2021 Fourth Quarter Results & Earnings xylem Let's Solve Water in 25 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 s ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 Xylem Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or orga ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 Xylem Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organizat ...

[PART I – Financial Information](index=4&type=section&id=PART%20I%20%E2%80%93%20Financial%20Information) [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) Xylem Inc.'s unaudited condensed consolidated financial statements for Q1 2021 and 2020 show significant improvements in key financial metrics [Condensed Consolidated Income Statements](index=4&type=section&id=Condensed%20Consolidated%20Income%20Statements) Xylem Inc. reported substantial increases in revenue, net income, and operating income for Q1 2021 compared to Q1 2020 | Metric | 2021 (Millions USD) | 2020 (Millions USD) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Revenue | 1,256 | 1,123 | 11.8% | | Gross profit | 490 | 409 | 19.8% | | Operating income | 133 | 61 | 118.0% | | Net income | 87 | 38 | 128.9% | | Basic EPS | 0.49 | 0.21 | 133.3% | | Diluted EPS | 0.48 | 0.21 | 128.6% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The company's comprehensive income significantly improved from a loss in Q1 2020 to a gain in Q1 2021 | Metric | 2021 (Millions USD) | 2020 (Millions USD) | Change (Millions USD) | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | | Net income | 87 | 38 | 49 | | Foreign currency translation adjustment | 10 | (78) | 88 | | Other comprehensive income (loss), before tax | 1 | (73) | 74 | | Comprehensive income (loss) | 74 | (49) | 123 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, Xylem's total assets slightly decreased, mainly due to reduced cash and cash equivalents | Metric | March 31, 2021 (Millions USD) | December 31, 2020 (Millions USD) | Change (Millions USD) | | :-------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | | Cash and cash equivalents | 1,688 | 1,875 | (187) | | Total current assets | 3,401 | 3,523 | (122) | | Total assets | 8,545 | 8,750 | (205) | | Total current liabilities | 1,844 | 1,956 | (112) | | Total liabilities | 5,599 | 5,774 | (175) | | Total stockholders' equity | 2,937 | 2,968 | (31) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Xylem reported increased cash used in operating and financing activities for Q1 2021, resulting in a net decrease in cash | Metric | 2021 (Millions USD) | 2020 (Millions USD) | Change (Millions USD) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Net Cash – Operating activities | (26) | (2) | (24) | | Net Cash – Investing activities | (31) | (48) | 17 | | Net Cash – Financing activities | (115) | 87 | (202) | | Net change in cash and cash equivalents | (187) | 15 | (202) | | Cash and cash equivalents at end of period | 1,688 | 739 | 949 | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on Xylem's accounting policies, revenue, restructuring, income taxes, and other financial items [Note 1. Background and Basis of Presentation](index=8&type=section&id=Note%201.%20Background%20and%20Basis%20of%20Presentation) Xylem Inc. is a leading water and wastewater equipment and service provider, operating in three segments - Xylem operates in **three** segments: Water Infrastructure, Applied Water, and Measurement & Control Solutions, providing equipment and services for water and wastewater applications[17](index=17&type=chunk)[18](index=18&type=chunk) - The preparation of financial statements involves estimates and assumptions, with **increased** uncertainty due to the COVID-19 pandemic[21](index=21&type=chunk) [Note 2. Revenue](index=9&type=section&id=Note%202.%20Revenue) Total revenue for Q1 2021 was **$1,256 million**, with Water Infrastructure generating the highest revenue | Revenue Source | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :------------------------- | :--------------------- | :--------------------- | | Contracts with customers | 1,211 | 1,074 | | Lease Revenue | 45 | 49 | | **Total Revenue** | **1,256** | **1,123** | | Segment/Application | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :-------------------------- | :--------------------- | :--------------------- | | Water Infrastructure - Transport | 370 | 318 | | Water Infrastructure - Treatment | 94 | 71 | | Applied Water - Commercial | 147 | 137 | | Applied Water - Residential | 67 | 50 | | Applied Water - Industrial | 179 | 151 | | Measurement & Control - Water | 283 | 265 | | Measurement & Control - Energy | 71 | 82 | | **Total Contracts Revenue** | **1,211** | **1,074** | | Geographic Region (Contracts Revenue) | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | | Water Infrastructure - United States | 123 | 121 | | Water Infrastructure - Western Europe | 173 | 142 | | Water Infrastructure - Emerging Markets | 122 | 86 | | Applied Water - United States | 194 | 191 | | Applied Water - Western Europe | 92 | 74 | | Applied Water - Emerging Markets | 78 | 50 | | Measurement & Control - United States | 213 | 221 | | Measurement & Control - Western Europe | 74 | 63 | | Measurement & Control - Emerging Markets | 46 | 41 | | **Total Contracts Revenue** | **1,211** | **1,074** | [Note 3. Restructuring and Asset Impairment Charges](index=11&type=section&id=Note%203.%20Restructuring%20and%20Asset%20Impairment%20Charges) Xylem recognized **$6 million** in restructuring and asset impairment charges in Q1 2021, primarily due to headcount reductions | Charge Type | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | | Severance and other charges | 4 | 2 | | Asset impairment | 1 | — | | **Total restructuring charges** | **5** | **2** | | Asset impairment charges | 1 | — | | **Total restructuring and asset impairment charges** | **6** | **2** | - The company initiated a restructuring plan in June **2020** in response to COVID-19, aiming to optimize costs, simplify operations, and strengthen competitive positioning[31](index=31&type=chunk) | Segment (Restructuring Accruals) | March 31, 2021 (Millions USD) | March 31, 2020 (Millions USD) | | :------------------------------- | :---------------------------- | :---------------------------- | | Water Infrastructure | 2 | 1 | | Applied Water | 1 | 1 | | Measurement & Control Solutions | 14 | 17 | | Regional selling locations | 4 | 1 | | **Total Accruals** | **21** | **20** | [Note 4. Income Taxes](index=13&type=section&id=Note%204.%20Income%20Taxes) Xylem's income tax expense for Q1 2021 was **$27 million**, resulting in a **23.3%** effective tax rate | Metric | Q1 2021 | Q1 2020 | | :---------------- | :------ | :------ | | Income tax expense | $27 million | $4 million | | Effective tax rate | 23.3% | 10.0% | - The **higher** effective tax rate in Q1 **2021** was primarily due to tax settlements and the Global Intangible Low Taxed Income (GILTI) inclusion, partially offset by favorable earnings mix[37](index=37&type=chunk) - Unrecognized tax benefits amounted to **$113 million** at March **31**, **2021**, with **$8 million** in accrued interest[38](index=38&type=chunk) [Note 5. Earnings Per Share](index=14&type=section&id=Note%205.%20Earnings%20Per%20Share) Basic earnings per share increased to **$0.49** in Q1 2021 from **$0.21** in Q1 2020, reflecting higher net income | Metric | Q1 2021 | Q1 2020 | | :-------------------------------- | :------ | :------ | | Net income (in millions) | $87 | $38 | | Basic earnings per share | $0.49 | $0.21 | | Diluted earnings per share | $0.48 | $0.21 | | Weighted average common shares outstanding (Basic, in thousands) | 180,267 | 180,179 | | Weighted average common shares outstanding (Diluted, in thousands) | 181,474 | 181,294 | [Note 6. Inventories](index=14&type=section&id=Note%206.%20Inventories) Total inventories increased to **$596 million** as of March 31, 2021, with increases across all components | Inventory Component | March 31, 2021 (Millions USD) | December 31, 2020 (Millions USD) | | :------------------ | :---------------------------- | :------------------------------- | | Finished goods | 232 | 221 | | Work in process | 58 | 49 | | Raw materials | 306 | 288 | | **Total inventories** | **596** | **558** | [Note 7. Goodwill and Other Intangible Assets](index=15&type=section&id=Note%207.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill slightly decreased to **$2,831 million** as of March 31, 2021, primarily due to foreign currency adjustments | Metric | March 31, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :-------------------------------- | :---------------------------- | :----------------------------- | | Goodwill - Water Infrastructure | 662 | 668 | | Goodwill - Applied Water | 526 | 529 | | Goodwill - Measurement & Control Solutions | 1,643 | 1,657 | | **Total Goodwill** | **2,831** | **2,854** | | Intangible Asset Type | Net Intangibles (March 31, 2021, Millions USD) | Net Intangibles (December 31, 2020, Millions USD) | | :-------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | Customer and distributor relationships | 518 | 531 | | Proprietary technology and patents | 71 | 75 | | Trademarks | 78 | 80 | | Software | 236 | 235 | | Indefinite-lived intangibles | 169 | 169 | | **Total Other Intangibles** | **1,075** | **1,093** | - Amortization expense for finite-lived intangible assets was **$32 million** for the **three** months ended March **31**, **2021**, **down** from **$35 million** in the prior year[44](index=44&type=chunk) [Note 8. Derivative Financial Instruments](index=15&type=section&id=Note%208.%20Derivative%20Financial%20Instruments) Xylem uses derivative financial instruments to manage foreign exchange and interest rate fluctuations, with **$400 million** in purchased notional amounts - Xylem uses foreign currency derivatives (e.g., currency forward agreements) to manage exposure to foreign exchange rate fluctuations, with principal exposures to Euro, Swedish Krona, British Pound, Canadian Dollar, Polish Zloty, and Australian Dollar[46](index=46&type=chunk)[47](index=47&type=chunk) | Derivative Type | March 31, 2021 (Millions USD) | December 31, 2020 (Millions USD) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Purchased notional amounts (FX contracts) | 400 | 0 | | Notional amount (Net investment hedges) | 1,196 | 1,249 | | Foreign Currency Denominated Debt (Net Investment Hedge) | 585 | 610 | | Effect on Comprehensive Income (Q1 2021, Millions USD) | | :---------------------------------------------------- | | Foreign Exchange Contracts (loss recognized in OCI) | (11) | | Cross Currency Swaps (gain recognized in OCI) | 30 | | Foreign Currency Denominated Debt (gain recognized in OCI) | 26 | [Note 9. Accrued and Other Current Liabilities](index=17&type=section&id=Note%209.%20Accrued%20and%20Other%20Current%20Liabilities) Total accrued and other current liabilities decreased to **$714 million** as of March 31, 2021, primarily due to reductions in compensation | Liability Component | March 31, 2021 (Millions USD) | December 31, 2020 (Millions USD) | | :-------------------------------- | :---------------------------- | :------------------------------- | | Compensation and other employee-benefits | 211 | 258 | | Customer-related liabilities | 180 | 186 | | Accrued taxes | 93 | 103 | | Lease liabilities | 64 | 63 | | Accrued warranty costs | 51 | 54 | | Other accrued liabilities | 115 | 123 | | **Total accrued and other current liabilities** | **714** | **787** | [Note 10. Credit Facilities and Debt](index=18&type=section&id=Note%2010.%20Credit%20Facilities%20and%20Debt) Total debt outstanding was **$3,060 million** as of March 31, 2021, with an undrawn **$800 million** revolving credit facility | Debt Type | March 31, 2021 (Millions USD) | December 31, 2020 (Millions USD) | | :------------------------------------ | :---------------------------- | :------------------------------- | | 4.875% Senior Notes due 2021 | 600 | 600 | | 2.250% Senior Notes due 2023 | 587 | 612 | | 3.250% Senior Notes due 2026 | 500 | 500 | | 1.950% Senior Notes due 2028 (Green Bond) | 500 | 500 | | 2.250% Senior Notes due 2031 (Green Bond) | 500 | 500 | | 4.375% Senior Notes due 2046 | 400 | 400 | | Debt issuance costs and unamortized discount | (27) | (28) | | **Total debt** | **3,060** | **3,084** | | Less: short-term borrowings and current maturities | 600 | 600 | | **Total long-term debt** | **2,460** | **2,484** | - The **2019** Five-Year Revolving Credit Facility provides up to **$800 million**, undrawn as of March **31**, **2021**, and includes an ESG score-based pricing grid[65](index=65&type=chunk)[66](index=66&type=chunk)[68](index=68&type=chunk) - The company has U.S. Dollar and Euro commercial paper programs with maximum issuing balances of **$600 million** and **€500 million** respectively, both undrawn as of March **31**, **2021**[69](index=69&type=chunk)[71](index=71&type=chunk) [Note 11. Post-retirement Benefit Plans](index=20&type=section&id=Note%2011.%20Post-retirement%20Benefit%20Plans) Total net periodic benefit cost for defined benefit pension plans was **$8 million** in Q1 2021, with international plans contributing the majority | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | | Domestic defined benefit pension plans (Net periodic benefit cost) | 1 | 1 | | International defined benefit pension plans (Net periodic benefit cost) | 7 | 6 | | **Total net periodic benefit cost** | **8** | **7** | - Xylem contributed **$6 million** to its defined benefit plans in Q1 **2021** and anticipates further contributions of **$13 million** to **$21 million** for the rest of **2021**[74](index=74&type=chunk) [Note 12. Equity](index=21&type=section&id=Note%2012.%20Equity) Total equity decreased slightly to **$2,946 million** as of March 31, 2021, reflecting net income offset by other comprehensive loss and repurchases | Equity Component | Balance at Jan 1, 2021 (Millions USD) | Net Income (Millions USD) | Other Comprehensive Loss (Millions USD) | Dividends Declared (Millions USD) | Repurchase of Common Stock (Millions USD) | Balance at Mar 31, 2021 (Millions USD) | | :-------------------------------- | :------------------------------------ | :------------------------ | :-------------------------------------- | :-------------------------- | :---------------------------------------- | :------------------------------------ | | Common Stock | 2 | — | — | — | — | 2 | | Capital in Excess of Par Value | 2,037 | — | — | — | — | 2,049 | | Retained Earnings | 1,930 | 87 | — | (50) | — | 1,967 | | Accumulated Other Comprehensive Loss | (413) | — | (13) | — | — | (426) | | Treasury Stock | (588) | — | — | — | (60) | (655) | | Non-controlling Interests | 8 | — | — | — | — | 9 | | **Total Equity** | **2,976** | **87** | **(13)** | **(50)** | **(60)** | **2,946** | [Note 13. Share-Based Compensation Plans](index=21&type=section&id=Note%2013.%20Share-Based%20Compensation%20Plans) Share-based compensation expense was **$9 million** in Q1 2021, with **257 thousand** stock options granted - Share-based compensation expense **increased** to **$9 million** in Q1 **2021** from **$8 million** in Q1 **2020**[77](index=77&type=chunk) | Share-Based Award | Outstanding at Jan 1, 2021 (Thousands) | Granted (Thousands) | Outstanding at Mar 31, 2021 (Thousands) | | :-------------------------------- | :------------------------------------- | :------------------ | :-------------------------------------- | | Stock Options | 1,961 | 257 | 2,166 | | Restricted Stock Units | 537 | 191 | 529 | | ROIC Performance Share Units | 182 | 60 | 184 | | TSR Performance Share Units | 182 | 60 | 184 | | ESG Performance Share Units | <0.1 | <0.1 | <0.1 | - The total intrinsic value of options exercised during Q1 **2021** was **$2.3 million**[78](index=78&type=chunk) [Note 14. Capital Stock](index=23&type=section&id=Note%2014.%20Capital%20Stock) Xylem repurchased approximately **0.7 million** shares for **$67 million** in Q1 2021, with **$228 million** remaining under the program | Repurchase Activity | Q1 2021 (Shares in Millions) | Q1 2021 (Value in Millions USD) | Q1 2020 (Shares in Millions) | Q1 2020 (Value in Millions USD) | | :-------------------------------- | :----------------------------- | :------------------------------ | :----------------------------- | :------------------------------ | | Total shares repurchased | 0.7 | 67 | 0.8 | 60 | | Under $500M program | 0.6 | 60 | 0.7 | 50 | | For employee tax withholding | 0.1 | 7 | 0.1 | 10 | - As of March **31**, **2021**, **$228 million** in shares may still be purchased under the **$500 million** repurchase program[86](index=86&type=chunk) [Note 15. Accumulated Other Comprehensive Loss](index=24&type=section&id=Note%2015.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss increased to **$426 million** as of March 31, 2021, driven by foreign currency translation | Component | Balance at Jan 1, 2021 (Millions USD) | Foreign Currency Translation (Millions USD) | Post-retirement Benefit Plans (Millions USD) | Derivative Instruments (Millions USD) | Balance at Mar 31, 2021 (Millions USD) | | :-------------------------------- | :------------------------------------ | :---------------------------------- | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Foreign Currency Translation | (86) | (4) | — | — | (90) | | Post-retirement Benefit Plans | (330) | — | 4 | — | (326) | | Derivative Instruments | 3 | — | — | (13) | (10) | | **Total** | **(413)** | **(4)** | **4** | **(13)** | **(426)** | [Note 16. Commitments and Contingencies](index=25&type=section&id=Note%2016.%20Commitments%20and%20Contingencies) Xylem is involved in various legal and regulatory proceedings, with **$5 million** accrued for general legal matters - Xylem is involved in various legal and regulatory proceedings incidental to its business operations, covering environmental, tax, intellectual property, product liability, and other disputes[90](index=90&type=chunk) - The company has accrued **$5 million** for general legal matters and **$3 million** for environmental matters as of March **31**, **2021**[93](index=93&type=chunk)[98](index=98&type=chunk) - Xylem has indemnification from ITT Corporation for asbestos and silica liability claims arising before October **31**, **2011**[91](index=91&type=chunk)[94](index=94&type=chunk) [Note 17. Segment Information](index=27&type=section&id=Note%2017.%20Segment%20Information) All three of Xylem's segments reported increased revenue and operating income in Q1 2021 compared to Q1 2020 - Xylem's **three** reportable segments are Water Infrastructure (transportation and treatment of water), Applied Water (residential, commercial, industrial uses), and Measurement & Control Solutions (advanced technology for water/energy resources and analytical instrumentation)[101](index=101&type=chunk) | Segment | Q1 2021 Revenue (Millions USD) | Q1 2020 Revenue (Millions USD) | Q1 2021 Operating Income (Millions USD) | Q1 2020 Operating Income (Millions USD) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------------------------- | :-------------------------------------- | | Water Infrastructure | 509 | 438 | 71 | 39 | | Applied Water | 393 | 338 | 66 | 47 | | Measurement & Control Solutions | 354 | 347 | 9 | (12) | | **Total** | **1,256** | **1,123** | **133** | **61** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Xylem's Q1 2021 financial condition and results, highlighting strong growth and the 2021 outlook [Overview](index=30&type=section&id=Overview) Xylem is a global water technology company providing engineered products and solutions across the water cycle - Xylem is a global water technology company offering engineered products and solutions for the full water cycle, from delivery and measurement to treatment and analysis[110](index=110&type=chunk) - The company's offerings are organized into **three** segments: Water Infrastructure, Applied Water, and Measurement & Control Solutions, aligned with critical market applications[110](index=110&type=chunk) [COVID-19 Pandemic Update](index=30&type=section&id=COVID-19%20Pandemic%20Update) The COVID-19 pandemic continues to impact Xylem's supply chains, causing component shortages and increased logistics costs - The COVID-19 pandemic has adversely affected Xylem's supply chains, leading to component shortages, raw material interruptions, and **increased** logistics costs in **2021**[112](index=112&type=chunk) - Xylem is mitigating supply chain challenges through enhanced supplier pulsing, redundancy, buffer stock, and alternative suppliers[112](index=112&type=chunk) - The company continues to prioritize employee health and safety, maintaining support pay programs and remote work for many offices[114](index=114&type=chunk)[115](index=115&type=chunk) [Executive Summary](index=31&type=section&id=Executive%20Summary) Xylem reported strong Q1 2021 financial performance, with revenue up **11.8%** and operating income more than doubling | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Revenue | 1,256 | 1,123 | 11.8% | | Operating income | 133 | 61 | 118.0% | | Operating margin | 10.6% | 5.4% | 520 bp | | Adjusted operating income | 143 | 70 | 104.3% | | Adjusted operating margin | 11.4% | 6.2% | 520 bp | | Orders | 1,538 | 1,261 | 22.0% | | Diluted EPS | 0.48 | 0.21 | 128.6% | | Adjusted Diluted EPS | 0.56 | 0.23 | 143.5% | - The **increase** in adjusted operating margin was primarily driven by cost reductions from productivity, restructuring, and other cost-saving initiatives, favorable volume from COVID-19 recovery, and **decreased** quality management costs[118](index=118&type=chunk) [Key Performance Indicators and Non-GAAP Measures](index=32&type=section&id=Key%20Performance%20Indicators%20and%20Non-GAAP%20Measures) Management uses non-GAAP measures like organic revenue, adjusted net income, and free cash flow to evaluate performance - Management uses non-GAAP measures such as organic revenue, constant currency, adjusted net income, adjusted operating income, EBITDA, and free cash flow to evaluate operating performance and capital generation[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[126](index=126&type=chunk) | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | | Net income | 87 | 38 | | Adjusted net income | 102 | 42 | | EBITDA | 195 | 120 | | Adjusted EBITDA | 215 | 138 | | Free cash flow | (65) | (53) | [2021 Outlook](index=34&type=section&id=2021%20Outlook) Xylem anticipates total revenue growth of **8%** to **10%** in 2021, with organic revenue growth projected between **5%** and **7%** - Xylem forecasts total revenue growth of **8%** to **10%** in **2021**, with organic revenue growth of **5%** to **7%**[127](index=127&type=chunk) | End Market | 2021 Organic Revenue Growth Outlook | | :---------------- | :---------------------------------- | | Utilities | Mid to high-single-digit | | Industrial | Mid-single-digit | | Commercial | Low-single-digit | | Residential | High-single-digit to low-double-digit | - The company expects to incur **$50-60 million** in restructuring and realignment costs in **2021**, yielding approximately **$40 million** in net savings[127](index=127&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Xylem's Q1 2021 results show significant improvements across key financial metrics, driven by organic growth and cost reductions | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Revenue | 1,256 | 1,123 | 11.8% | | Gross profit | 490 | 409 | 19.8% | | Gross margin | 39.0% | 36.4% | 260 bp | | Operating income | 133 | 61 | 118.0% | | Operating margin | 10.6% | 5.4% | 520 bp | | Net income | 87 | 38 | 128.9% | - Revenue growth was primarily driven by **strong** organic growth in emerging markets (especially China's COVID-19 recovery) and Western Europe, partially offset by organic declines in the U.S[130](index=130&type=chunk) [Revenue](index=35&type=section&id=Revenue) Total revenue for Q1 2021 increased by **$133 million** (**11.8%**) to **$1,256 million**, with constant currency growth of **7.9%** | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :------- | :--------------------- | :--------------------- | :--------- | | Revenue | 1,256 | 1,123 | 11.8% | | Organic Growth | 91 | N/A | 8.1% | | Foreign currency translation | 44 | N/A | 3.9% | - **Strong** organic growth was observed in emerging markets, particularly China, and Western Europe, driven by recovery from COVID-19 impacts[130](index=130&type=chunk) [Water Infrastructure Revenue](index=36&type=section&id=Water%20Infrastructure%20%28within%20Revenue%29) Water Infrastructure revenue grew by **16.2%** to **$509 million** in Q1 2021, driven by strong organic growth in utility and industrial end markets | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Revenue | 509 | 438 | 16.2% | | Organic Growth | 47 | N/A | 10.7% | | Foreign currency translation | 24 | N/A | 5.5% | - Organic growth was **strong** in utility and industrial end markets, especially in Asia Pacific (China's COVID-19 recovery) and Western Europe, with transport and treatment applications contributing[132](index=132&type=chunk)[133](index=133&type=chunk) [Applied Water Revenue](index=36&type=section&id=Applied%20Water%20%28within%20Revenue%29) Applied Water revenue increased by **16.3%** to **$393 million** in Q1 2021, with organic growth across all end markets and regions | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Revenue | 393 | 338 | 16.3% | | Organic Growth | 44 | N/A | 13.0% | | Foreign currency translation | 11 | N/A | 3.3% | - Organic growth was driven by strength in industrial water (emerging markets, North America, Western Europe) and residential building services (China, North America, Western Europe), with commercial building services showing modest growth[135](index=135&type=chunk) [Measurement & Control Solutions Revenue](index=36&type=section&id=Measurement%20%26%20Control%20Solutions%20%28within%20Revenue%29) Measurement & Control Solutions revenue increased by **2.0%** to **$354 million** in Q1 2021, but organic revenue was flat | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Revenue | 354 | 347 | 2.0% | | Organic Growth | — | N/A | —% | | Divestitures | (2) | N/A | (0.6)% | | Foreign currency translation | 9 | N/A | 2.6% | - Organic revenue was flat, with declines in the energy application (slower gas project deployments) offset by growth in the water application (**strong** backlog execution in Western Europe and China COVID-19 recovery)[137](index=137&type=chunk) [Orders / Backlog](index=37&type=section&id=Orders%20%2F%20Backlog) Total orders for Q1 2021 increased by **22.0%** to **$1,538 million**, driven by **strong** organic order growth across all segments | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Orders | 1,538 | 1,261 | 22.0% | | Organic Growth | 235 | N/A | 18.6% | | Foreign currency translation | 49 | N/A | 3.9% | - Total backlog was **$2,403 million** at March **31**, **2021**, an **increase** of **$516 million** (**27.3%**) from March **31**, **2020**[144](index=144&type=chunk) - Approximately **54%** of the backlog at March **31**, **2021**, is expected to be recognized as revenue in the remainder of **2021**[144](index=144&type=chunk) [Water Infrastructure Orders](index=37&type=section&id=Water%20Infrastructure%20%28within%20Orders%2FBacklog%29) Water Infrastructure orders increased by **18.9%** to **$611 million** in Q1 2021, primarily due to organic growth in the transport application | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Orders | 611 | 514 | 18.9% | | Organic Growth | 70 | N/A | 13.6% | | Foreign currency translation | 27 | N/A | 5.3% | - Organic order growth was driven by the transport application (India, Europe, North America) and treatment application (Asia Pacific, North America, Europe)[140](index=140&type=chunk) [Applied Water Orders](index=37&type=section&id=Applied%20Water%20%28within%20Orders%2FBacklog%29) Applied Water orders surged by **28.2%** to **$477 million** in Q1 2021, driven by organic growth across all end markets | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Orders | 477 | 372 | 28.2% | | Organic Growth | 92 | N/A | 24.7% | | Foreign currency translation | 13 | N/A | 3.5% | - Organic order growth was **strong** across all end markets, especially in the U.S. (**strong** demand, early ordering) and in Western Europe and emerging markets (China's COVID-19 recovery)[141](index=141&type=chunk) [Measurement & Control Solutions Orders](index=37&type=section&id=Measurement%20%26%20Control%20Solutions%20%28within%20Orders%2FBacklog%29) Measurement & Control Solutions orders increased by **20.0%** to **$450 million** in Q1 2021, with **19.5%** organic order growth | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Orders | 450 | 375 | 20.0% | | Organic Growth | 73 | N/A | 19.5% | | Divestitures | (7) | N/A | (1.9)% | | Foreign currency translation | 9 | N/A | 2.4% | - Organic order growth was driven by the water application (U.S., Western Europe, emerging markets COVID-19 recovery) and large project deployments in the North American energy application[142](index=142&type=chunk)[143](index=143&type=chunk) [Backlog](index=38&type=section&id=Backlog) Total backlog reached **$2,403 million** at March 31, 2021, a **27.3%** increase year-over-year | Metric | March 31, 2021 (Millions USD) | March 31, 2020 (Millions USD) | December 31, 2020 (Millions USD) | | :------- | :---------------------------- | :---------------------------- | :------------------------------- | | Backlog | 2,403 | 1,887 | 2,124 | - The backlog **increased** by **$516 million** (**27.3%**) year-over-year and **$279 million** (**13.1%**) quarter-over-quarter due to significant order increases[144](index=144&type=chunk) - Approximately **54%** of the backlog is anticipated to be recognized as revenue in the remainder of **2021**[144](index=144&type=chunk) [Gross Margin](index=38&type=section&id=Gross%20Margin) Gross margin expanded by **260 basis points** to **39.0%** in Q1 2021, driven by cost reductions and favorable volume | Metric | Q1 2021 | Q1 2020 | Change (bp) | | :---------- | :------ | :------ | :---------- | | Gross margin | 39.0% | 36.4% | 260 | | Gross profit | $490 million | $409 million | 19.8% | | Revenue | $1,256 million | $1,123 million | 11.8% | - The gross margin **increase** was driven by cost reductions from global procurement and productivity initiatives, **decreased** quality management costs, and favorable volume from COVID-19 recovery[145](index=145&type=chunk) [Operating Expenses](index=38&type=section&id=Operating%20Expenses) Total operating expenses increased by **2.6%** to **$357 million** in Q1 2021, but decreased as a percentage of revenue | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Selling, general and administrative expenses | 301 | 297 | 1.3% | | Research and development expenses | 50 | 49 | 2.0% | | Restructuring and asset impairment charges | 6 | 2 | 200.0% | | **Operating expenses** | **357** | **348** | **2.6%** | | Expense to revenue ratio | 28.4% | 31.0% | (260) bp | [Selling, General and Administrative ("SG&A") Expenses](index=38&type=section&id=Selling%2C%20General%20and%20Administrative%20%28%22SG%26A%22%29%20Expenses) SG&A expenses increased by **$4 million** to **$301 million** in Q1 2021, but decreased as a percentage of revenue to **24.0%** | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | SG&A expenses | 301 | 297 | 1.3% | | SG&A as a % of revenue | 24.0% | 26.4% | (240) bp | - The improvement in SG&A as a percentage of revenue was driven by cost reductions from productivity, restructuring, and other cost-saving initiatives[147](index=147&type=chunk) [Research and Development ("R&D") Expenses](index=38&type=section&id=Research%20and%20Development%20%28%22R%26D%22%29%20Expenses) R&D expense slightly increased to **$50 million** in Q1 2021, but decreased as a percentage of revenue to **4.0%** | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | R&D expenses | 50 | 49 | 2.0% | | R&D as a % of revenue | 4.0% | 4.4% | (40) bp | [Restructuring and Asset Impairment Charges](index=39&type=section&id=Restructuring%20and%20Asset%20Impairment%20Charges) Restructuring and asset impairment charges increased to **$6 million** in Q1 2021, primarily due to headcount reductions | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :-------------------------------- | :--------------------- | :--------------------- | | Restructuring and asset impairment charges | 6 | 2 | | Employee position eliminations (Planned reductions - March 31) | 228 | 186 | - The restructuring plan, initiated in June **2020** in response to COVID-19, aims to optimize cost structure, improve operational efficiency, and strengthen competitive positioning[150](index=150&type=chunk) - Xylem expects to incur **$35-45 million** in restructuring costs for the full year **2021**, anticipating approximately **$4 million** in total net savings[153](index=153&type=chunk) [Operating Income](index=40&type=section&id=Operating%20Income) Operating income for Q1 2021 significantly increased by **118.0%** to **$133 million**, with operating margin expanding by **520 basis points** | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Operating income | 133 | 61 | 118.0% | | Operating margin | 10.6% | 5.4% | 520 bp | | Adjusted operating income | 143 | 70 | 104.3% | | Adjusted operating margin | 11.4% | 6.2% | 520 bp | - The **increase** in adjusted operating margin was primarily due to cost reductions from productivity, restructuring, and other cost-saving initiatives, favorable volume from COVID-19 recovery, and **decreased** quality management costs[154](index=154&type=chunk) [Water Infrastructure Operating Income](index=41&type=section&id=Water%20Infrastructure%20%28within%20Operating%20Income%29) Water Infrastructure operating income increased by **82.1%** to **$71 million** in Q1 2021, driven by cost reductions and favorable volume | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Operating income | 71 | 39 | 82.1% | | Operating margin | 13.9% | 8.9% | 500 bp | | Adjusted operating income | 76 | 44 | 72.7% | | Adjusted operating margin | 14.9% | 10.0% | 490 bp | - The **increase** in adjusted operating margin was primarily due to cost reductions from productivity, restructuring, and other cost-saving initiatives, and favorable volume from COVID-19 recovery[156](index=156&type=chunk) [Applied Water Operating Income](index=41&type=section&id=Applied%20Water%20%28within%20Operating%20Income%29) Applied Water operating income increased by **40.4%** to **$66 million** in Q1 2021, with adjusted operating margin rising to **17.3%** | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Operating income | 66 | 47 | 40.4% | | Operating margin | 16.8% | 13.9% | 290 bp | | Adjusted operating income | 68 | 49 | 38.8% | | Adjusted operating margin | 17.3% | 14.5% | 280 bp | - The **increase** in adjusted operating margin was primarily due to cost reductions from productivity, restructuring, and other cost-saving initiatives, and favorable volume from COVID-19 recovery[157](index=157&type=chunk) [Measurement & Control Solutions Operating Income](index=41&type=section&id=Measurement%20%26%20Control%20Solutions%20%28within%20Operating%20Income%29) Measurement & Control Solutions operating income significantly improved from a **$12 million** loss in Q1 2020 to a **$9 million** gain in Q1 2021 | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Operating income (loss) | 9 | (12) | 175.0% | | Operating margin | 2.5% | (3.5)% | 600 bp | | Adjusted operating income (loss) | 11 | (10) | 210.0% | | Adjusted operating margin | 3.1% | (2.9)% | 600 bp | - The **increase** in adjusted operating margin was primarily due to cost reductions from restructuring, productivity, and other cost-saving initiatives, and **decreased** quality management costs, including the non-recurrence of a prior-year warranty charge[158](index=158&type=chunk) [Corporate and other Operating Income](index=41&type=section&id=Corporate%20and%20other%20%28within%20Operating%20Income%29) Corporate and other operating loss remained constant at **$13 million** in Q1 2021 compared to the prior year | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Operating loss | (13) | (13) | —% | | Adjusted operating loss | (12) | (13) | (7.7)% | [Interest Expense](index=41&type=section&id=Interest%20Expense) Interest expense increased to **$21 million** in Q1 2021 from **$16 million** in Q1 2020, primarily due to the Green Bond issuance | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (Millions USD) | | :------------- | :--------------------- | :--------------------- | :-------------------- | | Interest expense | 21 | 16 | 5 | - The **increase** in interest expense was primarily driven by the issuance of the Green Bond in Q2 **2020**[160](index=160&type=chunk) [Income Tax Expense](index=41&type=section&id=Income%20Tax%20Expense) Income tax expense for Q1 2021 was **$27 million**, resulting in a **23.3%** effective tax rate, significantly **higher** than Q1 2020 | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | | :---------------- | :--------------------- | :--------------------- | | Income tax expense | 27 | 4 | | Effective tax rate | 23.3% | 10.0% | - The **higher** effective tax rate was primarily due to tax settlements and the Global Intangible Low Taxed Income (GILTI) inclusion, partially offset by favorable earnings mix[161](index=161&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Xylem's liquidity saw a net decrease in cash of **$187 million** in Q1 2021, but maintains strong liquidity with **$1.7 billion** in cash | Cash Flow Activity | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (Millions USD) | | :------------------- | :--------------------- | :--------------------- | :-------------------- | | Operating activities | (26) | (2) | (24) | | Investing activities | (31) | (48) | 17 | | Financing activities | (115) | 87 | (202) | | Foreign exchange | (15) | (22) | 7 | | **Total** | **(187)** | **15** | **(202)** | - As of March **31**, **2021**, Xylem has approximately **$2.5 billion** in available liquidity, comprising **$1.7 billion** in cash and **$800 million** in available credit facilities[170](index=170&type=chunk) - The company expects to pay its **$600 million** Senior Notes due in **2021** out of cash and believes it has sufficient liquidity to meet future funding requirements and service debt[170](index=170&type=chunk) [Sources and Uses of Liquidity](index=42&type=section&id=Sources%20and%20Uses%20of%20Liquidity) In Q1 2021, Xylem experienced increased cash usage from operating and financing activities, while investing activities used less cash - Net cash used by operating activities **increased** to **$26 million** in Q1 **2021**, primarily due to **increased** working capital, **higher** interest and tax payments, and timing of compensation-related payments[163](index=163&type=chunk) - Cash used in investing activities **decreased** to **$31 million** in Q1 **2021**, mainly driven by **lower** capital expenditures[164](index=164&type=chunk) - Cash used by financing activities **increased** to **$115 million** in Q1 **2021**, primarily due to **higher** short-term debt levels in Q1 **2020** and **increased** share repurchase and dividend payments in Q1 **2021**[165](index=165&type=chunk) [Operating Activities](index=42&type=section&id=Operating%20Activities) Net cash used by operating activities was **$26 million** for Q1 2021, an **increase** of **$24 million** in cash used compared to the prior year | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (Millions USD) | | :------------------------- | :--------------------- | :--------------------- | :-------------------- | | Net cash used by operating activities | (26) | (2) | (24) | - The **increase** in cash used was primarily driven by **increased** working capital to support year-over-year growth, **higher** interest and tax payments, and timing of compensation-related payments[163](index=163&type=chunk) [Investing Activities](index=42&type=section&id=Investing%20Activities) Cash used in investing activities decreased by **$17 million** to **$31 million** for Q1 2021, mainly due to **lower** capital expenditures | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (Millions USD) | | :------------------------- | :--------------------- | :--------------------- | :-------------------- | | Cash used in investing activities | (31) | (48) | 17 | - The **decrease** in cash used was mainly driven by **lower** spending on capital expenditures compared to the prior year[164](index=164&type=chunk) [Financing Activities](index=42&type=section&id=Financing%20Activities) Cash used by financing activities was **$115 million** for Q1 2021, a significant shift from **$87 million** generated in the prior year | Metric | Q1 2021 (Millions USD) | Q1 2020 (Millions USD) | Change (Millions USD) | | :------------------------- | :--------------------- | :--------------------- | :-------------------- | | Cash used by financing activities | (115) | 87 | (202) | - The net **increase** in cash used was primarily due to **higher** levels of short-term debt during Q1 **2020** and an **increase** in share repurchase activity and dividend payments in Q1 **2021**[165](index=165&type=chunk) [Funding and Liquidity Strategy](index=42&type=section&id=Funding%20and%20Liquidity%20Strategy) Xylem relies on operating cash flow, bank financing, and capital markets for funding, expecting to meet its liquidity needs - Xylem's funding strategy relies on generating cash from operations and access to bank financing and capital markets[166](index=166&type=chunk) - The company has approximately **$2.5 billion** in available liquidity, consisting of **$1.7 billion** in cash and **$800 million** in available credit facilities, and expects to meet its funding requirements and service debt[170](index=170&type=chunk) - Capital expenditures are expected to gradually **increase** to normal levels during **2021** as markets recover[166](index=166&type=chunk) [Non-U.S. Operations](index=43&type=section&id=Non-U.S.%20Operations) Non-U.S. operations generated **56%** of Xylem's revenue in Q1 2021, with **$6 million** deferred tax liability for repatriated earnings | Metric | Q1 2021 | Q1 2020 | | :-------------------------------- | :------ | :------ | | Revenue from non-U.S. operations | 56% | 50% | - Xylem manages worldwide cash requirements by transferring funds among subsidiaries when cost-effective[173](index=173&type=chunk) - A deferred tax liability of **$6 million** has been provided for net foreign withholding taxes and state income taxes on **$356 million** of earnings expected to be repatriated[173](index=173&type=chunk) [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) Financial statements rely on critical accounting estimates, with a **$58 million** goodwill impairment charge recorded in Q3 2020 - Financial statements rely on critical accounting estimates and assumptions, with **increased** uncertainty due to the COVID-19 pandemic[174](index=174&type=chunk) - In Q3 **2020**, a **$58 million** goodwill impairment charge was recorded for the Advanced Infrastructure Analytics (AIA) businesses due to COVID-119 impacts and ongoing investments[175](index=175&type=chunk) - The remaining goodwill balance in the AIA reporting unit was **$112 million** as of March **31**, **2021**, with a risk of future impairment if forecasts are not achieved[175](index=175&type=chunk)[176](index=176&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures have occurred since the 2020 Annual Report - No material changes in market risk disclosures have occurred since the **2020** Annual Report[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded Xylem's disclosure controls and procedures were effective as of March 31, 2021 - Xylem's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of March **31**, **2021**[178](index=178&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter[179](index=179&type=chunk) [PART II – Other Information](index=45&type=section&id=PART%20II%20%E2%80%93%20Other%20Information) [Item 1. Legal Proceedings](index=45&type=section&id=Item%201%20-%20Legal%20Proceedings) Xylem is routinely involved in various legal and regulatory proceedings, with further details in Note 16 - Xylem is involved in various legal and regulatory proceedings incidental to its business operations, covering environmental, tax, intellectual property, product liability, and other disputes[182](index=182&type=chunk) - Additional information on legal proceedings is available in Note **16**, 'Commitments and Contingencies,' of the financial statements[182](index=182&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A%20-%20Risk%20Factors) No material changes to the risk factors previously disclosed in Xylem's 2020 Annual Report on Form 10-K - No material changes have occurred in the risk factors since the **2020** Annual Report[183](index=183&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2021, Xylem repurchased **0.6 million** shares for **$60 million** under its share repurchase program | Period | Shares Purchased (Millions) | Average Price Paid Per Share ($) | Shares Purchased Under Publicly Announced Plans (Millions) | Dollar Value Remaining Under Plans (Millions $) | | :---------------- | :-------------------------- | :------------------------------- | :------------------------------------------------------- | :-------------------------------------------- | | 1/1/21 - 1/31/21 | — | — | — | 288 | | 2/1/21 - 2/28/21 | 0.3 | 100.07 | 0.3 | 258 | | 3/1/21 - 3/31/21 | 0.3 | 101.07 | 0.3 | 228 | - For Q1 **2021**, Xylem repurchased **0.6 million** shares for **$60 million** under its **$500 million** share repurchase program, with **$228 million** still available[185](index=185&type=chunk) - Additionally, **0.1 million** shares were repurchased for **$7 million** to satisfy employee tax withholding obligations related to restricted stock unit vesting[187](index=187&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[186](index=186&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) Not applicable to the registrant - Mine Safety Disclosures are not applicable to the registrant[187](index=187&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205%20-%20Other%20Information) No other information is reported under this item - No other information is reported under this item[188](index=188&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206%20-%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents and certifications - Exhibits include organizational documents (Articles of Incorporation, By-laws), employment contracts, various incentive plan agreements (stock option, performance share unit, restricted stock unit, ESG performance share unit), and certifications (Sarbanes-Oxley Act Section **302** and **906**)[191](index=191&type=chunk) - The report also includes financial statements and notes formatted in Inline Extensible Business Reporting Language (Inline XBRL)[192](index=192&type=chunk) [Signatures](index=48&type=section&id=Signatures) The report is duly signed on behalf of Xylem Inc. by Geri McShane, Vice President, Controller, and Chief Accounting Officer - The report is signed by Geri McShane, Vice President, Controller and Chief Accounting Officer of Xylem Inc., on May **4**, **2021**[195](index=195&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 Xylem Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) ...

[Part I – Financial Information](index=4&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the three and nine months ended September 30, 2020, show a decline in revenue and net income compared to the same periods in 2019, with operating income significantly impacted by impairment charges and the balance sheet reflecting increased cash and long-term debt [Condensed Consolidated Income Statements](index=4&type=section&id=Condensed%20Consolidated%20Income%20Statements) For Q3 2020, revenue decreased to $1.22 billion from $1.30 billion in 2019, and net income fell to $37 million from $65 million, with operating income significantly affected by a $58 million goodwill impairment charge Condensed Consolidated Income Statements (in millions) | | Three Months Ended Sep 30, | | Nine Months Ended Sep 30, | | | :--- | :--- | :--- | :--- | :--- | | **(in millions)** | **2020** | **2019** | **2020** | **2019** | | Revenue | $1,220 | $1,296 | $3,503 | $3,878 | | Gross Profit | $461 | $509 | $1,304 | $1,509 | | Operating Income | $73 | $11 | $188 | $291 | | Net Income | $37 | $65 | $106 | $283 | | Diluted EPS | $0.20 | $0.36 | $0.58 | $1.56 | - A goodwill impairment charge of **$58 million** was recorded in Q3 2020, compared to a **$148 million** charge in Q3 2019[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets increased to $8.45 billion from $7.71 billion, driven by higher cash and short-term investments, while total liabilities rose to $5.57 billion due to a $1.01 billion increase in long-term debt Condensed Consolidated Balance Sheets (in millions) | | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **(in millions)** | | | | **Assets** | | | | Cash and cash equivalents | $1,402 | $724 | | Total current assets | $3,311 | $2,450 | | Goodwill | $2,795 | $2,839 | | Total assets | $8,448 | $7,710 | | **Liabilities & Equity** | | | | Total current liabilities | $1,280 | $1,501 | | Long-term debt | $3,053 | $2,040 | | Total liabilities | $5,573 | $4,743 | | Total equity | $2,875 | $2,967 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, net cash from operating activities remained stable at $454 million, while net cash from financing activities significantly shifted to a $550 million source due to new long-term debt issuance Condensed Consolidated Statements of Cash Flows (in millions) | | Nine Months Ended Sep 30, | | | :--- | :--- | :--- | | **(in millions)** | **2020** | **2019** | | Net Cash – Operating activities | $454 | $451 | | Net Cash – Investing activities | $(326) | $(185) | | Net Cash – Financing activities | $550 | $(99) | | Net change in cash and cash equivalents | $678 | $157 | - The company issued **$985 million** in long-term debt and repaid **$600 million** in short-term debt during the first nine months of 2020[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, revenue declines, restructuring charges due to COVID-19, significant impairment charges in the Measurement & Control Solutions segment, and a substantial increase in debt from a new bond issuance - The global outbreak of COVID-19 has created significant volatility and uncertainty, affecting estimates and assumptions in the financial statements[21](index=21&type=chunk) - In Q3 2020, a **$58 million** goodwill impairment charge was recorded for the Advanced Infrastructure Analytics (AIA) reporting unit due to negative volume impacts from the COVID-19 pandemic[48](index=48&type=chunk) - On June 26, 2020, the company issued **$1 billion** in new Senior Notes (the "Green Bond")[69](index=69&type=chunk) [Management's Discussion and Analysis (MD&A)](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of the COVID-19 pandemic on operations, leading to revenue and order declines across all segments, with Q3 2020 revenue falling 6.6% organically, while liquidity remains strong, bolstered by a $1 billion Green Bond issuance [COVID-19 Pandemic Impact](index=34&type=section&id=COVID-19%20Pandemic%20Impact) The COVID-19 pandemic significantly impacted Xylem, causing volume reductions across all segments and geographic regions, leading to restructuring, temporary pay cuts, and reduced capital expenditures, though global operating capacity remains over 90% - The most significant operational impacts have been volume reductions across all segments and major geographic regions[132](index=132&type=chunk) - In response to the pandemic, management initiated restructuring activities, temporary salary reductions for senior leadership, and reduced capital and discretionary spending[134](index=134&type=chunk) - Despite some production disruptions, overall operating capacity remains just over **90%** globally, with all production facilities operational[131](index=131&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) For Q3 2020, revenue decreased 5.9% to $1.22 billion, with an organic decline of 6.6%, and gross margin fell 150 basis points to 37.8% due to inflation and unfavorable mix, while adjusted operating margin decreased to 13.0% reflecting operational pressures Results of Operations (in millions) | (In millions) | Q3 2020 | Q3 2019 | Change | Nine Months 2020 | Nine Months 2019 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,220 | $1,296 | (5.9)% | $3,503 | $3,878 | (9.7)% | | Gross Profit | $461 | $509 | (9.4)% | $1,304 | $1,509 | (13.6)% | | Operating Income | $73 | $11 | 563.6% | $188 | $291 | (35.4)% | | Net Income | $37 | $65 | (43.1)% | $106 | $283 | (62.5)% | - Q3 organic revenue declined **6.6%**, driven by weakness across all segments, with Measurement & Control Solutions falling **15.2%**, Applied Water **4.0%**, and Water Infrastructure **2.1%**[153](index=153&type=chunk) - Q3 adjusted operating margin decreased to **13.0%** from **15.1%** in the prior year, primarily due to cost inflation, unfavorable volume and mix, and increased strategic investments[197](index=197&type=chunk) [Segment Performance](index=40&type=section&id=Segment%20Performance) In Q3 2020, all segments experienced organic revenue and adjusted operating margin declines, with Measurement & Control Solutions revenue falling 15.2% organically and its adjusted operating margin dropping significantly by 640 basis points to 3.6% Segment Performance (in millions) | Segment | Q3 2020 Revenue (M) | Organic Change | Q3 2020 Adj. Op. Margin | YoY Change (bps) | | :--- | :--- | :--- | :--- | :--- | | Water Infrastructure | $524 | (2.1)% | 18.5% | (110) | | Applied Water | $364 | (4.0)% | 15.9% | (110) | | Measurement & Control Solutions | $332 | (15.2)% | 3.6% | (640) | [Orders and Backlog](index=42&type=section&id=Orders%20and%20Backlog) Third-quarter 2020 orders decreased 7.4% to $1.25 billion (8.2% organically), with declines across all segments, most notably in Measurement & Control Solutions, yet total backlog increased 17.3% year-over-year to $2.19 billion - Q3 2020 orders decreased **8.2%** organically to **$1.246 billion**, with the largest decline in the Measurement & Control Solutions segment[166](index=166&type=chunk)[167](index=167&type=chunk) - Total backlog was **$2.192 billion** at September 30, 2020, an increase of **17.3%** compared to the prior year[177](index=177&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position with approximately $2.4 billion available as of September 30, 2020, bolstered by a $1 billion Senior Notes issuance in June 2020, while net cash from operations for the first nine months remained stable at $454 million - Available liquidity as of September 30, 2020, was approximately **$2.4 billion**[221](index=221&type=chunk) - In June 2020, the company issued **$1 billion** in Senior Notes to fund green projects and manage liquidity risk[217](index=217&type=chunk) - Net cash provided by operating activities for the nine months ended September 30, 2020, was **$454 million**, a slight increase from **$451 million** in the prior year[213](index=213&type=chunk) [Part II – Other Information](index=55&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various routine legal and regulatory proceedings incidental to its business operations, with further details on these matters provided in Note 18 of the financial statements - The company is involved in routine legal and regulatory proceedings related to environmental, tax, intellectual property, and other matters incidental to its business[237](index=237&type=chunk) [Share Repurchases](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2020, Xylem did not repurchase any common stock under its publicly announced program, with approximately $288 million remaining available for future repurchases as of September 30, 2020 - No shares were repurchased under the company's publicly announced plan during the three months ended September 30, 2020[239](index=239&type=chunk)[243](index=243&type=chunk) - As of September 30, 2020, **$288 million** remained authorized for purchase under the share repurchase program[239](index=239&type=chunk)[243](index=243&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 Xylem Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organizat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) India ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended 12/31/2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 Xylem Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Indian ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-35229 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of ...