Core Insights - Xylem Inc. reported adjusted earnings of $1.26 per share for Q2 2025, exceeding the Zacks Consensus Estimate of $1.14, marking a 16% year-over-year increase [1] - Revenues reached $2.30 billion, surpassing the consensus estimate of $2.21 billion, with a 6% year-over-year growth driven by strong order growth across segments [1] - Orders totaled $2.17 billion, reflecting a 4% year-over-year increase on both reported and organic bases [1] Segmental Performance - Water Infrastructure segment revenues were $650 million, up 3% year over year, with organic sales increasing by 4%, exceeding the consensus estimate of $640 million [2] - Applied Water segment generated revenues of $483 million, a 6% year-over-year increase, with organic sales up 5%, surpassing the consensus estimate of $459 million [3] - Measurement & Control Solutions segment revenues totaled $540 million, up 12% year over year, with organic sales increasing by 10%, exceeding the consensus estimate of $509 million [4] - Water Solutions and Services segment revenues reached $628 million, a 5% year-over-year increase, with organic sales also up 5%, surpassing the consensus estimate of $605 million [4] Financial Metrics - Adjusted EBITDA was $502 million, an 11.1% increase from the previous year, with a margin improvement to 21.8% from 20.8% [5] - Adjusted operating income rose to $401 million, a 13.9% year-over-year increase, with an adjusted operating margin of 17.4%, up from 16.2% [5] Balance Sheet and Cash Flow - Cash and cash equivalents at the end of Q2 were $1.17 billion, up from $1.12 billion at the end of December 2024; long-term debt decreased to $1.93 billion from $1.98 billion [6] - Net cash generated from operating activities in the first half of 2025 was $338 million, compared to $377 million in the same period last year; capital expenditure increased by 15% to $169 million [6] Shareholder Returns - Q2 EPS rose 16% to $1.26, supported by 6% revenue growth, with all segments showing year-over-year growth [7] - Dividends paid in Q2 amounted to $196 million, a 12% increase year over year, while share buybacks totaled $13 million [8] 2025 Guidance - Xylem raised its 2025 revenue outlook to $8.9 – $9.0 billion, up from the previous range of $8.7-$8.8 billion, indicating a 4-5% increase from the prior year [9] - Adjusted EBITDA margin is expected to be approximately 21.3-21.8%, reflecting an expansion of 70-120 basis points from the previous year [9] - Adjusted earnings are forecasted to be in the range of $4.70 – $4.85 per share, an increase from the previous expectation of $4.50–$4.70 [10]

Core Insights - Xylem reported revenue of $2.3 billion for the quarter ended June 2025, reflecting a year-over-year increase of 6.1% and surpassing the Zacks Consensus Estimate by 3.93% [1] - The company's EPS for the quarter was $1.26, up from $1.09 in the same quarter last year, exceeding the consensus estimate of $1.14 by 10.53% [1] Revenue Breakdown - Measurement & Control Solutions generated $540 million, exceeding the average estimate of $509.46 million by five analysts, representing a 12% year-over-year increase [4] - Applied Water revenue was $483 million, compared to the estimated $459.4 million, marking a 5.9% increase from the previous year [4] - Water Infrastructure revenue reached $650 million, surpassing the average estimate of $639.53 million, with a year-over-year change of 3% [4] - Water Solutions and Services brought in $628 million, exceeding the average estimate of $605.08 million, reflecting a 4.7% increase year-over-year [4] Adjusted Operating Income - Adjusted Operating Income for Water Infrastructure was $127 million, slightly above the estimate of $124.64 million [4] - Adjusted Operating Income for Applied Water was $94 million, significantly higher than the average estimate of $80.1 million [4] - Adjusted Operating Income for Water Solutions and Services was $106 million, exceeding the estimate of $98.21 million [4] - Corporate and other segments reported an Adjusted Operating Income of -$23 million, worse than the estimate of -$16.4 million [4] - Measurement & Control Solutions had an Adjusted Operating Income of $98 million, surpassing the estimate of $84.05 million [4] Stock Performance - Xylem's shares have returned -0.8% over the past month, while the Zacks S&P 500 composite increased by 2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

[PART I – Financial Information](index=4&type=section&id=PART%20I%20%E2%80%93%20Financial%20Information) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Xylem Inc.'s unaudited condensed consolidated financial statements, including income statements, balance sheets, and cash flows, for the periods ended June 30, 2025 [Condensed Consolidated Income Statements](index=4&type=section&id=Condensed%20Consolidated%20Income%20Statements) Xylem reported Q2 2025 revenue of **$2,301 million** and net income of **$224 million**, with diluted EPS of **$0.93**, reflecting strong year-over-year growth Q2 & H1 2025 Financial Performance (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $2,301 | $2,169 | +6.1% | $4,370 | $4,202 | +4.0% | | **Gross Profit** | $892 | $819 | +8.9% | $1,660 | $1,571 | +5.7% | | **Operating Income** | $305 | $253 | +20.6% | $536 | $462 | +16.0% | | **Net Income** | $224 | $194 | +15.5% | $391 | $347 | +12.7% | | **Diluted EPS** | $0.93 | $0.80 | +16.3% | $1.62 | $1.43 | +13.3% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Xylem's total assets reached **$17.19 billion**, with total liabilities at **$5.88 billion** and total equity at **$11.08 billion**, indicating balance sheet growth Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $4,369 | $4,098 | | **Goodwill** | $8,237 | $7,980 | | **Total Assets** | $17,191 | $16,493 | | **Total Current Liabilities** | $2,301 | $2,336 | | **Long-term Debt** | $1,928 | $1,978 | | **Total Liabilities** | $5,882 | $5,611 | | **Total Equity** | $11,081 | $10,647 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for H1 2025 was **$338 million**, a decrease from the prior year, while financing cash usage significantly decreased due to lower debt repayments Six-Month Cash Flow Summary (in millions) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | **Net Cash – Operating** | $338 | $377 | | **Net Cash – Investing** | $(140) | $(128) | | **Net Cash – Financing** | $(244) | $(419) | | **Net Change in Cash** | $49 | $(204) | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, acquisitions like Vacom Systems and EnviroMix, divestitures, and restructuring charges, providing context for financial activities - In Q2 2025, the company acquired Vacom Systems, LLC for **$42 million** in cash, accounted for as an asset acquisition[24](index=24&type=chunk) - On February 7, 2025, the company divested its Evoqua Magneto business for **$61 million**, resulting in a **$10 million** loss on the sale[27](index=27&type=chunk) - Restructuring charges of **$22 million** and **$39 million** were incurred in Q2 and H1 2025, respectively, to streamline the organization[44](index=44&type=chunk) - Post-period, on July 23, 2025, Xylem acquired EMX Holdings, Inc. (EnviroMix) for **$108 million** in cash[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 2025 financial results, highlighting a **6.1%** Q2 revenue increase, segment performance, and a raised full-year 2025 revenue growth outlook - Q2 2025 revenue increased **6.1%** to **$2,301 million**, with organic growth of **5.5%**[131](index=131&type=chunk) - Q2 2025 orders grew **4.1%** (**3.7%** organically) to **$2,174 million**[131](index=131&type=chunk) - Adjusted EBITDA margin for Q2 2025 improved by **100 basis points** to **21.8%**[131](index=131&type=chunk) - The company raised its full-year 2025 total revenue growth outlook to **4% to 5%**, with organic growth of approximately **4%**[210](index=210&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Q2 2025 revenue grew **6.1%** to **$2.3 billion**, with gross margin expanding by **100 basis points** to **38.8%** and operating margin increasing to **13.3%** Q2 2025 vs Q2 2024 Performance Summary | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $2,301M | $2,169M | +6.1% | | **Gross Margin** | 38.8% | 37.8% | +100 bp | | **Operating Margin** | 13.3% | 11.7% | +160 bp | | **Net Income** | $224M | $194M | +15.5% | - Gross margin improvement was driven by **210 basis points** from productivity savings and **130 basis points** from price realization, partially offset by **180 basis points** of inflation[154](index=154&type=chunk) [Segment Performance](index=45&type=section&id=Segment%20Performance) All segments reported organic revenue growth in Q2 2025, with Measurement and Control Solutions leading at **9.4%**, driven by smart metering backlog execution Q2 2025 Organic Revenue Growth by Segment | Segment | Organic Growth (%) | | :--- | :--- | | Water Infrastructure | 4.1% | | Applied Water | 4.7% | | Measurement and Control Solutions | 9.4% | | Water Solutions and Services | 4.6% | Q2 2025 Adjusted Operating Margin by Segment | Segment | Q2 2025 Adj. Op. Margin | Q2 2024 Adj. Op. Margin | Change (bp) | | :--- | :--- | :--- | :--- | | Water Infrastructure | 19.5% | 16.0% | +350 | | Applied Water | 19.5% | 16.0% | +350 | | Measurement and Control Solutions | 18.1% | 19.9% | -180 | | Water Solutions and Services | 16.9% | 16.5% | +40 | [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) H1 2025 cash from operations was **$338 million**, with total available liquidity of approximately **$2.2 billion**, reflecting a strong capital position despite decreased operating cash flow - Total available liquidity as of June 30, 2025, is approximately **$2.2 billion**[206](index=206&type=chunk) Six-Month Cash Flow Comparison (in millions) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | **Operating Activities** | $338 | $377 | | **Investing Activities** | $(140) | $(128) | | **Financing Activities** | $(244) | $(419) | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024 - There has been no material change in market risk disclosures since the **2024 Annual Report**[211](index=211&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[212](index=212&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter[213](index=213&type=chunk) [PART II – Other Information](index=64&type=section&id=PART%20II%20%E2%80%93%20Other%20Information) [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory proceedings incidental to its business operations, with further details in Note 18 - The company is involved in legal and regulatory proceedings incidental to its business, covering areas like environmental, tax, intellectual property, and product liability[216](index=216&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, have occurred - No material changes from the risk factors disclosed in the **2024 Annual Report** have occurred[218](index=218&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares in Q2 2025, with **$182 million** remaining authorized for future repurchases under the existing plan - No shares were repurchased under the company's publicly announced plan during the three months ended June 30, 2025[219](index=219&type=chunk)[220](index=220&type=chunk) - As of June 30, 2025, **$182 million** remains available for share repurchases under the authorized program[220](index=220&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading plans during the second quarter of 2025[223](index=223&type=chunk) [Item 6. Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files

Financial Data and Key Metrics Changes - The company reported a record adjusted EBITDA margin of 21.8%, up 100 basis points year over year [7][12] - Adjusted EPS grew by mid-teens percentage compared to the previous year [7] - Revenue growth was strong at 6% in the quarter, driven primarily by outperformance in Measurement and Control Solutions (MCS) [12][19] - Year-to-date free cash flow decreased by $61 million year over year, mainly due to outsourced water projects and timing of tax payments [13] Business Line Data and Key Metrics Changes - **Measurement and Control Solutions (MCS)**: Orders grew 12% organically, with revenue up 10% driven by energy metering demand [14] - **Water Infrastructure**: Revenue grew 4%, with demand led by treatment solutions, although orders declined by 2% due to funding delays in the UK and Canada [15] - **Applied Water**: Orders rose 4% for the sixth consecutive quarter, with revenue increasing by 5% [16] - **Water Solutions and Services**: Orders increased by 5%, with revenue growth also at 5% [17] Market Data and Key Metrics Changes - Demand for products and solutions remains resilient, particularly in smart metering, which saw double-digit growth [8] - The backlog remains strong across all segments, except MCS, which is being normalized [12] - The company noted ongoing economic challenges in China, with orders down approximately 18% year over year [54] Company Strategy and Development Direction - The company is focused on executing its transformation plan laid out at the Investor Day, which includes simplifying operations and enhancing portfolio for growth [10][22] - Recent acquisitions in advanced treatment are aimed at strengthening the growth engine and enhancing capabilities [26] - The company is committed to mitigating tariff impacts through pricing actions and supply chain adjustments [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong performance for the remainder of 2025, despite macro uncertainties [20][22] - The company raised its full-year revenue guidance to $8.9 billion to $9.0 billion, reflecting 4% to 5% total growth [19] - Management acknowledged potential impacts from tariffs and FX movements but emphasized strong demand and backlog execution [20] Other Important Information - The company has made significant progress in its simplification initiatives, which have improved productivity and customer responsiveness [9][10] - The integration of Evoqua is ahead of schedule, with strong traction on cost and revenue synergies [22][23] Q&A Session Summary Question: Update on MCS order outlook and destocking - Management noted resilient demand across the board, with expectations for MCS to return to positive book-to-bill by year-end [34] Question: Progress on simplification initiatives - Management reported tracking ahead of the timeline for simplification, with improved decision-making and customer metrics [36] Question: Applied Water segment performance and eightytwenty impact - Management highlighted strong orders and revenue growth, with eightytwenty helping to focus on growth while simplifying operations [48] Question: Municipal utility funding concerns - Management expressed confidence that Congress will appropriate funds to maintain healthy state revolving fund levels, despite concerns [90] Question: MCS legacy energy business margin drag - Management indicated that legacy projects would pressure margins in the near term but expect sequential improvement in Q4 [106]

Financial Data and Key Metrics Changes - The company reported a record adjusted EBITDA margin of 21.8%, an increase of 100 basis points year over year [6][12] - Adjusted EPS grew by mid-teens percentage compared to the previous year [6] - Revenue growth was strong at 6% in the quarter, driven primarily by outperformance in Measurement and Control Solutions (MCS) [12][20] - Year-to-date free cash flow decreased by $61 million year over year, mainly due to outsourced water projects and timing of tax payments [13] Business Line Data and Key Metrics Changes - **Measurement and Control Solutions (MCS)**: Orders grew 12% organically, with revenue up 10% driven by energy metering demand [14] - **Water Infrastructure (WI)**: Revenue grew 4%, with demand led by treatment solutions, although orders declined by 2% due to funding delays in the UK and Canada [15] - **Applied Water**: Orders increased by 4%, with revenue up 5%, driven by strength in commercial buildings [16] - **Water Solutions and Services**: Orders increased by 5%, with revenue growth also at 5%, reflecting strong execution on pricing and productivity [17] Market Data and Key Metrics Changes - Demand for products and solutions remains resilient, with strong orders pace and particularly solid growth in smart metering [7] - The backlog remains strong, exceeding $5 billion, with a book-to-bill ratio near one [12] Company Strategy and Development Direction - The company is focused on executing its transformation plan laid out at the Investor Day, which includes simplifying operations and enhancing portfolio for growth through targeted acquisitions [9][26] - Recent acquisitions in advanced treatment are aimed at strengthening the company's growth engine and enhancing capabilities [26] - The company is committed to navigating tariff uncertainties and inflation through pricing actions and supply chain adjustments [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong performance for the remainder of 2025, despite macro uncertainties [20] - The company raised its full-year revenue guidance to $8.9 billion to $9 billion, reflecting 4% to 5% total growth [20] - Management noted that while there are uncertainties around tariffs and foreign exchange movements, the team is effectively controlling internal factors [21] Other Important Information - The company has implemented simplification initiatives that have improved productivity and customer responsiveness, contributing to margin expansion [7][10] - The integration of Evoqua is progressing well, with cost synergies being delivered ahead of schedule [24] Q&A Session Summary Question: Update on MCS order outlook and destocking - Management noted resilient demand across the board, with expectations for MCS to return to a positive book-to-bill ratio by year-end [35] Question: Progress on simplification initiatives - Management reported tracking ahead of the timeline for simplification, with improved decision-making and customer metrics [36][41] Question: Applied Water performance and eightytwenty impact - Management highlighted strong orders and revenue growth in Applied Water, with ongoing focus on simplifying the business to drive growth [50] Question: Municipal utility funding concerns - Management expressed confidence that Congress will appropriate funds to maintain healthy state revolving fund levels, despite concerns about potential cuts [88] Question: MCS margin drag from legacy projects - Management indicated that legacy projects would pressure margins in the short term but expect sequential improvement in the coming quarters [106] Question: Capital deployment strategy - Management remains forward-leaning on M&A, focusing on assets that fit the strategy and have strong financial returns [80]

Xylem (XYL) came out with quarterly earnings of $1.26 per share, beating the Zacks Consensus Estimate of $1.14 per share. This compares to earnings of $1.09 per share a year ago. These figures are adjusted for non- recurring items. This quarterly report represents an earnings surprise of +10.53%. A quarter ago, it was expected that this water and wastewater treatment company would post earnings of $0.95 per share when it actually produced earnings of $1.03, delivering a surprise of +8.42%. Over the last fou ...

Financial Performance - Second quarter revenue reached $2.301 billion, representing a 6% overall growth[6] - Organic revenue growth was 6%[6] - Adjusted EBITDA margin hit a record quarterly high, expanding by 100 bps[7] - Earnings per share reached $0.93, with adjusted EPS at $1.26[6] - The company is raising its full-year revenue guidance to $8.9 - $9.0 billion, reflecting a 4-5% total growth[20] - The company is raising its full-year adjusted EPS guidance to $4.70 – $4.85[20] Segment Performance - Measurement and Control Solutions saw order growth of 12% and revenue growth of 10%[14] - Water Infrastructure experienced a 2% decline in orders but a 4% revenue growth[14] - Applied Water orders grew by 4% and revenue by 5%[14] - Water Solutions and Services orders grew by 5% and revenue by 5%[14] Tariff Impact - The company estimates a total tariff impact of $255 million on imports of $1.1 billion[17] - Net tariff exposure is estimated at $160 million after accounting for USMCA compliant imports from Mexico[17] - Tariff costs are being mitigated through pricing and supplier management[19]

[Second Quarter 2025 Earnings Release](index=1&type=section&id=Second%20Quarter%202025%20Earnings%20Release) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Xylem reported strong Q2 2025 results, exceeding expectations with 6% revenue growth and double-digit EPS growth Q2 2025 Key Financial Metrics | Metric | Value | Growth vs. Q2 2024 | | :--- | :--- | :--- | | Total Revenue | $2.3 billion | +6% (Reported & Organic) | | Reported EPS | $0.93 | +16% | | Adjusted EPS | $1.26 | +16% | | Net Income | $226 million | - | | Adjusted EBITDA Margin | 21.8% | +100 bps YoY | - CEO Matthew Pine attributed the strong performance to **disciplined execution and resilient underlying demand**, highlighting measurable gains in speed and customer responsiveness[3](index=3&type=chunk) - The expansion in adjusted EBITDA margin was primarily driven by **productivity savings and effective price realization**, which more than offset inflation and product mix impacts[4](index=4&type=chunk) [Full-Year 2025 Outlook](index=2&type=section&id=Full-Year%202025%20Outlook) Following strong Q2 performance, Xylem raised its full-year 2025 guidance for revenue and adjusted earnings per share Updated Full-Year 2025 Guidance | Metric | New Guidance | Previous Guidance | | :--- | :--- | :--- | | Reported Revenue | $8.9B - $9.0B (+4% to +5%) | +1% to +2% | | Organic Revenue | Approx. +4% | Not specified | | Adjusted EBITDA Margin | 21.3% - 21.8% | Not specified | | Adjusted EPS | $4.70 - $4.85 | $4.50 - $4.70 | - The full-year free cash flow margin guidance remains unchanged, expected to be **approximately 9% to 10%**[7](index=7&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated income statement, balance sheet, and statement of cash flows [Condensed Consolidated Income Statements](index=4&type=section&id=Condensed%20Consolidated%20Income%20Statements) The company's Q2 2025 revenue grew to $2.301 billion, with operating and net income showing significant increases Q2 Income Statement Highlights (in millions, except EPS) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $2,301 | $2,169 | | Gross Profit | $892 | $819 | | Operating Income | $305 | $253 | | Net Income Attributable to Xylem | $226 | $194 | | Diluted EPS | $0.93 | $0.80 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $17.191 billion as of June 30, 2025, supported by increases in receivables, inventories, and goodwill Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,170 | $1,121 | | Total current assets | $4,369 | $4,098 | | Total assets | $17,191 | $16,493 | | Total liabilities | $5,882 | $5,611 | | Total equity | $11,081 | $10,647 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for the first six months of 2025 was $338 million, a decrease from the prior-year period Six-Month Cash Flow Highlights (in millions) | Activity | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Net Cash – Operating activities | $338 | $377 | | Net Cash – Investing activities | ($140) | ($128) | | Net Cash – Financing activities | ($244) | ($419) | | Net change in cash | $49 | ($204) | [Non-GAAP Financial Measures and Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section defines non-GAAP metrics and provides detailed reconciliations from GAAP to non-GAAP results [Definitions of Non-GAAP Measures](index=7&type=section&id=Definitions%20of%20Non-GAAP%20Measures) Defines key non-GAAP terms like Organic revenue, Adjusted EBITDA, and Adjusted EPS used for performance evaluation - Key non-GAAP measures used by management include[20](index=20&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk): - **Organic revenue:** Excludes impacts from foreign currency translation, acquisitions, and divestitures - **Adjusted EBITDA:** Excludes share-based compensation, restructuring, and other special charges from EBITDA - **Adjusted EPS:** Excludes restructuring, amortization of acquired intangibles, and other special items from GAAP EPS [Revenue Reconciliation (Reported vs. Organic)](index=8&type=section&id=Revenue%20Reconciliation%20(Reported%20vs.%20Organic)) The reconciliation shows Q2 2025 reported and organic revenue growth were both 6% after accounting for FX impact Q2 2025 Revenue Growth Reconciliation (Xylem Inc.) | Metric | Percentage | | :--- | :--- | | Reported Revenue Growth | 6% | | Impact of Acquisitions/Divestitures | 0% | | Impact of Foreign Exchange (FX) | -1% | | **Organic Revenue Growth** | **6%** | [Adjusted Diluted EPS Reconciliation](index=9&type=section&id=Adjusted%20Diluted%20EPS%20Reconciliation) Details the adjustments of $0.33 that reconcile Q2 2025 GAAP EPS of $0.93 to an adjusted EPS of $1.26 Q2 2025 EPS Reconciliation (GAAP to Adjusted) | Metric | Per Share Amount | | :--- | :--- | | Reported Diluted EPS (GAAP) | $0.93 | | Adjustments | $0.33 | | **Adjusted Diluted EPS (Non-GAAP)** | **$1.26** | [EBITDA and Adjusted EBITDA Reconciliation](index=10&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) Reconciles net income to Adjusted EBITDA, which reached $502 million with a margin of 21.8% in Q2 2025 Adjusted EBITDA Performance (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income attributable to Xylem | $226 | $194 | | Adjusted EBITDA | $502 | $452 | | Revenue | $2,301 | $2,169 | | **Adjusted EBITDA Margin** | **21.8%** | **20.8%** | [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section outlines inherent risks and uncertainties that could cause actual results to differ from projections - The company cautions that forward-looking statements are subject to inherent risks and uncertainties[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk): - Geopolitical events and global economic conditions - Manufacturing and operating cost increases due to inflation and supply chain shortages - Cybersecurity incidents - Failure to realize benefits from the Evoqua acquisition

Core Viewpoint - Analysts forecast that Xylem (XYL) will report quarterly earnings of $1.14 per share, reflecting a year-over-year increase of 4.6%, with anticipated revenues of $2.21 billion, showing a 2.1% increase compared to the previous year [1] Earnings Estimates - Over the last 30 days, there has been a 0.2% upward revision in the consensus EPS estimate for the quarter, indicating a collective reassessment by covering analysts [2] - Revisions to earnings estimates are crucial indicators for predicting potential investor actions regarding the stock, with empirical research showing a strong correlation between earnings estimate trends and short-term stock price performance [3] Revenue Projections - Analysts predict 'Revenue- Measurement & Control Solutions' will reach $509.46 million, a change of +5.7% year-over-year [5] - The consensus estimate for 'Revenue- Applied Water' stands at $459.40 million, suggesting a change of +0.8% year-over-year [5] - 'Revenue- Water Infrastructure' is projected to reach $639.53 million, indicating a +1.4% change from the year-ago quarter [5] - The average prediction for 'Revenue- Water Solutions and Services' is $605.08 million, reflecting a +0.9% change from the prior-year quarter [6] Adjusted Operating Income Estimates - Analysts expect 'Adjusted Operating Income- Water Infrastructure' to be $124.64 million, up from $101.00 million reported in the same quarter last year [6] - The estimated 'Adjusted Operating Income- Applied Water' is $80.10 million, compared to $73.00 million in the same quarter of the previous year [7] - 'Adjusted Operating Income- Water Solutions and Services' is projected at $98.21 million, slightly down from $99.00 million reported in the same quarter last year [7] - The consensus for 'Adjusted Operating Income- Measurement & Control Solutions' is $84.05 million, compared to $96.00 million from the previous year [8] Stock Performance - Over the past month, shares of Xylem have returned +3.4%, while the Zacks S&P 500 composite has changed by +4.9% [8] - Currently, XYL holds a Zacks Rank 3 (Hold), suggesting its performance may align with the overall market in the near future [8]

Group 1 - The core recommendation for Xylem Inc. (NYSE: XYL) is a buy rating, driven by its exposure to structural water scarcity, aging infrastructure, and PFAS treatment themes, which create durable, non-discretionary demand [1] - Management's 80/20 transformation is yielding tangible margin gains, indicating effective operational improvements [1] - The investment strategy focuses on long-term investments while also considering short-term opportunities to uncover alpha, emphasizing a bottom-up analysis of individual companies' fundamentals [1] Group 2 - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]