Xylem Reports Fourth Quarter and Full-Year 2021 Earnings

• Full-year organic growth, adjusted EBITDA margin expansion, adjusted earnings per share in line with November guidance
• Full-year revenue of $5.2 billion, up 7% on a reported basis, up 4% organically
• Full-year reported earnings per share of $2.35, up 68%; adjusted earnings per share of $2.49, up 21%
• Strong demand drives continuing commercial momentum in all business segments; fourth quarter and full-year reported and organic orders growth in excess of 20%
• Provides 2022 organic revenue growth guidance range of 3% to 5% and adjusted earnings per share range of $2.35 to $2.70, reflecting ongoing chip constraints across the technology sector

RYE BROOK, N.Y.--(BUSINESS WIRE)--Feb. 3, 2022-- 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 $1.32 billion, and full-year 2021 revenue of $5.20 billion, in line with previous guidance.

Fourth quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin decreased 260 basis points to 16.2 percent. Inflation and strategic investments drove the margin decline, exceeding the benefits of price realization and productivity savings. Xylem generated net income of $113 million, or $0.62 per share, and adjusted net income of $115 million, or $0.63 per share, which excludes the impact of restructuring, realignment and special charges.

For the full year, Xylem delivered adjusted EBITDA margin of 17.1 percent, up 80 basis points year-over-year. Productivity and volume drove the increase, exceeding inflation impacts. Full-year reported net income was $427 million, or $2.35 per share, and adjusted net income, which excludes the impact of restructuring, realignment and special charges, was $452 million, or $2.49 per share. The Company generated $538 million of operating cash flow, representing a 126 percent conversion, and $330 million of free cash flow, representing a 77 percent conversion.

“The team closed out 2021 with a strong performance, delivering full-year margin expansion alongside solid growth in revenue and earnings in the face of accelerating supply chain headwinds through the quarter,” said Patrick Decker, president and CEO of Xylem. “To mitigate the effects of inflation, the team also drove solid productivity improvements and price realization above our expectations. Market demand was clearly robust, as evidenced by continued strong orders and backlog growth in both the quarter and the year.”

“We expect the first half of 2022 to continue to be supply constrained due to ongoing chip shortages,” Decker continued. “Order-to-revenue conversion is set to pick up pace progressively, as we expect those constraints to begin easing in the latter part of the year. Overall, we expect full-year growth in the mid-single digits, with significant margin expansion in the second half, keeping us on track to achieve our 2025 growth and strategic milestones.”

Xylem announced that its Board of Directors declared a dividend in the amount of $0.30 per share, an increase of 7 percent. The dividend is payable on March 17, 2022, to shareholders of record as of February 17, 2022.

Full-year 2022 Outlook

Xylem forecasts full-year 2022 revenue in the range of $5.25 to $5.35 billion, up 1 to 3 percent on a reported basis and up 3 to 5 percent on an organic basis.

Full-year 2022 adjusted EBITDA margin is expected to be in the range of 16 to 17 percent. This results in adjusted earnings per share of $2.35 to $2.70, which represents a decline of 6 percent to an increase of 8 percent from Xylem’s 2021 adjusted results. Further 2022 planning assumptions are included in Xylem’s fourth quarter 2021 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 2021 revenue was $622 million, a 2 percent increase compared with fourth quarter 2020. This result was driven by healthy growth in the industrial end market, particularly in the Emerging Markets, partially offset by delayed revenue conversion in the U.S. utilities market primarily due to extended lead-times for ocean transit.

• Fourth quarter adjusted EBITDA margin was 21.7 percent, down 50 basis points from the prior year. Reported operating income for the segment was $122 million. Adjusted operating income for the segment, which excludes $2 million of restructuring and realignment, was $124 million, flat versus the comparable period last year. Reported operating margin for the segment was 19.6 percent, up 60 basis points versus the prior year, and adjusted operating margin was 19.9 percent, down 20 basis points versus prior year. Productivity benefits and price realization were more than offset by inflation and investments.

Applied Water

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

• Fourth quarter 2021 Applied Water revenue was $406 million, a 3 percent increase organically year-over-year. Industrial end-market strength in Emerging Markets, US and Western Europe was partially offset by weakness in the residential market in China particularly in light of strong prior-year performance.

• Fourth quarter adjusted EBITDA margin was 13.8 percent, down 340 basis points from the prior year. Reported operating income for the segment was $50 million and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was $52 million, a 16 percent decrease versus the comparable period last year. The segment reported operating margin was 12.3 percent, down 310 basis points versus the prior year period. Adjusted operating margin declined 290 basis points to 12.8 percent. Productivity benefits and price realization were more than offset by inflation.

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 2021 Measurement & Control Solutions revenue was $295 million, down 17 percent organically versus the prior year. The decline is in-line with our expectations and a result of the ongoing chip supply shortage and the outsized impact to our North American smart metering business.

• Fourth quarter adjusted EBITDA margin was 7.1 percent, down 750 basis points from the prior year. Reported operating income for the segment was -$17 million, and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was -$15 million, a 194 percent decrease versus the comparable period last year. The Measurement & Control Solutions segment reported operating margin was -5.8 percent, down 970 basis points versus the prior year period. Adjusted operating margin of -5.1 percent also decreased 950 basis points over the prior year period. Volume declines from component shortages as well as inflation more than offset productivity savings and modest price realization.

Supplemental information on Xylem’s fourth quarter 2021 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 17,000 diverse employees delivered revenue of $5.2 billion in 2021. 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," “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 the ongoing 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 ongoing COVID-19 pandemic’s magnitude, duration and impacts on our business, operations, growth, and financial condition; actual or potential other epidemics, pandemics or global health crises; availability, shortage or delays in receiving products, parts, electronic components and raw materials from our supply chain; manufacturing and operating cost increases due to inflation, prevailing price changes, tariffs and other factors; demand for our products, disruption, competition, 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 increasing 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 charges 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 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, competition, domestic content requirements, 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, 2020 and in subsequent filings we have made or may make with the Securities and Exchange Commission (“SEC”).

Forward-looking and other statements in this press release regarding our environmental and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or 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 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,	2021			2020				2019
Revenue	$	5,195		$	4,876			$	5,249
Cost of revenue		3,220			3,046				3,203
Gross profit		1,975			1,830				2,046
Selling, general and administrative expenses		1,179			1,143				1,158
Research and development expenses		204			187				191
Restructuring and asset impairment charges		7			75				63
Goodwill impairment charge		—			58				148
Operating income		585			367				486
Interest expense		76			77				67
Other non-operating (expense) income, net		—			(5	)			(4	)
Gain on sale of businesses		2			—				1
Income before taxes		511			285				416
Income tax expense		84			31				15
Net income		427			254				401
Earnings per share:
Basic	$	2.37		$	1.41			$	2.23
Diluted	$	2.35		$	1.40			$	2.21
Weighted average number of shares:
Basic		180.2			180.1				180.0
Diluted		181.5			181.1				181.2

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Millions, except per share amounts)
December 31,	2021				2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,349			$	1,875
Receivables, less allowances for discounts, returns and credit losses of $44 and $46 in 2021 and 2020, respectively		953				923
Inventories		700				558
Prepaid and other current assets		158				167
Total current assets		3,160				3,523
Property, plant and equipment, net		644				657
Goodwill		2,792				2,854
Other intangible assets, net		1,016				1,093
Other non-current assets		664				623
Total assets	$	8,276			$	8,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	639			$	569
Accrued and other current liabilities		752				787
Short-term borrowings and current maturities of long-term debt		—				600
Total current liabilities		1,391				1,956
Long-term debt, net		2,440				2,484
Accrued post-retirement benefits		438				519
Deferred income tax liabilities		287				242
Other non-current accrued liabilities		494				573
Total liabilities		5,050				5,774
Stockholders’ equity:
Common stock — par value $0.01 per share:
Authorized 750.0 shares, issued 195.6 and 194.9 shares in 2021 and 2020, respectively		2				2
Capital in excess of par value		2,089				2,037
Retained earnings		2,154				1,930
Treasury stock – at cost 15.2 shares and 14.5 shares in 2021 and 2020, respectively		(656	)			(588	)
Accumulated other comprehensive loss		(371	)			(413	)
Total stockholders’ equity		3,218				2,968
Non-controlling interest		8				8
Total equity		3,226				2,976
Total liabilities and stockholders’ equity	$	8,276			$	8,750

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions) (Unaudited)
Year Ended December 31,	2021				2020				2019
Operating Activities
Net income	$	427			$	254			$	401
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		118				117				117
Amortization		127				134				140
Deferred income taxes		10				(31	)			(77	)
Share-based compensation		33				26				29
Restructuring and asset impairment charges		7				75				63
Goodwill impairment charge		—				58				148
Gain from sale of businesses		(2	)			—				(1	)
Other, net		8				46				9
Payments for restructuring		(25	)			(36	)			(30	)
Contributions to post-retirement benefit plans		(29	)			(27	)			(19	)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables		(70	)			109				(23	)
Changes in inventories		(167	)			(5	)			47
Changes in accounts payable		81				(39	)			29
Changes in accrued liabilities		7				101				15
Changes in accrued taxes		(9	)			20				(13	)
Net changes in other assets and liabilities		22				22				4
Net Cash — Operating activities		538				824				839
Investing Activities
Capital expenditures		(208	)			(183	)			(226	)
Acquisitions of businesses and assets, net of cash acquired		—				—				(18	)
Proceeds from sale of businesses		10				—				—
Cash received from investments		3				200				11
Cash paid for investments		—				(200	)			(7	)
Cash received from cross-currency swaps		14				12				9
Other, net		(2	)			2				—
Net Cash — Investing activities		(183	)			(169	)			(231	)
Financing Activities
Short-term debt issued, net		—				359				281
Short-term debt repaid, net		—				(640	)			(254	)
Long-term debt issued, net		—				985				—
Long-term debt repaid, net		(600	)			—				—
Repurchase of common stock		(68	)			(61	)			(40	)
Proceeds from exercise of employee stock options		19				20				13
Dividends paid		(203	)			(188	)			(174	)
Other, net		(3	)			(2	)			(3	)
Net Cash — Financing activities		(855	)			473				(177	)
Effect of exchange rate changes on cash		(26	)			23				(3	)
Net change in cash and cash equivalents		(526	)			1,151				428
Cash and cash equivalents at beginning of year		1,875				724				296
Cash and cash equivalents at end of year	$	1,349			$	1,875			$	724
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	99			$	77			$	77
Income taxes (net of refunds received)	$	83			$	41			$	107

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 Flows, less capital expenditures, and "Free Cash Flow Conversion" defined as Free Cash Flows 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 costs related to the UK pension plan buyout.

“Tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments.

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		2021 v. 2020		2021 v. 2020					FX Impact			Adj. 2021 v. 2020		Adj. 2021 v. 2020
	2021		2020
Year Ended December 31
Xylem Inc.	6,300		5,033		1,267		25	%		12		(140	)		1,139		23	%		22	%
Water Infrastructure	2,471		2,134		337		16	%		-		(76	)		261		12	%		12	%
Applied Water	1,860		1,483		377		25	%		-		(39	)		338		23	%		23	%
Measurement & Control Solutions	1,969		1,416		553		39	%		12		(25	)		540		38	%		37	%
Quarter Ended December 31
Xylem Inc.	1,584		1,294		290		22	%		2		7			299		23	%		23	%
Water Infrastructure	598		464		134		29	%		-		4			138		30	%		30	%
Applied Water	451		410		41		10	%		-		1			42		10	%		10	%
Measurement & Control Solutions	535		420		115		27	%		2		2			119		28	%		28	%
Quarter Ended September 30
Xylem Inc.	1,518		1,246		272		22	%		2		(24	)		250		20	%		20	%
Water Infrastructure	623		558		65		12	%		-		(12	)		53		9	%		9	%
Applied Water	446		375		71		19	%		-		(7	)		64		17	%		17	%
Measurement & Control Solutions	449		313		136		43	%		2		(5	)		133		42	%		42	%
Quarter Ended June 30
Xylem Inc.	1,660		1,232		428		35	%		1		(74	)		355		29	%		29	%
Water Infrastructure	639		598		41		7	%		-		(41	)		-		0	%		0	%
Applied Water	486		326		160		49	%		-		(20	)		140		43	%		43	%
Measurement & Control Solutions	535		308		227		74	%		1		(13	)		215		70	%		69	%
Quarter Ended March 31
Xylem Inc.	1,538		1,261		277		22	%		7		(49	)		235		19	%		18	%
Water Infrastructure	611		514		97		19	%		-		(27	)		70		14	%		14	%
Applied Water	477		372		105		28	%		-		(13	)		92		25	%		25	%
Measurement & Control Solutions	450		375		75		20	%		7		(9	)		73		19	%		18	%

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 / Divestitures					Change			% Change
	Revenue		Revenue		2021 v. 2020			2021 v. 2020					FX Impact			Adj. 2021 v. 2020			Adj. 2021 v. 2020
	2021		2020
Year Ended December 31
Xylem Inc.	5,195		4,876		319			7	%		13		(122	)		210			4	%		4	%
Water Infrastructure	2,247		2,079		168			8	%		-		(65	)		103			5	%		5	%
Applied Water	1,613		1,434		179			12	%		-		(34	)		145			10	%		10	%
Measurement & Control Solutions	1,335		1,363		(28	)		(2	%)		13		(23	)		(38	)		(3	%)		(4	%)
Quarter Ended December 31
Xylem Inc.	1,323		1,373		(50	)		(4	%)		6		8			(36	)		(3	%)		(3	%)
Water Infrastructure	622		616		6			1	%		-		5			11			2	%		2	%
Applied Water	406		395		11			3	%		-		2			13			3	%		3	%
Measurement & Control Solutions	295		362		(67	)		(19	%)		6		1			(60	)		(17	%)		(18	%)
Quarter Ended September 30
Xylem Inc.	1,265		1,220		45			4	%		2		(20	)		27			2	%		2	%
Water Infrastructure	547		524		23			4	%		-		(10	)		13			2	%		2	%
Applied Water	400		364		36			10	%		-		(7	)		29			8	%		8	%
Measurement & Control Solutions	318		332		(14	)		(4	%)		2		(3	)		(15	)		(5	%)		(5	%)
Quarter Ended June 30
Xylem Inc.	1,351		1,160		191			16	%		3		(66	)		128			11	%		11	%
Water Infrastructure	569		501		68			14	%		-		(36	)		32			6	%		6	%
Applied Water	414		337		77			23	%		-		(18	)		59			18	%		18	%
Measurement & Control Solutions	368		322		46			14	%		3		(12	)		37			11	%		11	%
Quarter Ended March 31
Xylem Inc.	1,256		1,123		133			12	%		2		(44	)		91			8	%		8	%
Water Infrastructure	509		438		71			16	%		-		(24	)		47			11	%		11	%
Applied Water	393		338		55			16	%		-		(11	)		44			13	%		13	%
Measurement & Control Solutions	354		347		7			2	%		2		(9	)		-			0	%		(1	%)

Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income ($ Millions)
		Q1					Q2					Q3					Q4					YTD
		2021		2020			2021		2020			2021		2020			2021		2020			2021		2020
	Total Revenue
	• Total Xylem	1,256		1,123			1,351		1,160			1,265		1,220			1,323		1,373			5,195		4,876
	• Water Infrastructure	509		438			569		501			547		524			622		616			2,247		2,079
	• Applied Water	393		338			414		337			400		364			406		395			1,613		1,434
	• Measurement & Control Solutions	354		347			368		322			318		332			295		362			1,335		1,363
	Operating Income (Loss)
	• Total Xylem	133		61			160		54			152		73			140		179			585		367
	• Water Infrastructure	71		39			93		73			101		89			122		117			387		318
	• Applied Water	66		47			64		41			60		56			50		61			240		205
	• Measurement & Control Solutions	9		(12	)		13		(46	)		7		(62	)		(17	)	14			12		(106	)
	• Total Segments	146		74			170		68			168		83			155		192			639		417
	Operating Margin
	• Total Xylem	10.6	%	5.4	%		11.8	%	4.7	%		12.0	%	6.0	%		10.6	%	13.0	%		11.3	%	7.5	%
	• Water Infrastructure	13.9	%	8.9	%		16.3	%	14.6	%		18.5	%	17.0	%		19.6	%	19.0	%		17.2	%	15.3	%
	• Applied Water	16.8	%	13.9	%		15.5	%	12.2	%		15.0	%	15.4	%		12.3	%	15.4	%		14.9	%	14.3	%
	• Measurement & Control Solutions	2.5	%	(3.5	%)		3.5	%	(14.3	%)		2.2	%	(18.7	%)		(5.8	%)	3.9	%		0.9	%	(7.8	%)
	• Total Segments	11.6	%	6.6	%		12.6	%	5.9	%		13.3	%	6.8	%		11.7	%	14.0	%		12.3	%	8.6	%
	Special Charges
	• Total Xylem	2		-			-		11			1		70			1		-			4		81
	• Water Infrastructure	-		-			-		-			-		-			-		-			-		-
	• Applied Water	1		-			-		-			-		-			-		-			1		-
	• Measurement & Control Solutions	-		-			-		10			-		69			-		-			-		79
	• Total Segments	1		-			-		10			-		69			-		-			1		79
	Restructuring & Realignment Costs
	• Total Xylem	8		9			6		43			2		15			6		10			22		77
	• Water Infrastructure	5		5			4		8			1		8			2		7			12		28
	• Applied Water	1		2			2		4			2		2			2		1			7		9
	• Measurement & Control Solutions	2		2			-		31			(1	)	5			2		2			3		40
	• Total Segments	8		9			6		43			2		15			6		10			22		77
	Adjusted Operating Income (Loss)
	• Total Xylem	143		70			166		108			155		158			147		189			611		525
	• Water Infrastructure	76		44			97		81			102		97			124		124			399		346
	• Applied Water	68		49			66		45			62		58			52		62			248		214
	• Measurement & Control Solutions	11		(10	)		13		(5	)		6		12			(15	)	16			15		13
	• Total Segments	155		83			176		121			170		167			161		202			662		573
	Adjusted Operating Margin
	• Total Xylem	11.4	%	6.2	%		12.3	%	9.3	%		12.3	%	13.0	%		11.1	%	13.8	%		11.8	%	10.8	%
	• Water Infrastructure	14.9	%	10.0	%		17.0	%	16.2	%		18.6	%	18.5	%		19.9	%	20.1	%		17.8	%	16.6	%
	• Applied Water	17.3	%	14.5	%		15.9	%	13.4	%		15.5	%	15.9	%		12.8	%	15.7	%		15.4	%	14.9	%
	• Measurement & Control Solutions	3.1	%	(2.9	%)		3.5	%	(1.6	%)		1.9	%	3.6	%		(5.1	%)	4.4	%		1.1	%	1.0	%
	• Total Segments	12.3	%	7.4	%		13.0	%	10.4	%		13.4	%	13.7	%		12.2	%	14.7	%		12.7	%	11.8	%

Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
		Q4 2021												Q4 2020
		As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
	Total Revenue		1,323				-				1,323				1,373				-				1,373
	Operating Income		140				7		a		147				179				10		a		189
	Operating Margin		10.6	%							11.1	%			13.0	%							13.8	%
	Interest Expense		(13	)			-				(13	)			(21	)			-				(21	)
	Other Non-Operating Income (Expense)		(1	)			3		b		2				-				1		b		1
	Gain/(Loss) From Sale of Business		-				-				-				-				-				-
	Income before Taxes		126				10				136				158				11				169
	Provision for Income Taxes		(13	)			(8	)	c		(21	)			(10	)			(14	)	c		(24	)
	Net Income Attributable to Xylem		113				2				115				148				(3	)			145
	Diluted Shares		181.6								181.6				181.5								181.5
	Diluted EPS	$	0.62			$	0.01			$	0.63			$	0.82			$	(0.01	)		$	0.81
	Year-over-year currency translation impact on current year diluted EPS	$	(0.01	)		$	-			$	(0.01	)
	Diluted EPS at Constant Currency	$	0.63			$	0.01			$	0.64
		Q4 YTD 2021												Q4 YTD 2020
		As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
	Total Revenue		5,195				-				5,195				4,876				-				4,876
	Operating Income		585				26		a		611				367				158		a		525
	Operating Margin		11.3	%							11.8	%			7.5	%							10.8	%
	Interest Expense		(76	)			-				(76	)			(77	)			-				(77	)
	Other Non-Operating Income (Expense)		-				8		b		8				(5	)			5		b		-
	Gain/(Loss) From Sale of Business		2				(2	)			-				-				-				-
	Income before Taxes		511				32				543				285				163				448
	Provision for Income Taxes		(84	)			(7	)	c		(91	)			(31	)			(43	)	c		(74	)
	Net Income Attributable to Xylem		427				25				452				254				120				374
	Diluted Shares		181.5								181.5				181.1								181.0
	Diluted EPS	$	2.35			$	0.14			$	2.49			$	1.40			$	0.66			$	2.06
	Year-over-year currency translation impact on current year diluted EPS	$	0.08			$	0.01			$	0.09
	Diluted EPS at Constant Currency	$	2.27			$	0.13			$	2.40

a		Quarter-to-date: Restructuring & realignment costs of $6 million in 2021 and $10 million in 2020, as well as special charges of $1 million in 2021.
		Year-to-date: Restructuring & realignment costs of $22 million and $77 million in 2021 and 2020, respectively; special charges of $4 million ($1 million of intangible asset impairment charges and $3 million of other charges) and $81 million of special charges in 2020 ($79 million of intangible asset and goodwill impairment charges and $2 million of other charges).
b		Quarter-to-date: Special non-operating charges consist of $3 million in 2021 and $1 million in 2020 for costs related to the UK pension plan that is going to be part of a buyout.
		Year-to-date: Special non-operating charges consist of $8 million in 2021 and $5 million in 2020 for costs related to the UK pension plan that is going to be part of a buyout .
c		Quarter-to-date: Net tax impact on restructuring & realignment costs of $1 million in 2021 and $2 million in 2020; $1 million net tax impact on special charges in each of 2021 and 2020 and $6 million and $11 million in 2021 and 2020, respectively, of negative impact from tax related special benefits to GAAP tax.
		Year-to-date: Net tax impact on restructuring & realignment costs of $5 million and $17 million in 2021 and 2020, respectively; $2 million and $10 million of net tax impact on special charges in 2021 and 2020, respectively; and $16 million in 2020 of negative impact from tax related special benefits to GAAP tax.

Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow ($ Millions)
		Q1								Q2								Q3								Q4								Year-to-Date
		2021				2020				2021				2020				2021				2020				2021				2020				2021				2020
Net Cash - Operating Activities		$	(26	)		$	(2	)		$	232			$	181			$	112			$	275			$	220			$	370			$	538			$	824
Capital Expenditures - PP&E			(22	)			(32	)			(25	)			(24	)			(33	)			(24	)			(62	)			(29	)			(142	)			(109	)
Capital Expenditures - Software			(17	)			(19	)			(16	)			(20	)			(14	)			(17	)			(19	)			(18	)			(66	)			(74	)
Capital Expenditures			(39	)			(51	)			(41	)			(44	)			(47	)			(41	)			(81	)			(47	)			(208	)			(183	)
Free Cash Flow		$	(65	)		$	(53	)		$	191			$	137			$	65			$	234			$	139			$	323			$	330			$	641
Net Income			87				38				113				31				114				37				113				148				427				254
Gain/(Loss) from sale of business			-				-				2				-				-				-				-				-				2				-
Restructuring & Realignment Charges - non-cash impairment			(1	)			-				-				(17	)			-				(3	)			-				(1	)			(1	)			(21	)
Special Charges - non-cash impairment			(1	)			-				-				(10	)			-				(69	)			-				-				(1	)			(79	)
Net Income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items		$	89			$	38			$	111			$	58			$	114			$	109			$	113			$	149			$	427			$	354
Operating Cash Flow Conversion			(30	%)			(5	%)			205	%			584	%			98	%			743	%			195	%			250	%			126	%			324	%
Free Cash Flow Conversion			(73	%)			(139	%)			172	%			236	%			57	%			215	%			123	%			217	%			77	%			181	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
2021
		Q1			Q2			Q3			Q4			Total
Net Income		87			113			114			113			427
Income Tax Expense		27			25			19			13			84
Interest Expense (Income), net		19			19			20			11			69
Depreciation		30			29			31			28			118
Amortization		32			33			31			31			127
EBITDA		195			219			215			196			825
Share-based Compensation		9			8			8			8			33
Restructuring & Realignment		8			6			2			6			22
Loss/(Gain) from sale of business		-			(2	)		-			-			(2	)
Special Charges		3			3			2			4			12
Adjusted EBITDA		215			234			227			214			890
Revenue		1,256			1,351			1,265			1,323			5,195
Adjusted EBITDA Margin		17.1	%		17.3	%		17.9	%		16.2	%		17.1	%
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	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Water Infrastructure
2021
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		70			92			102			121			385
Interest Expense (Income), net		(1	)		(1	)		-			(1	)		(3	)
Depreciation		11			11			11			10			43
Amortization		2			2			1			3			8
EBITDA		82			104			114			133			433
Share-based Compensation		1			-			1			-			2
Restructuring & Realignment		5			4			1			2			12
Adjusted EBITDA		88			108			116			135			447
Revenue		509			569			547			622			2,247
Adjusted EBITDA Margin		17.3	%		19.0	%		21.2	%		21.7	%		19.9	%
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	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Applied Water
2021
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income		66			65			60			48			239
Interest Expense (Income), net		-			-			-			-			-
Depreciation		5			5			5			5			20
Amortization		1			1			-			-			2
EBITDA		72			71			65			53			261
Share-based Compensation		1			1			1			1			4
Restructuring & Realignment		1			2			2			2			7
Loss/(Gain) from sale of business		-			(2	)		-			-			(2	)
Special Charges		1			-			-			-			1
Adjusted EBITDA		75			72			68			56			271
Revenue		393			414			400			406			1,613
Adjusted EBITDA Margin		19.1	%		17.4	%		17.0	%		13.8	%		16.8	%
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	%

Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter ($ Millions)
Measurement & Control Solutions
2021
		Q1			Q2			Q3			Q4			Total
Pre-Tax Income	*	8			12			7			(17	)		10
Interest Expense (Income), net		-			-			-			-			-
Depreciation		9			10			11			8			38
Amortization		27			27			27			26			107
EBITDA		44			49			45			17			155
Share-based Compensation		1			2			1			2			6
Restructuring & Realignment		2			-			(1	)		2			3
Adjusted EBITDA		47			51			45			21			164
Revenue		354			368			318			295			1,335
Adjusted EBITDA Margin		13.3	%		13.9	%		14.2	%		7.1	%		12.3	%
2020
		Q1			Q2			Q3			Q4			Total
Pre-Tax (Loss) 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	%

*Revised from previously reported Q1 income to adjust for a one-time income item that offsets with Corporate and Other in consolidation.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220202005816/en/

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

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

Source: Xylem Inc.