Xylem reports fourth quarter and full-year 2020 earnings

• Operational performance exceeds expectations on top and bottom line; quarter sequential gains across all segments and end markets
• Fourth quarter and full-year revenue of $1.37 billion and $4.88 billion, respectively
• Fourth quarter 2020 reported net income of $148 million or $0.82 per share; adjusted net income of $145 million or $0.81 per share
• Full-year 2020 reported net income of $254 million or $1.40 per share; adjusted full-year net income of $374 million or $2.06 per share
• Strong full-year cash performance of 324% operating cash flow conversion and 181% free cash flow conversion
• Announces 8% increase in cash dividend, representing the Company’s 10th consecutive annual dividend increase
• Provides 2021 organic revenue growth guidance range of 3% to 5% and adjusted earnings per share range of $2.35 to $2.60

RYE BROOK, N.Y.--(BUSINESS WIRE)--Feb. 4, 2021-- Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported fourth quarter revenue of $1.37 billion, and full-year 2020 revenue of $4.88 billion, exceeding expectations on strengthening end-market performance, despite COVID-19 related impacts.

Fourth quarter reported operating margin was 13.0 percent, and adjusted operating margin was 13.8 percent, each declining 120 basis points year-over-year. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin declined 170 basis points to 18.8 percent. COVID-related impacts and inflation drove the margin decline, exceeding productivity improvements and cost savings. Xylem generated net income of $148 million, or $0.82 per share, and adjusted net income of $145 million, or $0.81 per share, which excludes the impact of restructuring, realignment and special charges.

For the full year, Xylem delivered reported operating margin of 7.5 percent, down 180 basis points versus the prior year, and adjusted operating margin of 10.8 percent, down 310 basis points for the same period. Adjusted EBITDA margin was 16.3 percent, down 320 basis points year-over-year. The margin declines for the full year were driven by the same factors as in the fourth quarter. Full-year reported net income was $254 million, or $1.40 per share, with a reported operating margin of 7.5 percent. Adjusted net income, which excludes the impact of restructuring, realignment and special charges, was $374 million, or $2.06 per share. The Company generated $824 million of operating cash flow, representing a 324 percent conversion, and $641 million of free cash flow, representing a 181 percent conversion.

“Our team again delivered solid operational performance, exceeding expectations across all major indicators, including revenue, margin, and EPS,” said Patrick Decker, president and CEO of Xylem. “We drove better-than-anticipated top-line improvements in all segments, taking full advantage of stabilizing demand, demonstrated by sequential gains globally, and with particularly strong performance in Europe and China. Our improved bottom-line performance reflects effective cost containment and supply chain execution through the pandemic, and over-delivery on our free cash flow conversion commitments on the back of disciplined working capital management.”

“That performance gives us positive momentum entering 2021,” Decker continued, “as our end markets showed encouraging signs of recovery in the fourth quarter, with healthy orders trends and significant backlog growth. We also delivered strong performance with our industry-leading digital portfolio, as the pandemic continues to accelerate customer adoption of digital technologies across the water sector. This clearly positions Xylem well in both the near and long term.”

Xylem announced that its Board of Directors declared a dividend in the amount of $0.28 per share, an increase of 8 percent. The dividend is payable on March 18, 2021, to shareholders of record as of February 18, 2021.

Full-year 2021 Outlook

Xylem forecasts full-year 2021 revenue in the range of $5.16 to $5.26 billion, up 6 to 8 percent on a reported basis and up 3 to 5 percent on an organic basis.

Full-year 2021 adjusted EBITDA margin is expected to be in the range of 16.7 to 17.7 percent and adjusted operating margin is expected to be in the range of 11.5 to 12.5 percent. This results in adjusted earnings per share of $2.35 to $2.60, which represents an increase of 14 to 26 percent from Xylem’s 2020 adjusted results. The Company’s adjusted earnings outlook excludes projected restructuring and realignment costs of approximately $50 to $60 million for the year. Further 2021 planning assumptions are included in Xylem’s fourth quarter 2020 earnings materials posted at www.xylem.com/investors. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort.

Fourth Quarter Segment Results

Water Infrastructure

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

• Fourth quarter 2020 revenue was $616 million, flat organically compared with fourth quarter 2019. This result, achieved despite difficult market conditions, was driven by modest growth in the wastewater utility end market in Europe, Asia and Canada offset by softness in the U.S. industrial market.
• Fourth quarter reported operating income for the segment was $117 million. Adjusted operating income for the segment, which excludes $7 million of restructuring and realignment, was $124 million, a less than one percent decrease versus the comparable period last year. Reported operating margin for the segment was 19.0 percent, down 70 basis points versus the prior year, and adjusted operating margin was 20.1 percent, down 60 basis points versus prior year. Adjusted EBITDA margin was 22.2 percent, down 70 basis points from the prior year. Productivity benefits, cost control and modest price realization were more than offset by inflation, increased reserves, and unfavorable volume and mix impacts.

Applied Water

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

• Fourth quarter 2020 Applied Water revenue was $395 million, a one percent decline organically year-over-year. Volume weakness in industrial end markets continued in the quarter, with particular softness in the U.S. and Middle East, partly offset by robust growth in the residential market in the U.S. and China.
• Fourth quarter reported operating income for the segment was $61 million and adjusted operating income, which excludes $1 million of restructuring and realignment costs, was $62 million, a 5 percent decrease versus the comparable period last year. The segment reported operating margin was 15.4 percent, down 40 basis points versus the prior year period. Adjusted operating margin declined 90 basis points to 15.7 percent. Adjusted EBITDA margin was 17.2 percent, down 170 basis points from the prior year. Productivity benefits, favorable mix and modest price realization were more than offset by inflation and lower volumes.

Measurement & Control Solutions

Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses in smart metering, network technologies, advanced infrastructure analytics and analytic instrumentation.

• Fourth quarter 2020 Measurement & Control Solutions revenue was $362 million, down 5 percent organically versus the prior year, lapping large project deployments in the U.S. and Middle East. Strong sequential improvement reflects healthy demand in the test business and Advanced Infrastructure Analytics, both of which were up high single digits.
• Fourth quarter reported operating income for the segment was $14 million, and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was $16 million, a 45 percent decrease versus the comparable period last year. The Measurement & Control Solutions segment reported operating margin was 3.9 percent, down 330 basis points versus the prior year period. Adjusted operating margin of 4.4 percent also decreased 330 basis points over the prior year period. Adjusted EBITDA margin was 14.6 percent, down 350 basis points from the prior year. Strong productivity results and cost savings programs partly offset lower volume, inflation and unfavorable mix.

Supplemental information on Xylem’s fourth quarter 2020 earnings and reconciliations for certain non-GAAP items is posted at www.xylem.com/investors.

About Xylem

Xylem (XYL) is a leading global water technology company committed to solving critical water and infrastructure challenges with innovation. Our more than 16,000 diverse employees delivered revenue of $4.88 billion in 2020. We are creating a more sustainable world by enabling our customers to optimize water and resource management, and helping communities in more than 150 countries become water-secure. Join us at www.xylem.com.

Forward-Looking Statements

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

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by the coronavirus (“COVID-19”) pandemic. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: overall industry and economic conditions, including industrial, governmental and private sector spending and the strength of the residential and commercial real estate markets; geopolitical, regulatory, economic and other risks associated with international operations; continued uncertainty around the COVID-19 pandemic’s magnitude, duration and impacts on our business, operations, growth, and financial condition, as well as uncertainty around approved vaccines and the pace of recovery when the pandemic subsides; actual or potential other epidemics, pandemics or global health crises; manufacturing and operating cost increases due to inflation, prevailing price changes, tariffs and other factors; fluctuations in foreign currency exchange rates; disruption, competition and pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; availability of products, parts and raw materials from our supply chain; availability, regulation and interference with radio spectrum used by some of our products; our ability to retain and attract senior management and other key talent; uncertainty related to restructuring and realignment actions and related charges and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; difficulty predicting our financial results, including uncertainties due to the nature of our short- and long-cycle businesses; volatility in our results due to weather conditions; risks relating to products, including defects, security, warranty and liability claims, and recalls; our ability to borrow or refinance our existing indebtedness and the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, competition, and the environment; 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 in “Part I Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in subsequent filings we may make with the Securities and Exchange Commission. All forward-looking statements made herein are based on information currently available to us as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (Unaudited)
(In Millions, except per share data)
Year Ended December 31,		2020				2019				2018
Revenue		$	4,876			$	5,249			$	5,207
Cost of revenue		3,046				3,203				3,181
Gross profit		1,830				2,046				2,026
Selling, general and administrative expenses		1,143				1,158				1,161
Research and development expenses		187				191				189
Restructuring and asset impairment charges		75				63				22
Goodwill impairment charge		58				148				—
Operating income		367				486				654
Interest expense		77				67				82
Other non-operating (expense) income, net		(5		)		(4		)		13
Gain on sale of businesses		—				1				—
Income before taxes		285				416				585
Income tax expense		31				15				36
Net income		254				401				549
Earnings per share:
Basic		$	1.41			$	2.23			$	3.05
Diluted		$	1.40			$	2.21			$	3.03
Weighted average number of shares:
Basic		180.1				180.0				179.8
Diluted		181.1				181.2				181.1

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Millions, except per share amounts)
December 31,		2020				2019
ASSETS
Current assets:
Cash and cash equivalents		$	1,875			$	724
Receivables, less allowances for discounts, returns and credit losses of $46 and $35 in 2020 and 2019, respectively		923				1,036
Inventories		558				539
Prepaid and other current assets		167				151
Total current assets		3,523				2,450
Property, plant and equipment, net		657				658
Goodwill		2,854				2,839
Other intangible assets, net		1,093				1,174
Other non-current assets		623				589
Total assets		$	8,750			$	7,710
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	569			$	597
Accrued and other current liabilities		787				628
Short-term borrowings and current maturities of long-term debt		600				276
Total current liabilities		1,956				1,501
Long-term debt, net		2,484				2,040
Accrued post-retirement benefits		519				445
Deferred income tax liabilities		242				310
Other non-current accrued liabilities		573				447
Total liabilities		5,774				4,743
Stockholders’ equity:
Common stock — par value $0.01 per share:
Authorized 750.0 shares, issued 194.9 and 193.9 shares in 2020 and 2019, respectively		2				2
Capital in excess of par value		2,037				1,991
Retained earnings		1,930				1,866
Treasury stock – at cost 14.5 shares and 13.7 shares in 2020 and 2019, respectively		(588		)		(527		)
Accumulated other comprehensive loss		(413		)		(375		)
Total stockholders’ equity		2,968				2,957
Non-controlling interest		8				10
Total equity		2,976				2,967
Total liabilities and stockholders’ equity		$	8,750			$	7,710

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions) (Unaudited)
Year Ended December 31,		2020				2019					2018
Operating Activities
Net income		$	254			$	401				$	549
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		117				117					117
Amortization		134				140					144
Deferred income taxes		(31		)		(77		)			(47		)
Share-based compensation		26				29					30
Restructuring and asset impairment charges		75				63					22
Goodwill impairment charge		58				148					—
Gain from sale of businesses		—				(1		)			—
Other, net		46				9					9
Payments for restructuring		(36		)		(30		)			(21		)
Contributions to post-retirement benefit plans		(27		)		(19		)			(41		)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables		109				(23		)			(103		)
Changes in inventories		(5		)		47					(97		)
Changes in accounts payable		(39		)		29					51
Changes in accrued liabilities		101				15					(6		)
Changes in accrued taxes		20				(13		)			—
Net changes in other assets and liabilities		22				4					(21		)
Net Cash — Operating activities		824				839					586
Investing Activities
Capital expenditures		(183		)		(226		)			(237		)
Acquisitions of businesses and assets, net of cash acquired		—				(18		)			(433		)
Proceeds from sale of businesses		—				—					22
Cash received from investments		200				11					11
Cash paid for investments		(200		)		(7		)			(11		)
Cash received from cross-currency swaps		12				9					—
Other, net		2				—					5
Net Cash — Investing activities		(169		)		(231		)			(643		)
Financing Activities
Short-term debt issued, net		359				281					335
Short-term debt repaid, net		(640		)		(254		)			(52		)
Long-term debt issued, net		985				—					1
Long-term debt repaid, net		—				—					(120		)
Repurchase of common stock		(61		)		(40		)			(59		)
Proceeds from exercise of employee stock options		20				13					7
Dividends paid		(188		)		(174		)			(152		)
Other, net		(2		)		(3		)			—
Net Cash — Financing activities		473				(177		)			(40		)
Effect of exchange rate changes on cash		23				(3		)			(21		)
Net change in cash and cash equivalents		1,151				428					(118		)
Cash and cash equivalents at beginning of year		724				296					414
Cash and cash equivalents at end of year		$	1,875			$	724				$	296
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest		$	77			$	77				$	78
Income taxes (net of refunds received)		$	41			$	107				$	75

Xylem Inc. Non-GAAP Measures

Management reviews key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, working capital and backlog, among others. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and to provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including but not limited to, dividends, acquisitions, share repurchases and debt repayment. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following items to represent the non-GAAP measures we consider to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

“Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales or discontinuance of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate.

“Constant currency” defined as financial results adjusted for foreign currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar.

“EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense. “Adjusted EBITDA” and "Adjusted Segment EBITDA" reflects the adjustments to EBITDA and segment EBITDA, respectively, to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses and special charges.

"Adjusted EBITDA Margin" and "Adjusted Segment EBITDA margin" defined as adjusted EBITDA and adjusted segment EBITDA divided by total revenue and segment revenue, respectively.

"Adjusted Operating Income", "Adjusted Segment Operating Income", "Adjusted Net Income" and “Adjusted EPS” defined as operating income, segment operating income, net income and earnings per share, adjusted to exclude restructuring and realignment costs, gain or loss from sale of businesses, special charges and tax-related special items, as applicable.

"Adjusted Operating Margin" and "Adjusted Segment Operating Margin" defined as adjusted operating income and adjusted segment operating income divided by total revenue and segment revenue, respectively.

“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures, and "Free Cash Flow Conversion" defined as Free Cash Flow divided by net income, excluding the gain on sale of businesses, non-cash impairment charges and significant deferred tax items. Our definitions of "free cash flow" and "free cash flow conversion" do not consider certain non-discretionary cash payments, such as debt.

“Realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs.

“Special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for pension costs.

“Tax-related special items" defined as tax items, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for pension costs.

Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Orders
($ Millions)
		(As Reported - GAAP)										(As Adjusted - Organic)											Constant Currency
				(A)		(B)						(C)		(D)			(E) = B+C+D			(F) = E/A			(G) = (E - C) / A
						Change			% Change			Acquisitions / Divestitures					Change			% Change
		Orders		Orders		2020 v. 2019			2020 v. 2019					FX Impact			Adj. 2020 v. 2019			Adj. 2020 v. 2019
		2020		2019
Year Ended December 31
Xylem Inc.		5,033		5,339		(306	)		(6	%)		4		18			(284	)		(5	%)		(5	%)
Water Infrastructure		2,134		2,234		(100	)		(4	%)		-		20			(80	)		(4	%)		(4	%)
Applied Water		1,483		1,556		(73	)		(5	%)		-		-			(73	)		(5	%)		(5	%)
Measurement & Control Solutions		1,416		1,549		(133	)		(9	%)		4		(2	)		(131	)		(8	%)		(9	%)
Quarter Ended December 31
Xylem Inc.		1,294		1,286		8			1	%		4		(31	)		(19	)		(1	%)		(2	%)
Water Infrastructure		464		530		(66	)		(12	%)		-		(18	)		(84	)		(16	%)		(16	%)
Applied Water		410		387		23			6	%		-		(7	)		16			4	%		4	%
Measurement & Control Solutions		420		369		51			14	%		4		(6	)		49			13	%		12	%
Quarter Ended September 30
Xylem Inc.		1,246		1,346		(100	)		(7	%)		-		(10	)		(110	)		(8	%)		(8	%)
Water Infrastructure		558		586		(28	)		(5	%)		-		(4	)		(32	)		(5	%)		(5	%)
Applied Water		375		376		(1	)		(0	%)		-		(3	)		(4	)		(1	%)		(1	%)
Measurement & Control Solutions		313		384		(71	)		(18	%)		-		(3	)		(74	)		(19	%)		(19	%)
Quarter Ended June 30
Xylem Inc.		1,232		1,392		(160	)		(11	%)		-		36			(124	)		(9	%)		(9	%)
Water Infrastructure		598		586		12			2	%		-		27			39			7	%		7	%
Applied Water		326		399		(73	)		(18	%)		-		6			(67	)		(17	%)		(17	%)
Measurement & Control Solutions		308		407		(99	)		(24	%)		-		3			(96	)		(24	%)		(24	%)
Quarter Ended March 31
Xylem Inc.		1,261		1,315		(54	)		(4	%)		-		23			(31	)		(2	%)		(2	%)
Water Infrastructure		514		532		(18	)		(3	%)		-		15			(3	)		(1	%)		(1	%)
Applied Water		372		394		(22	)		(6	%)		-		4			(18	)		(5	%)		(5	%)
Measurement & Control Solutions		375		389		(14	)		(4	%)		-		4			(10	)		(3	%)		(3	%)

Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Revenue
($ Millions)
		(As Reported - GAAP)										(As Adjusted - Organic)											Constant Currency
				(A)		(B)						(C)		(D)			(E) = B+C+D			(F) = E/A			(G) = (E - C) / A
						Change			% Change			Acquisitions /					Change			% Change
		Revenue		Revenue		2020 v. 2019			2020 v. 2019			Divestitures		FX Impact			Adj. 2020 v. 2019			Adj. 2020 v. 2019
		2020		2019
Year Ended December 31
Xylem Inc.		4,876		5,249		(373	)		(7	%)		2		7			(364	)		(7	%)		(7	%)
Water Infrastructure		2,079		2,177		(98	)		(5	%)		-		9			(89	)		(4	%)		(4	%)
Applied Water		1,434		1,541		(107	)		(7	%)		-		(1	)		(108	)		(7	%)		(7	%)
Measurement & Control Solutions		1,363		1,531		(168	)		(11	%)		2		(1	)		(167	)		(11	%)		(11	%)
Quarter Ended December 31
Xylem Inc.		1,373		1,371		2			0	%		2		(28	)		(24	)		(2	%)		(2	%)
Water Infrastructure		616		603		13			2	%		-		(15	)		(2	)		(0	%)		(0	%)
Applied Water		395		392		3			1	%		-		(7	)		(4	)		(1	%)		(1	%)
Measurement & Control Solutions		362		376		(14	)		(4	%)		2		(6	)		(18	)		(5	%)		(5	%)
Quarter Ended September 30
Xylem Inc.		1,220		1,296		(76	)		(6	%)		-		(9	)		(85	)		(7	%)		(7	%)
Water Infrastructure		524		531		(7	)		(1	%)		-		(4	)		(11	)		(2	%)		(2	%)
Applied Water		364		376		(12	)		(3	%)		-		(3	)		(15	)		(4	%)		(4	%)
Measurement & Control Solutions		332		389		(57	)		(15	%)		-		(2	)		(59	)		(15	%)		(15	%)
Quarter Ended June 30
Xylem Inc.		1,160		1,345		(185	)		(14	%)		-		25			(160	)		(12	%)		(12	%)
Water Infrastructure		501		561		(60	)		(11	%)		-		16			(44	)		(8	%)		(8	%)
Applied Water		337		394		(57	)		(14	%)		-		6			(51	)		(13	%)		(13	%)
Measurement & Control Solutions		322		390		(68	)		(17	%)		-		3			(65	)		(17	%)		(17	%)
Quarter Ended March 31
Xylem Inc.		1,123		1,237		(114	)		(9	%)		-		19			(95	)		(8	%)		(8	%)
Water Infrastructure		438		482		(44	)		(9	%)		-		12			(32	)		(7	%)		(7	%)
Applied Water		338		379		(41	)		(11	%)		-		3			(38	)		(10	%)		(10	%)
Measurement & Control Solutions		347		376		(29	)		(8	%)		-		4			(25	)		(7	%)		(7	%)

Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income
($ Millions)
			Q1						Q2						Q3						Q4						YTD
			2020			2019			2020			2019			2020			2019			2020			2019			2020			2019
	Total Revenue
	• Total Xylem		1,123			1,237			1,160			1,345			1,220			1,296			1,373			1,371			4,876			5,249
	• Water Infrastructure		438			482			501			561			524			531			616			603			2,079			2,177
	• Applied Water		338			379			337			394			364			376			395			392			1,434			1,541
	• Measurement & Control Solutions		347			376			322			390			332			389			362			376			1,363			1,531
	Operating Income
	• Total Xylem		61			109			54			171			73			11			179			195			367			486
	• Water Infrastructure		39			51			73			98			89			97			117			119			318			365
	• Applied Water		47			56			41			62			56			61			61			62			205			241
	• Measurement & Control Solutions		(12	)		16			(46	)		26			(62	)		(136	)		14			27			(106	)		(67	)
	• Total Segments		74			123			68			186			83			22			192			208			417			539
	Operating Margin
	• Total Xylem		5.4	%		8.8	%		4.7	%		12.7	%		6.0	%		0.8	%		13.0	%		14.2	%		7.5	%		9.3	%
	• Water Infrastructure		8.9	%		10.6	%		14.6	%		17.5	%		17.0	%		18.3	%		19.0	%		19.7	%		15.3	%		16.8	%
	• Applied Water		13.9	%		14.8	%		12.2	%		15.7	%		15.4	%		16.2	%		15.4	%		15.8	%		14.3	%		15.6	%
	• Measurement & Control Solutions		(3.5	%)		4.3	%		(14.3	%)		6.7	%		(18.7	%)		(35.0	%)		3.9	%		7.2	%		(7.8	%)		(4.4	%)
	• Total Segments		6.6	%		9.9	%		5.9	%		13.8	%		6.8	%		1.7	%		14.0	%		15.2	%		8.6	%		10.3	%
	Special Charges
	• Total Xylem		-			4			11			-			70			155			-			-			81			159
	• Water Infrastructure		-			-			-			-			-			-			-			-			-			-
	• Applied Water		-			-			-			-			-			-			-			-			-			-
	• Measurement & Control Solutions		-			4			10			-			69			155			-			-			79			159
	• Total Segments		-			4			10			-			69			155			-			-			79			159
	Restructuring & Realignment Costs
	• Total Xylem		9			20			43			21			15			30			10			11			77			82
	• Water Infrastructure		5			9			8			9			8			7			7			6			28			31
	• Applied Water		2			3			4			4			2			3			1			3			9			13
	• Measurement & Control Solutions		2			8			31			8			5			20			2			2			40			38
	• Total Segments		9			20			43			21			15			30			10			11			77			82
	Adjusted Operating Income
	• Total Xylem		70			133			108			192			158			196			189			206			525			727
	• Water Infrastructure		44			60			81			107			97			104			124			125			346			396
	• Applied Water		49			59			45			66			58			64			62			65			214			254
	• Measurement & Control Solutions		(10	)		28			(5	)		34			12			39			16			29			13			130
	• Total Segments		83			147			121			207			167			207			202			219			573			780
	Adjusted Operating Margin
	• Total Xylem		6.2	%		10.8	%		9.3	%		14.3	%		13.0	%		15.1	%		13.8	%		15.0	%		10.8	%		13.9	%
	• Water Infrastructure		10.0	%		12.4	%		16.2	%		19.1	%		18.5	%		19.6	%		20.1	%		20.7	%		16.6	%		18.2	%
	• Applied Water		14.5	%		15.6	%		13.4	%		16.8	%		15.9	%		17.0	%		15.7	%		16.6	%		14.9	%		16.5	%
	• Measurement & Control Solutions		(2.9	%)		7.4	%		(1.6	%)		8.7	%		3.6	%		10.0	%		4.4	%		7.7	%		1.0	%		8.5	%
	• Total Segments		7.4	%		11.9	%		10.4	%		15.4	%		13.7	%		16.0	%		14.7	%		16.0	%		11.8	%		14.9	%

Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
			Q4 2020												Q4 2019
			As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
	Total Revenue			1,373				-				1,373				1,371				-				1,371
	Operating Income			179				10		a		189				195				11		a		206
	Operating Margin			13.0	%							13.8	%			14.2	%							15.0	%
	Interest Expense			(21	)			-				(21	)			(15	)			-				(15	)
	Other Non-Operating Income (Expense)			-				1		b		1				(2	)			8		b		6
	Gain/(Loss) From Sale of Business			-				-				-				-				-				-
	Income before Taxes			158				11				169				178				19				197
	Provision for Income Taxes			(10	)			(14	)	c		(24	)			(60	)			24		c		(36	)
	Net Income Attributable to Xylem			148				(3	)			145				118				43				161
	Diluted Shares			181.5								181.5				181.2								181.2
	Diluted EPS		$	0.82			$	(0.01	)		$	0.81			$	0.65			$	0.24			$	0.89
	Year-over-year currency translation impact on current year diluted EPS		$	0.04			$	0.00			$	0.04
	Diluted EPS at Constant Currency		$	0.78			$	(0.01	)		$	0.77
			Q4 YTD 2020												Q4 YTD 2019
			As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
	Total Revenue			4,876				-				4,876				5,249				-				5,249
	Operating Income			367				158		a		525				486				241		a		727
	Operating Margin			7.5	%							10.8	%			9.3	%							13.9	%
	Interest Expense			(77	)			-				(77	)			(67	)			-				(67	)
	Other Non-Operating Income (Expense)			(5	)			5		b		-				(4	)			19		b		15
	Gain/(Loss) From Sale of Businesses			-				-				-				1				(1	)			-
	Income before Taxes			285				163				448				416				259				675
	Provision for Income Taxes			(31	)			(43	)	c		(74	)			(15	)			(113	)	c		(128	)
	Net Income Attributable to Xylem			254				120				374				401				146				547
	Diluted Shares			181.1								181.1				181.2								181.2
	Diluted EPS		$	1.40			$	0.66			$	2.06			$	2.21			$	0.81			$	3.02
	Year-over-year currency translation impact on current year diluted EPS		$	0.02			$	0.01			$	0.03
	Diluted EPS at Constant Currency		$	1.38			$	0.65			$	2.03

a		Quarter-to-date: Restructuring & realignment costs of $10 million in 2020 and $11 million in 2019.
		Year-to-date: Restructuring & realignment costs of $77 million and $82 million in 2020 and 2019, respectively; special charges of $81 million ($79 million of intangible asset and goodwill impairment charges and $2 million of other charges) and $159 million of special charges in 2019 ($158 million of goodwill and asset impairment charges and $1 million of acquisition related costs).
b		Special non-operating charges consist of pension costs related to the UK pension plan that has been transferred to an annuity in 2020 as part of the planned buyout activities ($1 million and $5 million in 2020, and $6 million and $17 million in 2019, quarter-to-date and year-to-date, respectively). Also, $2 million of other non-operating charges in 2019, both quarter-to-date and year-to-date.
c		Quarter-to-date: Net tax impact on restructuring & realignment costs of $2 million in both 2020 and 2019, respectively; $1 million of tax on special charges in 2020 and $4 million in 2019; and $11 million and $30 million of positive impact from tax related special Expense adjustments in 2020 and 2019, respectively.
		Year-to-date:  Net tax impact on restructuring & realignment costs of $17 million and $19 million in 2020 and 2019, respectively; $10 million and $6 million of tax impact on special charges in 2020 and 2019; and $16 million and $88 million of negative impact from tax related special benefit adjustments in 2020 and 2019, respectively.

Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)
		Q1								Q2								Q3								Q4								Year-to-Date
		2020				2019				2020				2019				2020				2019				2020				2019				2020				2019
Net Cash - Operating Activities		$	(2	)		$	83			$	181			$	123			$	275			$	245			$	370			$	388			$	824			$	839
Capital Expenditures - PP&E			(32	)			(53	)			(24	)			(40	)			(24	)			(28	)			(29	)			(29	)			(109	)			(150	)
Capital Expenditures - Software			(19	)			(16	)			(20	)			(20	)			(17	)			(18	)			(18	)			(22	)			(74	)			(76	)
Capital Expenditures			(51	)			(69	)			(44	)			(60	)			(41	)			(46	)			(47	)			(51	)			(183	)			(226	)
Free Cash Flow		$	(53	)		$	14			$	137			$	63			$	234			$	199			$	323			$	337			$	641			$	613
Net Income			38				79				31				139				37				65				148				118				254			$	401
Gain/(Loss) from sale of businesses			-				1				-				-				-				-				-				-				-				1
Restructuring & Realignment Charges - non-cash impairment			-				-				(17	)			-				(3	)			-				(1	)			-				(21	)			-
Special Charges - non-cash impairment			-				(3	)			(10	)			-				(69	)			(155	)			-				-				(79	)			(158	)
Significant deferred tax benefit/(charge)			-				-				-				-				-				97				-				(33	)			-				64
Net Income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items		$	38			$	81			$	58			$	139			$	109			$	123			$	149			$	151			$	354			$	494
Operating Cash Flow Conversion			(5	%)			105	%			584	%			88	%			743	%			377	%			250	%			329	%			324	%			209	%
Free Cash Flow Conversion			(139	%)			17	%			236	%			45	%			215	%			162	%			217	%			223	%			181	%			124	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter
($ Millions)
	2020
		Q1			Q2			Q3			Q4			Total
Net Income		38			31			37			148			254
Income Tax Expense		4			4			13			10			31
Interest Expense (Income), net		14			16			20			20			70
Depreciation		29			29			30			29			117
Amortization		35			33			33			33			134
EBITDA		120			113			133			240			606
Share-based Compensation		8			8			3			7			26
Restructuring & Realignment		9			43			15			10			77
Special Charges		1			13			71			1			86
Adjusted EBITDA		138			177			222			258			795
Revenue		1,123			1,160			1,220			1,373			4,876
Adjusted EBITDA Margin		12.3	%		15.3	%		18.2	%		18.8	%		16.3	%
	2019
		Q1			Q2			Q3			Q4			Total
Net Income		79			139			65			118			401
Income Tax Expense (Benefit)		15			17			(77	)		60			15
Interest Expense (Income), net		17			18			14			13			62
Depreciation		29			29			30			29			117
Amortization		35			34			35			36			140
EBITDA		175			237			67			256			735
Share-based Compensation		9			7			7			6			29
Restructuring & Realignment		20			21			30			11			82
Loss/(Gain) from sale of business		(1	)		-			-			-			(1	)
Special Charges		4			-			166			8			178
Adjusted EBITDA		207			265			270			281			1,023
Revenue		1,237			1,345			1,296			1,371			5,249
Adjusted EBITDA Margin		16.7	%		19.7	%		20.8	%		20.5	%		19.5	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter
Water Infrastructure
($ Millions)
	2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		37			71			85			116			309
Interest Expense (Income), net		-			(1	)		-			-			(1	)
Depreciation		11			11			11			11			44
Amortization		4			5			2			2			13
EBITDA		52			86			98			129			365
Share-based Compensation		-			1			-			1			2
Restructuring & Realignment		5			8			8			7			28
Adjusted EBITDA		57			95			106			137			395
Revenue		438			501			524			616			2,079
Adjusted EBITDA Margin		13.0	%		19.0	%		20.2	%		22.2	%		19.0	%
	2019
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		50			96			97			117			360
Interest Expense (Income), net		(1	)		1			(1	)		-			(1	)
Depreciation		11			12			11			10			44
Amortization		4			4			4			5			17
EBITDA		64			113			111			132			420
Share-based Compensation		1			-			-			1			2
Restructuring & Realignment		9			9			7			5			30
Adjusted EBITDA		74			122			118			138			452
Revenue		482			561			531			603			2,177
Adjusted EBITDA Margin		15.4	%		21.7	%		22.2	%		22.9	%		20.8	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter
Applied Water
($ Millions)
		2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		47			42			55			60			204
Interest Expense (Income), net		-			-			-			-			-
Depreciation		5			5			6			5			21
Amortization		1			-			1			1			3
EBITDA		53			47			62			66			228
Share-based Compensation		1			1			-			1			3
Restructuring & Realignment		2			4			2			1			9
Adjusted EBITDA		56			52			64			68			240
Revenue		338			337			364			395			1,434
Adjusted EBITDA Margin		16.6	%		15.4	%		17.6	%		17.2	%		16.7	%
		2019
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		57			62			62			63			244
Interest Expense (Income), net		-			-			-			(1	)		(1	)
Depreciation		5			5			5			6			21
Amortization		1			1			-			1			3
EBITDA		63			68			67			69			267
Share-based Compensation		1			-			1			1			3
Restructuring & Realignment		3			4			3			4			14
Adjusted EBITDA		67			72			71			74			284
Revenue		379			394			376			392			1,541
Adjusted EBITDA Margin		17.7	%		18.3	%		18.9	%		18.9	%		18.4	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter
Measurement & Control Solutions
($ Millions)
		2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		(13	)		(46	)		(62	)		14			(107	)
Interest Expense (Income), net		-			-			-			-			-
Depreciation		9			8			9			9			35
Amortization		27			26			27			27			107
EBITDA		23			(12	)		(26	)		50			35
Share-based Compensation		2			1			1			1			5
Restructuring & Realignment		2			31			5			2			40
Special Charges		-			10			69			-			79
Adjusted EBITDA		27			30			49			53			159
Revenue		347			322			332			362			1,363
Adjusted EBITDA Margin		7.8	%		9.3	%		14.8	%		14.6	%		11.7	%
		2019
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		16			26			(137	)		28			(67	)
Interest Expense (Income), net		-			-			-			-			-
Depreciation		9			9			9			10			37
Amortization		27			26			27			27			107
EBITDA		52			61			(101	)		65			77
Share-based Compensation		1			2			1			1			5
Restructuring & Realignment		8			8			20			2			38
Loss/(Gain) from sale of business		(1	)		-			-			-			(1	)
Special Charges		4			-			155			-			159
Adjusted EBITDA		64			71			75			68			278
Revenue		376			390			389			376			1,531
Adjusted EBITDA Margin		17.0	%		18.2	%		19.3	%		18.1	%		18.2	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210204005572/en/

Media
Houston Spencer +1 (914) 323-5723
houston.spencer@xyleminc.com

Investors
Matt Latino +1 (914) 323-5821
matthew.latino@xyleminc.com

Source: Xylem Inc.