Xylem : 3Q 2022 Earnings Package 6.3 MB

2022 Third Quarter

Results & Earnings

Forward-Looking Statements

This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words "anticipate," "estimate," "expect," "project," "intend," "plan," "contemplate," "predict," "forecast," "likely," "believe," "target," "will," "could," "would," "should," "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals (including those related to our social, environmental and other sustainability goals); or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward- looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by impacts from changes in international conditions, including as a result of the war between Russia and Ukraine, the coronavirus ("COVID-19") pandemic and macroeconomic conditions, including inflation. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward- looking statements include, among others, the following: the impact of overall industry and general economic conditions, including industrial, governmental, and public and private sector spending, inflation, interest rates and related monetary policy by governments in response to inflation, and the strength of the residential and commercial real estate markets, on economic activity and our operations; geopolitical events, including the war between Russia and Ukraine, and regulatory, economic and other risks associated with our global sales and operations, including with respect to domestic content requirements applicable to projects with governmental funding; continued uncertainty around the ongoing impacts of the COVID-19 pandemic on the macroeconomy and our business, operations, growth, and financial condition; actual or potential other epidemics, pandemics or global health crises; availability, shortage or delays in receiving electronic components (in particular, semiconductors), parts, and raw materials from our supply chain; manufacturing and operating cost increases due to macroeconomic conditions, including inflation, energy supply, supply chain shortages, logistics challenges, tight labor markets, prevailing price changes, tariffs and other factors; demand for our products; disruption, competition or pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; ability to retain and attract senior management and other diverse and key talent, as well as competition for overall talent and labor; difficulty predicting our financial results; defects, security, warranty and liability claims, and recalls with respect to products; availability, regulation or interference with radio spectrum used by certain of our products; uncertainty related to restructuring and realignment actions and related costs and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; volatility in served markets or impacts on business and operations due to weather conditions, including the effects of climate change; fluctuations in foreign currency exchange rates; our ability to borrow or refinance our existing indebtedness and uncertainty around the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with, or changes in, laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, our products, competition, and the environment and climate change; changes in our effective tax rates or tax expenses; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; and other factors set forth under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Annual Report") and in subsequent filings we make with the Securities and Exchange Commission ("SEC"). Forward-looking and other statements in this presentation regarding our environmental and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or are required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking social, environmental and sustainability related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. All forward-looking statements made herein are based on information currently available to us as of the date of this Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Q3 2022 Results & Earnings

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Q3 2022 Performance Summary

($ in millions, unless otherwise noted)

2022	Reported Q3	Adj* Q3
	Xylem Consolidated
Revenue	$1,380	$1,380
Overall Growth	9%	9%
Constant Currency* Growth		15%
Organic Growth*		16%
Operating Income	$168	$187
Operating Margin	12.2%	13.6%
EBITDA*	$82	$252
EBITDA Margin*	5.9%	18.3%
Earnings Per Share	$0.07	$0.79
2022	Reported Q3	Adj* Q3
	Applied Water
Revenue	$458	$458
Overall Growth	15%	15%
Constant Currency* Growth		20%
Organic Growth*		20%
Operating Income	$77	$78
Operating Margin	16.8%	17.0%
EBITDA*	$80	$83
EBITDA Margin*	17.5%	18.1%

2022	Reported Q3	Adj* Q3
	Water Infrastructure
Revenue	$574	$574
Overall Growth	5%	5%
Constant Currency* Growth		13%
Organic Growth*		13%
Operating Income	$104	$107
Operating Margin	18.1%	18.6%
EBITDA*	$116	$119
EBITDA Margin*	20.2%	20.7%
2022	Reported Q3	Adj* Q3
Measurement & Control Solutions
Revenue	$348	$348
Overall Growth	9%	9%
Constant Currency* Growth		14%
Organic Growth*		15%
Operating Income	($2)	$12
Operating Margin	(0.6%)	3.4%
EBITDA*	$32	$48
EBITDA Margin*	9.2%	13.8%

Q3 2022 Results & Earnings *See appendix for definitions of non-GAAP measures and non-GAAP reconciliations

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Patrick Decker

CEO & President

• The team delivered very strong performance across all our regions, driving third quarter results well above expectations on all key metrics. Demand remains resilient across our largest end-markets, and disciplined operational execution delivered double-digit revenue growth with strong margin expansion.
  We anticipate our momentum will continue driven by the essential nature of the services we provide. Our strong backlog and bidding pipelines support that outlook. The team, from our factories to our channel partners, continues to demonstrate resilience in managing through a dynamic environment, as our customers and
  communities invest in essential water infrastructure. Based on this strength, we are further raising our full-year guidance for both revenue and earnings per share, with" continued confidence in Xylem's longer-term growth outlook.

Q3 2022 Highlights

Organic* Revenue	Organic* Orders	Adj. EBITDA*	Adj. EPS*	Sustainability
		Margin

+16%	(1%)	18.3%	$0.79	80+ utilities
globally committed
vs guidance 10% - 12%		+40 bps YoY margin expansion	25% YoY growth	to net zero
		vs guidance 16.5% - 17.0%

Q3 2022 Results & Earnings *See appendix for definitions of non-GAAP measures and non-GAAP reconciliations

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Q3 2022

XYLEM PERFORMANCE

REVENUE
$1,265	$1,380
Organic*
16%
Q3 2021 Q3 2022

	ADJUSTED
	EBITDA MARGIN*
	17.9%	18.3%
	+40 bps
	Q3 2021	Q3 2022
Adj. Op Margin*	12.3%	13.6%

ADJUSTED EPS*

	$0.79
$0.63
+25%
Q3 2021	Q3 2022

Organic Growth* by End Market Utilities 15%

Industrial 16%

Commercial 17%

Residential 19%

Organic Growth* by Region United States 18% Western Europe 14% Emerging Markets 16%

KEY PERFORMANCE DRIVERS

• Organic* revenue growth of 16% mainly driven by strong price realization and modest supply chain improvements
• Organic* orders down (1%) lapping prior year compares of 20% growth with backlog of $3.8B

			ADJUSTED EBITDA MARGIN*
			7.5%	3.0%
	17.9%				(6.5%)		18.3%
					(1.8%)
		(1.8%)
	Q3 2021	Vol, Mix, & Other	Price	Productivity	Cost Inflation	Strategic	Q3 2022
				Savings		Investments
ADJ EPS*	$0.63	($0.08)	+$0.57	+$0.19	($0.40)	($0.12)	$0.79

Q3 2022 Results & Earnings	Tax Rate: 18.7% Interest/Other Expense: $10M	Share Count: 180.9M	5
*See appendix for definitions of non-GAAP measures and non-GAAP reconciliations