Xylem(US:XYL)2022-05-04 17:35Financial Data and Key Metrics Changes - Revenues grew 4% organically, surpassing guidance, with EBITDA margin performance above previous guidance due to strong price realization [9][11] - EPS for the quarter was $0.47, again above expectations [11][18] - EBITDA margin was 14.2%, which was above the guided range, but contracted 290 basis points year-over-year due to inflation and lower volumes from chip shortages [18][28] Business Line Data and Key Metrics Changes - Utilities segment revenue decreased by 3%, impacted by chip supply constraints [17] - Industrial segment grew 10%, with strong performance across all geographies, excluding China [17] - Commercial segment revenue increased by 11%, driven by growth in the U.S. [17] - Residential segment revenue rose by 15%, also driven by the U.S. [17] - Measurement & Control Solutions (M&CS) orders grew 25% organically, but revenue declined 9% due to chip supply constraints [25][26] Market Data and Key Metrics Changes - Western Europe delivered 10% growth, while emerging markets grew high single digits, excluding China [10][16] - China, accounting for roughly 7% of total revenue, faced significant impacts from COVID, with expected revenue declines in the first half of the year [74][75] Company Strategy and Development Direction - The company is raising its guidance for the year due to strong demand and higher price realization [13][30] - A strategic shift towards unifying and simplifying segment and regional leadership was announced to enhance customer access to offerings [36][39] - The company is focused on sustainability, having reduced greenhouse gas intensity by 12% since 2019 [42][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the structural demand across all end markets and regions, despite challenges from chip shortages and inflation [12][34] - The company anticipates continued strong demand and is optimistic about the gradual improvement in chip supply [32][34] - Management highlighted the importance of maintaining strong relationships with customers and suppliers to navigate current challenges [93][114] Other Important Information - The company has a robust financial position with $1.1 billion in cash and available liquidity of approximately $1.9 billion [28] - The headquarters is moving to Washington, D.C., to better position itself within the global water sector [62][63] Q&A Session Summary Question: Update on M&CS and chip shortage - Management confirmed no cancellations of deals and expressed confidence in the margin profile of new orders [69][71] Question: Impact of China on revenue - Revenue exposure in China is about $350 million, with expected declines in the first half but a recovery anticipated in the second half [74][75] Question: Utility sector momentum - Management sees strong demand and a healthy bidding pipeline, with no immediate concerns about derailing momentum [80][82] Question: Backlog visibility - Backlog provides good coverage for the next couple of quarters, with M&CS backlog expected to take about two years to catch up on demand [84][85] Question: Capital allocation and share repurchases - Management remains open to using equity for M&A but emphasizes a disciplined approach to valuation [90][91] Question: Price/cost dynamics - Management expects price realization to improve throughout the year, with a positive outlook for the full year [106][110]