX then the in time past say X the probably were margins. to. chip And things we to one, on backlog. I'd supply, hampered able Number would being by point unlock I Yes. past out turn But spent months, to Thanks we've lot I'll the to Sandy. question. it for start and over

helping And so really helped fixed the with being our able and absorption backlog in factories is costs. to cover unlock

So one. number that's probably

products we're for go Number resources back our to getting business. productivity that chips. to two redeploy in redesign to had after We is

year business. that continue has And we'll the year-over-year, drive and in productivity to so increased this

X has just very quarters well. been helped a over cost would the buoy I as to in margins X thirdly, then And which say, positive has good in M&CS, past price general,

going we'll going pace margin expect improvement forward forward. sequentially So that continue and

the a Patrick. margin long this some the able Brian, we've time. an in seeing would up -- historical is story here early I this backlog would margins And what had that's past in few read-through of impressively the you're been past deliver certain growing course on exactly made be, for We've We not what perspective an turnaround. reach as that what here. I just terms of the in And on mean, is when what levels is those offer commitments issue to on a been backlog the over has has being may to revenue, right be we that years. now. M&CS for of

And of way. potential the stage have for potential clouds give to So something team because especially full out the our moved the always they've of what part business off the we kind and is shout again, our since now next you're that drives, seeing business. this I entire we're metrology along of the the been seeing ever that now a or -- this acquisition. horizon executing part the least of on it's the at been just did It's

their past, less revenue portfolio exposure Evoqua sales as what lot like of a the their has recurring great. seems it'd scale, more bigger Evoqua, across appreciate just I then much the is part I broken or In color. of know but question second be cyclical Okay. the of around a And That's that with the clearly model. maybe mix. out acquisition sort It a -- forward. going much business of diversification sort

think the Xylem different where you the that entity, on any of kind compares you segments combined stand-alone? Now to of to as revenue sense nature the recurring exposure and have us how can you there how give about

that Yes. I component. line we not any one but tremendous certainly mean it as year revenue of into was recurring the of looks reason to upon No, is question, that the The Brian. certainly, benefits the commitments have big contractual going like. based for certainly, business, great acquisition, what Evoqua sight given

revenue their the is portion of predictable and year. going into repeatable you're the so largest about talking And

got so what obviously the that largest we which Evoqua. from really is And part and is of ISS, --

of If you a historically, the lot of at contract. other also has our under parts M&CS business, look is business, metrology, our revenue which

even it's And looking Infrastructure is majority visible that XX- over but be we've revenue but of products so are XX-year frame, our pumps, year, at base it to submersible are year. not under. that wastewater a good environment. long-term the installed replacement fact projects a that given Water do particularly just that a a time going We very one, got given that. such also the next deals large the one our typically of we're course operating the there kind It's very repair there. of about would feel treatment And stable AMI into that of we

replacement a very your spec we is XX% X/X while industrial The for a that's is we you've very commercial would an there, it's and revenue, our It's of area a customer upwards always -- business. us changing new once into cycle a or pumps business building, shorter there. Applied our under been even But it's positions application, the Water supplier say And likelihood of out not market-leading sticky, low. contract, to model. have to of the

have even that kind So year. contractual, not though it's into we going can of visibility the

So business now to Evoqua. of this revenue much we future, you the in quarter very recurring now, of we'll we ago right that the numbers want the overcommit durability -- feel but more and give good about I in did than don't to because of we will specific nature aggregate. a bringing in

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

mean, months of world I in your part for strong are be seeing that excited and call. so power for today your is right great the companies ongoing over were a in support. And of I this out this we Well, the be are lastly, the next the because of that. X to many come a about the performing of again, you to water and again, many look coming for just It's these combination with, feel really we companies really challenges together you there X on position time. there and meaningful forward before all to that here And time coming now a to dealt morning own of to together thanks well. time reminder, our their

So all very thank you much.

Please Second Quarter line this Thank Call. concludes you. your today's day. XXXX wonderful Earnings a have disconnect at and This Xylem Conference time,