Xylem(XYL) - 2024 Q3 - Quarterly Results

Performance Summary and Outlook Xylem reported strong third-quarter earnings and robust order growth, leading to narrowed full-year guidance Third Quarter 2024 Performance Highlights Xylem reported modest revenue growth but strong earnings and robust order demand in Q3 2024 Q3 2024 Key Financial Metrics | Metric | Value | Growth (YoY) | | :--- | :--- | :--- | | Revenue | $2.1 billion | 1% (Reported & Organic) | | Orders | - | 8% (Reported & Organic) | | Earnings Per Share (EPS) | $0.89 | 41% | | Adjusted EPS | $1.11 | 12% | Management Commentary Management highlighted strong earnings, margin expansion, resilient demand, and accelerated Evoqua integration - The management team emphasized strong earnings and margin expansion, which beat internal expectations[2] - Demand remained resilient, evidenced by robust orders growth across all segments[2] - The integration of Evoqua is progressing ahead of schedule, with synergy capture accelerating and expected to close the year above target[2] Full-Year 2024 Outlook Xylem updated its full-year 2024 guidance, projecting $8.5 billion in revenue and adjusted EPS between $4.22 and $4.24 Updated Full-Year 2024 Guidance | Metric | Guidance | | :--- | :--- | | Revenue | $8.5 billion | | Reported Revenue Growth | ~15% | | Organic Revenue Growth | ~5% | | Adjusted EBITDA Margin | ~20.5% | | Adjusted EPS | $4.22 to $4.24 | | Free Cash Flow Conversion | At least 120% of Net Income | Financial Statements Xylem's financial statements reflect improved profitability and cash flow, alongside a strengthened balance sheet Condensed Consolidated Statements of Income Xylem's Q3 2024 income statement shows slight revenue growth but significant increases in operating income and net income Q3 Income Statement Highlights (in millions, except EPS) | Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $2,104 | $2,076 | +1.3% | | Gross Profit | $784 | $764 | +2.6% | | Operating Income | $280 | $191 | +46.6% | | Net Income | $217 | $152 | +42.8% | | Diluted EPS | $0.89 | $0.63 | +41.3% | Condensed Consolidated Balance Sheets As of September 30, 2024, Xylem's balance sheet reflects a slight decrease in total assets, a reduction in total liabilities, and an increase in stockholders' equity Balance Sheet Summary (in millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $4,013 | $3,884 | | Total Assets | $16,046 | $16,112 | | Total Current Liabilities | $2,052 | $2,205 | | Total Liabilities | $5,446 | $5,936 | | Total Stockholders' Equity | $10,593 | $10,166 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, operating cash flow significantly improved, while investing and financing activities resulted in net cash outflows Nine-Month Cash Flow Summary (in millions) | Activity | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Net Cash – Operating | $688 | $382 | | Net Cash – Investing | ($193) | ($539) | | Net Cash – Financing | ($520) | ($71) | | Net Change in Cash | ($30) | ($239) | Non-GAAP Financial Measures and Reconciliations Xylem provides non-GAAP financial measures to offer a clearer view of its operational performance and facilitate comparability Explanation of Non-GAAP Measures Xylem uses non-GAAP measures like Organic Revenue, Adjusted EBITDA, and Adjusted EPS to provide a clearer view of operational performance - Key non-GAAP metrics used by management include Organic Revenue/Orders, Constant Currency results, Adjusted EBITDA, Adjusted Operating Income, Adjusted Net Income, Adjusted EPS, and Free Cash Flow[17] Orders Reconciliation (Reported vs. Organic) Q3 2024 orders grew 8% on both a reported and organic basis, driven by strong performance in Measurement and Control Solutions and Water Solutions and Services Q3 2024 Orders Growth by Segment (YoY) | Segment | Reported Growth | Organic Growth | | :--- | :--- | :--- | | Xylem Inc. | 8% | 8% | | Water Infrastructure | 7% | 6% | | Applied Water | 4% | 4% | | Measurement and Control Solutions | 13% | 12% | | Water Solutions and Services | 11% | 11% | Revenue Reconciliation (Reported vs. Organic) Q3 2024 total revenue grew 1% reported and organic, with varied segment performance including strong growth in Measurement and Control Solutions Q3 2024 Revenue Growth by Segment (YoY) | Segment | Reported Growth | Organic Growth | | :--- | :--- | :--- | | Xylem Inc. | 1% | 1% | | Water Infrastructure | 2% | 1% | | Applied Water | (4)% | (4)% | | Measurement and Control Solutions | 11% | 11% | | Water Solutions and Services | (2)% | (1)% | Net Income and EPS Reconciliation Xylem reconciled Q3 2024 GAAP net income of $217 million to an adjusted net income of $269 million, resulting in adjusted diluted EPS of $1.11 Q3 2024 GAAP to Non-GAAP Reconciliation (in millions, except EPS) | Metric | As Reported (GAAP) | Adjustments | As Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Operating Income | $280 | $70 | $350 | | Net Income | $217 | $52 | $269 | | Diluted EPS | $0.89 | $0.22 | $1.11 | EBITDA Reconciliation Xylem reconciled Q3 2024 net income of $217 million to an Adjusted EBITDA of $447 million, achieving a 21.2% Adjusted EBITDA margin Q3 2024 Net Income to Adjusted EBITDA Reconciliation (in millions) | Line Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net Income | $217 | $152 | | D&A, Interest, Taxes | $198 | $186 | | EBITDA | $415 | $338 | | Other Adjustments* | $32 | $73 | | Adjusted EBITDA | $447 | $411 | | Adjusted EBITDA Margin | 21.2% | 19.8% | - *Other Adjustments include Share-based Compensation, Restructuring & Realignment, Special Charges, and Loss/Gain from sale of business[26][27]