Core Insights - Xylem's shares increased by 1.3% following the announcement of stronger-than-expected third-quarter results and an upward revision of its full-year revenue and earnings guidance [4] Financial Performance - Xylem reported third-quarter revenue of $2.27 billion, reflecting an 8% year-over-year increase on a reported basis [4]

Core Insights - Xylem Inc. reported third-quarter 2025 adjusted earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.24, representing a 23% year-over-year increase [1] - Revenues reached $2.27 billion, surpassing the consensus estimate of $2.22 billion, with a year-over-year growth of 7.8% driven by strong demand across segments [1] - Orders totaled $2.18 billion, reflecting a decrease of 0.9% year over year on a reported basis and 2% on an organic basis [1] Segment Performance - Water Infrastructure segment revenues were $656 million, up 5% year over year, with organic sales also increasing by 5%, exceeding the consensus estimate of $647 million [2] - Applied Water segment generated revenues of $456 million, a 2% year-over-year increase, with organic sales up 1%, slightly below the consensus estimate of $464 million [3] - Measurement & Control Solutions segment revenues totaled $522 million, up 14% year over year, with organic sales increasing by 11%, surpassing the consensus estimate of $503 million [3] - Water Solutions and Services segment revenues reached $634 million, a 10% year-over-year increase, with organic sales also up 10%, exceeding the consensus estimate of $605 million [4] Financial Metrics - Adjusted EBITDA was $527 million, a 17.9% increase from the previous year, with the margin improving to 23.2% from 21.2% [5] - Adjusted operating income rose to $429 million, up 22.6% year over year, with the adjusted operating margin increasing to 18.9% from 16.6% [5] Balance Sheet and Cash Flow - As of the end of the third quarter, Xylem had cash and cash equivalents of $1.19 billion, up from $1.12 billion at the end of December 2024, while long-term debt decreased to $1.91 billion from $1.98 billion [6] - In the first nine months of 2025, net cash generated from operating activities was $698 million, compared to $688 million in the prior year, with capital expenditure increasing by 12.2% to $248 million [7] Shareholder Returns - Xylem paid dividends of $293 million in the first nine months, an 11.4% increase year over year, and repurchased shares worth $14 million, down from $19 million in the previous year [8] 2025 Guidance - The company updated its 2025 revenue outlook to approximately $9.0 billion, indicating a 5-6% increase from the prior year, with adjusted EBITDA margin expected to be around 22-22.3% [10] - Adjusted earnings are forecasted to be in the range of $5.03–$5.08 per share, up from the previous expectation of $4.70 – $4.85, reflecting an increase from $4.27 per share in 2024 [11]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Revenue and Income - Revenue for Q3 2025 reached $2,268 million, a 7.8% increase from $2,104 million in Q3 2024[9] - Net income for the nine months ended September 30, 2025, was $617 million, up 9.4% from $564 million in the same period of 2024[10] - Revenue from contracts with customers for the nine months ended September 30, 2025, was $6,406 million, representing an increase of 8% compared to $5,920 million for the same period in 2024[49] - Total revenue for the three months ended September 30, 2025, was $2,268 million, an increase from $2,104 million in the same period of 2024, representing a growth of approximately 7.8%[129] - For the nine months ended September 30, 2025, total revenue reached $6,638 million, compared to $6,306 million for the same period in 2024, marking an increase of 5.3%[131] - Net income attributable to Xylem for the nine months ended September 30, 2025, was $622 million, a 10% increase from $564 million in the prior year[180] Profitability and Margins - Gross profit for Q3 2025 was $883 million, representing a gross margin of 38.9%, compared to $784 million in Q3 2024[9] - Operating income for the nine months ended September 30, 2025, was $870 million, an increase of 17.3% from $742 million in 2024[9] - Adjusted EBITDA margin improved to 23.2%, up 200 basis points from 21.2% in the prior year[144] - Operating income for Q3 2025 was $334 million, a 19.3% increase from $280 million in Q3 2024, with an operating margin of 14.7%[176] - Adjusted EBITDA for Q3 2025 was $527 million, an 18.0% increase from $447 million in Q3 2024, with an adjusted EBITDA margin of 23.2%[178] Expenses and Costs - Research and development expenses for the nine months ended September 30, 2025, totaled $166 million, a decrease of 3.5% from $172 million in 2024[9] - Total operating expenses for the three months were $549 million, an 8.9% increase year-over-year, resulting in an expense to revenue ratio of 24.2%[150] - SG&A expenses increased by $29 million to $474 million, or 20.9% of revenue, in Q3 2025, driven by $15 million in strategic investments and $13 million in inflation[170] - Restructuring charges for Q3 2025 were $23 million, significantly higher than $4 million in Q3 2024, reflecting efforts to streamline operations[172] Acquisitions and Divestitures - The company acquired Vacom Systems, LLC for a total cash consideration of $42 million, with $37 million paid at closing and the remainder to be paid over the next 12 to 18 months[25] - The company acquired Simply Clean Air and Water, Inc. for a net cash acquisition price of $7 million[27] - The acquisition of EMX Holdings, Inc. was completed for a total fair value of consideration transferred of $106 million, paid in cash[29] - The company divested its Evoqua Magneto business for a cash selling price of $61 million, resulting in a loss of $8 million[34] - The company acquired a 25.1% equity interest in Global Omnium Idrica, S.L. for $51 million, later increasing its stake to 61.0% for $154 million[38][39] Assets and Liabilities - Total assets increased to $17,295 million as of September 30, 2025, compared to $16,493 million at the end of 2024[12] - Cash and cash equivalents at the end of Q3 2025 were $1,191 million, up from $1,121 million at the end of 2024[12] - As of September 30, 2025, total debt outstanding was $1,962 million, with long-term debt amounting to $1,913 million[84] - The balance of stockholders' equity as of September 30, 2025, is $11,219 million, reflecting an increase from previous periods due to net income and other comprehensive income[103] Shareholder Information - Basic earnings per share for Q3 2025 were $0.93, an increase from $0.89 in Q3 2024[66] - Dividends declared for the nine months ended September 30, 2024, totaled $261 million, with a consistent rate of $0.36 per share[104] - The company repurchased 0.1 million shares of common stock for $14 million during the nine months ended September 30, 2025[116] - The company has up to $182 million in shares that may still be purchased under its share repurchase program as of September 30, 2025[116] Segment Performance - Segment operating income for Water Infrastructure was $113 million for Q3 2025, compared to $96 million in Q3 2024, reflecting a year-over-year increase of 17.7%[130] - Operating income for the Water Infrastructure segment increased by 26.5% to $296 million, with an operating margin of 15.7%[182] - Measurement and Control Solutions segment reported a 9.8% increase in adjusted operating income to $270 million, with an adjusted operating margin of 17.4%[182] - Water Solutions and Services segment's adjusted operating income increased by 12.7% to $311 million, with an adjusted operating margin of 17.0%[182] Future Outlook - The company anticipates continued growth in revenue and operating margins, supported by strategic investments in new technologies and market expansion initiatives[138] - The company faces risks including supply chain disruptions, inflation, and geopolitical events that could impact future performance[139]

Financial Data and Key Metrics Changes - Revenue grew by 7% in Q3 2025, driven by strong performance in Measurement & Control Solutions and Water Solutions & Services [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments [10] Business Line Data and Key Metrics Changes - Measurement & Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [13] - Applied Water reported a 1% revenue increase, with EBITDA margin expanding by 310 basis points to 21.7% [14] - Water Solutions & Services experienced a 10% revenue growth, despite an 11% decline in orders [15] Market Data and Key Metrics Changes - Orders were down 2% in Q3, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains strong at approximately $5 billion, indicating healthy demand across the business [10] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][11] - The ongoing simplification efforts and 80/20 implementations are driving margin improvement and resource allocation towards high-value opportunities [7][8] - The company is optimistic about long-term growth, particularly in digital water solutions and partnerships with major clients like Amazon [18][20] Management's Comments on Operating Environment and Future Outlook - Management raised full-year guidance for revenue, margin, and EPS, reflecting confidence in the team's ability to deliver commitments amid macro uncertainty [8][16] - The company anticipates continued momentum through the end of the year, supported by strong demand and backlog execution [17][20] - Management remains cautious about the impact of tariffs and FX movements but believes they can offset these through pricing actions [15][17] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations of a slight margin dilutive effect [15] - The company is committed to maintaining a strong balance sheet, with net debt to adjusted EBITDA at 0.4 times [10] Q&A Session Summary Question: Can you continue to get margin improvement into 2026 and beyond? - Management indicated that there is likely some upside to long-term targets, with a focus on delivering 2025 commitments first [26][28] Question: How is the demand in Measurement & Control Solutions shaping up for 2026? - Demand remains healthy, with a strong backlog and expectations for continued growth in both water and energy meters [29][30] Question: What are the impacts of the government shutdown on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [36] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing divestitures expected [39][40] Question: How does the company plan to manage the challenges in China? - The company is restructuring in China, reducing the workforce by around 40% to align with market demand [79]

Financial Data and Key Metrics Changes - Revenue grew by 7% in the quarter, driven by strong performance in Measurement and Control Solutions (MCS) and Water Solutions and Services (WSS) [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments, but offset by higher net income and improved net working capital [10] Business Line Data and Key Metrics Changes - Measurement and Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [13] - Applied Water reported a 1% revenue increase, marking its seventh consecutive quarter of order growth, with an EBITDA margin expansion of 310 basis points to 21.7% [14] - Water Solutions and Services experienced a 10% revenue growth, despite an 11% decline in orders [15] Market Data and Key Metrics Changes - Orders were down 2% in the quarter, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains robust at approximately $5 billion, with a book-to-bill ratio near one [10] - The company anticipates continued momentum in North America, with expectations for double-digit growth in water meter projects [30] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][10] - The ongoing simplification efforts and 80/20 implementations are driving margin improvement and resource allocation towards high-value opportunities [7][8] - The company raised its full-year guidance for revenue, margin, and EPS, reflecting confidence in its ability to deliver commitments amid macro uncertainties [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, particularly in digital water solutions and partnerships with major clients like Amazon [18][20] - The company is navigating macro uncertainties, including tariffs and foreign exchange movements, but remains confident in its operational execution and demand [17][20] - Management noted that while there are challenges in China, they are right-sizing the business to align with current market demand [79] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations to offset this through pricing actions and supply chain adjustments [15] - The company is committed to maintaining a strong balance sheet, with a net debt to adjusted EBITDA ratio of 0.4x [10] Q&A Session Summary Question: What is the potential for EBITDA margin improvement in 2026 and beyond? - Management indicated that there is likely upside to long-term targets, with a focus on delivering 2025 commitments first [26][28] Question: How is the demand landscape shaping up for MCS? - Demand remains healthy, with a strong pipeline and expectations for high single-digit growth in 2026 [29][30] Question: What impact is the government shutdown having on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [36] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing efforts to simplify operations and improve margins [39][40] Question: How does the company plan to manage the challenges in China? - The company is restructuring its operations in China, reducing workforce size to align with market demand while maintaining a long-term positive outlook for the region [79][80]

Financial Data and Key Metrics Changes - Revenue grew by 7% in Q3 2025, driven by strong performance in Measurement & Control Solutions and Water Solutions & Services [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments [10] Business Line Data and Key Metrics Changes - Measurement & Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [12] - Applied Water experienced a 1% revenue increase, with EBITDA margin expanding by 310 basis points to 21.7% [13] - Water Solutions & Services revenue grew by 10%, with an EBITDA margin of 26.3% [14] Market Data and Key Metrics Changes - Orders were down 2% in Q3, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains strong at approximately $5 billion, indicating healthy demand across the business [10] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][11] - The ongoing simplification efforts and 80/20 implementations are aimed at driving margin improvement and resource allocation [6][7][20] - The company raised its full-year guidance for revenue, margin, and EPS, reflecting confidence in its ability to deliver commitments despite macro uncertainties [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, particularly in digital water solutions and partnerships with major clients like Amazon [18][19] - The company is navigating macro uncertainties, including tariffs and FX movements, but remains confident in its operational execution and demand [17][20] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations to offset this through pricing actions and supply chain management [15] - The company is committed to maintaining a strong balance sheet, with net debt to adjusted EBITDA at 0.4 times [10] Q&A Session Summary Question: What is the potential for EBITDA margin improvement in 2026 and beyond? - Management indicated that there is likely upside to long-term targets, with a focus on delivering 2025 commitments and ongoing transformation efforts [24][25][26] Question: How is the demand landscape shaping up for Measurement & Control Solutions? - Demand remains healthy, with a strong backlog and expectations for continued growth in both water and energy meters [27][28] Question: What impact is the government shutdown having on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [32] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing efforts to simplify operations and improve resource allocation [34][35] Question: How does the company plan to address the challenges in the Chinese market? - The company is restructuring its operations in China, reducing workforce size to align with current demand levels while maintaining a long-term positive outlook for the market [70][71]

Core Insights - Xylem reported quarterly earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.24 per share, and showing an increase from $1.11 per share a year ago, resulting in an earnings surprise of +10.48% [1] - The company achieved revenues of $2.27 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.98% and up from $2.1 billion year-over-year [2] - Xylem's stock has increased by approximately 28.8% since the beginning of the year, outperforming the S&P 500's gain of 16.9% [3] Earnings Outlook - The future performance of Xylem's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is $1.31 on revenues of $2.37 billion, and for the current fiscal year, it is $4.84 on revenues of $8.96 billion [7] Industry Context - The Waste Removal Services industry, to which Xylem belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, indicating potential challenges ahead [8] - Another company in the same industry, Select Water Solutions, is expected to report a significant decline in earnings, with a projected EPS of $0.05, reflecting a year-over-year change of -66.7% [9]

2025 Third Quarter Results and Earnings October 28, 2025 Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words "anticipate," "estimate," "expect," "project," "intend," "plan," "contemplate," "predict," "forecast," "likely," "believe," "target," "will," "could," "would," "should," "potential," "may" and similar expre ...

Financial Performance - Total revenue for Q3 2025 was $2.3 billion, representing an 8% increase on a reported basis and a 7% increase organically[5] - Adjusted earnings per share (EPS) for Q3 2025 were $1.37, up 23% compared to the previous year, while reported EPS was $0.93, up 4%[5] - Net income attributable to Xylem for the quarter was $227 million, with a net income margin of 10.0%, a decline of 30 basis points year-over-year[3] - The company reported a gross profit of $883 million for Q3 2025, compared to $784 million in Q3 2024[16] - Net income for the nine months ended September 30, 2025, was $617 million, an increase of 9.4% compared to $564 million in 2024[18] - Total revenue for the nine months ended September 30, 2025, was $6,638 million, reflecting a 5% increase from $6,306 million in 2024[30] - Operating income for Q3 2025 was $429 million, up from $350 million in Q3 2024, reflecting an increase of 22.6%[31] - Net income attributable to Xylem for Q3 2025 was $333 million, compared to $269 million in Q3 2024, marking a 23.8% increase[31] Guidance and Projections - Xylem raised its full-year 2025 revenue guidance to approximately $9.0 billion, an increase of 5 to 6% on a reported basis[6] - Full-year adjusted EPS guidance for 2025 is now projected to be between $5.03 and $5.08, up from the previous range of $4.70 to $4.85[7] Margins and Profitability - Adjusted EBITDA margin for Q3 2025 was 23.2%, reflecting a year-over-year increase of 200 basis points driven by productivity savings and strong price realization[4] - Adjusted EBITDA for Q3 2025 reached $527 million, representing a 17.9% increase compared to $447 million in Q3 2024[35] - Adjusted EBITDA margin improved to 23.2% in Q3 2025 from 21.2% in Q3 2024[35] - The company reported a net income margin of 10.0% for Q3 2025, compared to 10.3% in Q3 2024[35] Cash Flow and Assets - Cash and cash equivalents increased to $1.191 billion from $1.121 billion year-over-year[17] - Operating cash flow for the same period was $698 million, slightly up from $688 million in 2024[18] - The company reported a free cash flow of $450 million for the nine months ended September 30, 2025, after accounting for capital expenditures[27] - The company’s total cash and cash equivalents at the end of the period were $1,191 million, compared to $989 million at the end of the previous year[18] - Total assets as of September 30, 2025, were $17.295 billion, an increase from $16.493 billion at the end of 2024[17] Expenses and Costs - The company experienced a decrease in interest expense, contributing to improved net income despite increased losses from the sale of businesses[3] - The interest expense decreased to $6 million in Q3 2025 from $10 million in Q3 2024[31] - Restructuring and realignment costs for Q3 2025 amounted to $30 million, compared to $11 million in Q3 2024[33] - The company’s adjusted operating income for the nine months ended September 30, 2025, was significantly impacted by restructuring and realignment costs[25] Dividends and Shareholder Returns - Dividends paid during the nine months ended September 30, 2025, amounted to $293 million, an increase from $263 million in 2024[18] Business Sales and Losses - The company experienced a loss from the sale of business amounting to $47 million in 2025, compared to $6 million in 2024[18] - The company experienced a gain from the sale of business of $37 million in Q3 2025, compared to a loss of $2 million in Q3 2024[31]