Xylem (XYL) 2 Nov 212021 Q3 Earnings call transcript

Company Profile

Participants

Matt Latino	Vice President of Investor Relations
Patrick Decker	Chief Executive Officer
Sandy Rowland	Chief Financial Officer
Tony Milando	Chief Supply Chain Officer
Scott Davis	Melius Research
Andy Kaplowitz	Citigroup
Saree Boroditsky	Jefferies
Andrew Buscaglia	Berenberg
Nathan Jones	Stifel
Connor Lynagh	Morgan Stanley
Pavel Molchanov	Raymond James
Brian Lee	Goldman Sachs
Ryan Connors	Boenning and Scattergood

Call transcript

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Operator

Welcome to the Xylem Third Quarter 2021 Earnings Conference Call [Operator Instructions]. I would now like to turn the call over to Matt Latino, Vice President of Investor Relations.

Matt Latino

Thank you, Ashley. Good morning, everyone, and welcome to Xylem's third quarter earnings conference call. With me today are Chief Executive Officer, Patrick Decker; and Chief Financial Officer, Sandy Rowland. Supply is Chief call. joining our Milando, Chain also Officer, today's Tony will Xylem's outlook. on their quarter They perspective our third provide results and

Following call will information our we related prepared the to address covered Instructions]. [Operator questions the on remarks,

be midnight As telephone of accompanied a at a be today's available Investors of call slide are at replay site until the by our in will reminder, Web or and on available www.xylem.com. XXX-XXXX webcast The X(XXX) call section this will November our Xth. presentation A X(XXX) available replay XXX-XXXX.

available call will heading playback the to section Additionally, Investors Please of Events. Web be Slide the for under via site the X. turn our Investor

including obligation note including the period ending Please Form for company results provided the reflect in or XX, statements and XXXX. statements undertakes on and references We or These XX-Q as recent an to our may could September indicated. will references XX-K Form those GAAP publicly also otherwise forward-looking summary call, the with reports SEC, adjusted described risks such circumstances, or you differ and including performance to report events to both will no annual organic in or in we factors have to will forward-looking unless are events to future. update that results events Xylem's the most be filed anticipate with make occur we a in statements on subsequent and metrics, actual our materially on All uncertainties, In the from today's anticipated. subject or basis some future non-GAAP subsequent developments appendix, those of metrics. that report future key

you on and all are otherwise For and presentation. references basis, call, for in have financials will today's unless the been appendix the the an reconciled purposes of organic be indicated. Non-GAAP adjusted of

turn and to turn please X, to Slide Patrick CEO, over Decker. the I'll call Now our

Patrick Decker

growth demand the margins by will above expectations. commercial growth are constraints the you $XXX is to our all driving last roughly chain we and to water that XX% solution large volume executing in earnings and you a backlog particularly on And $X.XX, sector growth solutions. share that the impact and our year for year is full up delivered for guidance with probable year Xylem, and our clear like have of performance margins which as to we're growth ago, environment. and the pace up on our of between our momentum first of a businesses on quarter, the quarters, in underlying anticipate team those strong above supply over the reflects now, our The fast joining orders Nevertheless, a solutions, range so quarter at especially geographies. represents players revenue, expand to bring revenue with view. Matt. full A and the revenue. market raised solid demand strategy us. $X.XX digital in supply-driven half moderate and driving EPS end affecting our of in we're orders challenges By morning, thank the now The will adjusted the chips, of continues global slowed everyone, robust components, orders other continued, million markets privileged saw trends year. driven first EPS for and growth XX%. constraints reflecting into digitize. digital sustainable we continues X% team Macro second a X% The which has and full the volume That be and continuing ongoing segments, third drive in the to in. shortage of portfolio seen Good reflects in to Having we Thanks, orders durable that XX% per conversion month increasing earnings microcontrollers indicated on with year position electronic

has The what today. while This headwinds detail, team those join cost. us addressing look Milando, been see of you. to and shown impact its year. Sandy, that to conditions. that Tony first, capture given to team and discipline ability Chain some landscape vivid Supply end real discussion to also the those seeing how quarter hand color in provide additional trends. showing to Chief the is a turn volume, on of we'll Still, the has demonstration demand invited having are call the on supply more market then quarter on we'll I've But me of the a let on our to we Sandy through over at Officer, the over third that the we're

Sandy Rowland

particular the while growth prior was conversion, the up and I'll Patrick. strong market, and our was detail. Geographically, compared the in Europe X% by residential, X%. led declined X, you, Thank Emerging turn Slide Please up our high down order continued Emerging The XX%, year. supply in America. especially Western and was Revenue was was up Markets market, largest Europe. our impacts in with XX%, despite US driven by M&CS ongoing while chip shortages, organically slowing was Utilities, chain modestly. cover digits, Eastern to Industrial end to recovery led Western the strength United up decline QX grew X% Latin continuing smallest single mid-single digits in grew Commercial on demand. Markets results more States, by end Europe deliveries.

delivered team regions. the and mentioned, was segments Patrick all which across exceptional broad XX%, based of growth organic orders As

of on growth, point metering realization, overall of And will order expected, year year longer fact, in and way of any the times history. orders led by in volume XX% into continue -- seeing nearly momentum QX the driven previous large an prior COVID-XX XXXX. impacted is the through we demand wins, than pent-up at In as quarter ramping year-to-date backlog lead XX%. and smart the higher contract which this exiting company impact price are We're XX% M&CS with a with from year. positive

X% regions. other key at and up and coming quarter. investments our Year-over-year, $X.XX. orders XX Emerging down were were Revenues to productivity Slide and our Emerging forecasted margin based I'll benefits Slide on EBITDA productivity XX% in productivity review contracted Industrial points than cost EBITDA applications organically Wastewater points was the were delivered from per were were year inflation industrial the strong and the Slide ocean please over and Margins year recovery. and contributed in the mostly were X. leverage Utilities to above organically increasing Water industrial margin Applied OpEx US the to realization. Markets largely Western X, Western segment. more the Regionally, growth high shipping. investments than applications. our & dewatering and to X% growth and contracted were and XX volume performance basis EBITDA Europe. demand at strength was The X% quarter as broad US continued led Solutions in orders mentioned. moment realization Control price Europe. up XX% were range Earnings and and recovery margin compared offset now orders Europe In a the turn inflation productivity, strong organically. offset In commercial slightly Western M&CS, on shipping uplift strength strength prior and modestly margins volume up for I price prior in as control activity. in cost XX% Looking cover across team. in EBITDA driven savings, turn Markets transport China on wastewater Measurement inflation growth as US and turn and offset by ago. commercial in momentum modestly, most X% due commercial due up realization I digit quarter Eastern the broad basis growth, in Residential to investments. Infrastructure, Revenue expanded containment. Segment metrics. in spending the both good the due by was up industrial share Water, was I'll Europe XX.X%, all to And and in also from to grew delays Geographically, to single resilient Please wastewater by as by mentioned with reflecting gains down strategic in the quarter In regions. up, segment Please and industrial. just more delays financial industrial moderated constraints. price continued due X

tangible chip The now accelerates. M&CS Organic customer effect at chip X%, digital digital Our which roughly greater pipeline for is was and to down revenue test from very bidding our stands shortages. metrology $X.X a technologies applications metering. advanced as backlog lower billion. down demand of of By geography, active for let's Markets composition smart declines modestly businesses to year to from Due in Segment exposure growth as largely Water services it prior compared single X offset points position. portfolio, the margin EBITDA company's the an in while inflation down was Slide up productivity The overview cash and as XX realization. flat. And price was quarter financial of Europe volume and to X% shortages the flows turn now digits. Western shortages. basis Emerging was component and higher down mid US offset has a sales were our assessment the remains was

year the free I'll with call very turn Net strong. X be closed cash quarter cash was the billion Slide debt-to-EBITDA third after we We And of cash in $XXX over to Free XX% was now please the XX% quarter. with to continue conversion financial in in at the of flow end in full line million continues the expect the Our X.X turn and to to conversion back debt leverage paying and times of position Patrick. $X.X down quarter quarter. expectations, to our XX%. flow

Patrick Decker

special earnings team The want Sandy. pulling all delivering a in I care shout-out solid great and despite supply They've difficult Thanks, teams. unusual to a challenges. stops service to job a circumstances. out our quarter's the for the been chain done give sales, customers has to our clearly

now the the to we been environment on actions look turn detail provide seeing forward. and the attention, we've chain more taking. quarter to supply what Since has everybody's want Let's and we're

Supply us over walk Tony that. to to Officer, asked our Milando, I've Chief Chain through So you. Tony,

Tony Milando

of and dimensions with various of you across segments are each in stress our microcontrollers Thank you, all particular Material chain Patrick. on sure supply of some challenges I'm sectors. effect familiar least chips. having the at already with other are on the shortages many

continued the logistics where manufacturing, addition, also in carry particularly significant we is labor have tightness have times In to We're low. at US. seeing reliability an all-time and in lengthen markets

we're than taking lot freight chains. contributed short advantage beyond. about manufacturers term with and rationalization. carriers the challenges working and managing has product to We're and this of with two border there's we're sourcing. thing SKU are with to well allocations a ahead components more both slightly months actions. inflation directly all and We've horizon, committing and of around or up rounds course, resilience options this further XXXX longer been using and term, create of technology that, to In One beyond actions with a supply end access times. improve dedicated to short to around usual. life, opportunity we've to that labor. mitigations mention, teams accelerated our smaller of ports value albeit unavailable nearing strategic commodities, into greater And firm time gain the thus logistics boat redesign to more nearly discussion cross Of dual accelerate fast we're take across term We're lead engineering To

Our because nearly current in the markets cases, as aren't seen global that localization hitting challenges emerging on simply strategies supply we What is we've developed depend have largely established well several markets hard, chains. our there.

supply that drive evaluating of the point, the that's overview. sell, we'll domestic of chain. our shortening we to to continue making where strategy benefit Patrick, So always

Of happy to into go more in to Q&A. detail get response questions course, perhaps we to when I'm

Patrick Decker

Tony. you, Thank

serve as to suppliers doing close So at not active, pace our cancellations. we risk and Bidding as It's project be orders now served are everything demand. keep turn, to are turning them we to them from and in are to We're and, our essentially supply to we to communities. customers pipelines seeing very continues help the their can staying story. opposite

headwinds. is constraints These them continues Xylem getting that we What of hear to deployments last our from analytics. the And networks flexible join from term their water continue the In durable with possible. we the challenges we supply On they're for them. of sustainable they're to from gas zero forefront vantage causes net is technology mind driving of as demand, and their utility the announced value are are short of for sector point, grow. emissions the term, the more top A XXX annual market all greenhouse example being nearly science commitment today's to Xylem's about these they're had digitizing at supply the are and User us our Just and solutions. as who seeing wide, growing week, industry trends longer operators Conference. of so advanced One patient to the based AMI same are than at staying Reach month ago, targets. customers

water leaders Over force the already Conference XX utilities encourage call the and a world which it's in they is two sharing utility at be be decarbonizing entire as their the with around on of commitments same. water movement Glasgow will aim Xylem weeks, turning that's utilities the will the than in peers so More done next just reflection to the the platforms affordably Climate toward sector. sector also to trend COPXX COP the of technologies out at make to gaining decarbonize that have momentum, one systems. around water net world the zero do

in markets, going the lay end back I'm for the seeing Turning our detail on the what to over share term some of we're balance it Sandy near hand to guidance to back to and our out year. drivers to

Sandy Rowland

clean our full of largely come markets underlying end both from we immediate high outlook in for Patrick. a for In water. single digits of in strong down from our with continues the Thanks, term, last the range consistent technologies year will very be growth utilities, quarter, to and expect flat. with to The mid demand to wastewater view utilities. exception our remains But

efforts volume. on Western OpEx but growth wastewater and On utility US the the revenue localization capital Emerging challenged Markets solid by large as in is Europe performance our remain rates result continued seen side, Order we on and projects of have steady a growth resilient there. in in constraints

water water offerings solutions demand side, be smart continues for clean the robust. On and to digital

with particularly And commentary, end water consistent to XX. the chip is now earlier our clean However, impact the shortages of in acute please turn Slide market.

rebounding single we and at Emerging to market, strength based segments of Looking driven end and also industrial We're growing the healthy the across in share seeing as introductions with industrial The the OEMs, is by ongoing product with in regions. broad most Western demand anticipate in digits. growth continue the industrial activity hospitality in gains de-watering in high and marine Markets our We're in beverage, all outdoor food recovery and as new impact Europe. well seeing the and continuing recreation sector. business

pace our We new to for begins recover the market. leading product commercial XX our let's new growth outlook is continuing teens to backlog single a US are mandates. now expectations growth The strength brisk indicators turn recovery optimism digit walk reflect and also continues in end you and maintaining to full Sustained and and continuing And the high our to the sector. introductions as building ramp, at efficiency business maintaining guidance. for from key low commercial institutional Western and in we're mid of coming on residential, momentum. Slide of I'll market updated through In China Europe energy in year

adverse Xylem overall, see year X% to For This effects breaks This previous down X%, the disruptions. growth shortages segment and reflects follows. down range the chain now guidance chip range revenue of X%. we X% supply the in by from other of as to organic revenue full of

maintain For expectations Infrastructure, of digit Water our single growth. mid we

single digits. Water, digit down digits. down up single growth expect low to in Solutions, rather Measurement now single be than expect Control double in we mid digits And high mid & from Applied We

expecting XX.X% points. now XX.X% range margins to roughly range compared expansion our of We This in of XX.X% are to to the basis XX.X%. guidance margin year of guidance previous full EBITDA XXX represents

Our year in increase flow free to last conversion $X.XX largely reflects with are our a assumptions provided adjusted of XX% year. the XX% EPS is around your assumptions is previous cash three right guidance at from supplement EPS to which, midpoint, XXXX $X.XX other Those guidance unchanged now with putting to XXX%. in at year We've guidance. Full full average line original over our you models. XX%, year number

updated euro rate our included And as typical to you X.XX. to appendix. our we've from the so table exchange conversion foreign assumption X.XX fourth dollar We for volatile have can sensitivity quarter foreign exchange know, the in be

to before Water organic revenues Infrastructure in fourth growth Now in high some be let Water wrapping anticipate X% total We down outlook. teens. Applied up, quarter. roughly share me includes and and our This company thoughts on the M&CS quarter X% down will flattish

to XX% call margin that, XX turn of We back please I'll expect to And comments. turn XX%. quarter and adjusted EBITDA for with in range Patrick to over be fourth closing the to Slide the

Patrick Decker

Thanks, Sandy.

Xylem we've when last out the a of couple in Xylem's recognizing XX-year the been ticker anniversary. spun trading ago of days, Just started The decade ITT. company

Some of ago, us. the water investable thesis, it less for with nearly you say since very sector. than confidence wasn't a been beginning, become the your and I years to to you market an it thank obvious as XX about growth much have was was in that want to us

trends. rarely straight demand us immediate the challenge sector good water exciting opportunities supply are intensifying shareholder decade. genuinely progress what's driving been that a anniversary our that created lot But believe the way, most a XXX along returns creating The over a reminder something those strongly only value. the trends team the Our made. are of are on I special. and ahead. we've reflect how the nearly happens been a positioned to double And much But growth line. has in has reminder have the around to chain lie S&P on Xylem's we've we're been in total

passionate leadership we're of technology about margin built model. world's digitization. team growing the water the sustainable growth benefiting and for We We're of We have challenges. on business that's the expansion the on outstanding and an market a durable solving purpose driven driving solutions, foundation from back

underpins which our commitment the at Investor our of month Day. growth laid that we last All to out framework

us will So I'm confident strategic deliver and milestones. momentum into that to pace carry strongly and our XXXX on and our market financial current XXXX us beyond keep

you, call take may to and Now Q&A. you the to please let's happy over Operator, any have. turn we're lead us into questions

Operator

first We'll Instructions] Davis take Research. our [Operator from with question Scott Melius

Scott Davis

to deliveries? with shortage just Do this here, deliveries make about we I help get you are comments chips when Do January understand, day you busy how and understand when Do chip have line in -- get visibility year? help on the Tony bit you getting you here, you're particularly I next on bunch a a mean, a in you in? It's then to around us unique about and little chips you can think but XQ guys. know them able not But you work? the does around just mean, that? visibility can and when of of us actually how you're

Tony Milando

with deal our we very all XX the it's give over we contract forecasts in and on with We deal provide of way manufacturers suppliers. materials. forecast depending mean, similar month our forecasts to a out We component. the them XX and electronic I We're our horizon to committing advance.

we no complicated we very than not do how than that. more it's in, of anything different So terms else get supply in

Patrick Decker

But we the of January, here question, because the month to I do Tony, don't that? comment can is Scott, show as being, bit in comment all your see And be to to of duration chips this how going of you of resolved. that Scott, bunch maybe up problem back? question want constraints. think, this we a your a quickly to sudden and snap It's through on you on work a Tony, also, will the

Tony Milando

the industrial know, that are clamoring, So personal all you it's guys industries there's of a automotive as or constraints, number the electronics industry. or whether from

same we're all So things. looking for the

technology in over we demand to are to so committed the contract sure and to our next months. with those what our directly very And understand and that XX closely working IDMs, to with our of they're the manufacturers and the they we're get looking make course manufacturers, XX

better. better we do -- into to certainly better it but when anticipate it so know certainly year. as to get get And we will that's don't We move to expect get we going next

Patrick Decker

there resolved. we're a that this that that fair because give there our in more And know to Scott, uncertainty. trying I view we board. again, the Tony off is views more are out come are get different hopefully, going we'll are of you our to about a And now And the still as around that there there do of number balanced prognosticating team working call. to their is are people very right are is backsides we across of back And on What responsible when think, sure and allocation get, share make chips. to earnings QX than the

Scott Davis

customer, to presume the risk, shipment you perhaps I that customer and to at mean when does goes And are right the backlog Or mechanically a moves mean, lost somebody that. point? that that to miss a I have point, the I help at us understand into revenue cancel else?

Patrick Decker

do really it's cancellations. XXX Things conference. I patient seen with comment industry is you a attendees good a than And our yes, think So Reach we've reality prepared the And understand as what same again, or dealing situation. utilities, feedback more of wide criticality are they're our customers of lot as here we an the User I project order moving there. issue. about from, being remarks, are especially any competitors my And this to We issues. right. seeing the mentioned because The for, are in when got the about made not they

So right, to right right. to some other have in the things mean, And go they for. cancel? don't I now cases, they alternatives the move to Certainly, have but do

Operator

Andy with from question next Citigroup. our Kaplowitz take we'll And

Andy Kaplowitz

could and as you've number you turn productivity? Do previously thinking think know with into Maybe you're productivity. how a of calendar overall you on price ahead get 'XX about can just times. you raised ahead color costs getting of pricing pricing us you logistics mentioned the inflation, cost more give you I of

Sandy Rowland

a little bit of you give color. me Let

we we are expected. come as the all, seeing realization price through of First

we I And continue expected to that and work expect as in seeing that QX When through QX tick start up basket, at into do the be backlog freight QX, into of and accelerate orders. we're And material we and XXXX. look of as in third neutral. you expect stood we we to positive. we the some earlier costs as will modestly look into move So that where if at quarter, momentum to price a we

Andy Kaplowitz

And then chain. on is a follow very to I chain, where wanted of Markets little in positioned more up it global mentioned is remarks developed that prepared supply better because Emerging whereas maybe Tony's in Xylem he a local for local supply markets,

So here more color markets? in that us could be for Does ramp-up done US, on the mean you give investment little a example? a localization to what could improve in of developed

Tony Milando

So sell. we strategy first all, to where our is of make underlying

sense. local we're in localized But Europe pretty in and the Emerging to to a in Markets, those So to supply we business regions we're that localized US also bring move case from highly in there, while the direction continue substantially will makes where manufacturing perspective.

localized So we substantially and are supporting the US less still those basically. but by supply regions we're in chains in-region in Europe

Patrick Decker

to any expect, there's and localization a in And This manufacturers have third-party uptick a move -- more them OpEx suppliers work you to should the not working with our that US. or us is with material address in to CapEx either our thing. It's accelerated not basis. on definitely Andy, an to see not significant

Operator

Dray Markets. RBC Deane from Capital with our next take question We'll

Deane Dray

more wide, the had Analyst there. some pushed? revenues calculation, chain million. your sounds ago, true getting like it be did up pushed no Day worsened. into It This that and that of into million conditions Where since XXXX. But how stand? is much some sector your It XQ best surprises $XXX like was have end it you does so a than $XXX supply sized Just would sounds month

Sandy Rowland

Deane, me size up. I it think let

to We the somewhere XX $XX that the quarter. About in days other of we related we'd and million ago, have and saw about the shortages think that was other of supply between half sort delays. impact half $XX chain third impact related million $XX million thought third in chip quarter. to I

probably the $XXX again, million. greatest sized down see quite our guide As side. in a in be, chip impact business you that's the And things tighten, around we've right the bit. QX on will why QX And M&CS

Deane Dray

meter And really most to semiconductors. like have just back, does that because you does it the of impacted side business if sound step is your exposure

So is centered of if think how about that meter in business? shortfall, you the your much

Sandy Rowland

QX impact When look is at our say the metrology I'd about QX business. of combined, and I XX% in

Patrick Decker

And it's the large the it's metrology issue, majority And business. again, so to of is not in that right. demand shifting impact, QX simply the Deane, a

Day. as And margin it's the something but whether laid at to our be we delays, for the prepared out chips, is the to attractive as the it remarks around has backlog important, access whether think the Investor think, challenges, logistics port it we our be on which shifted issues to right had don't in everyone equally shared is I you I see the, at when look getting

we're really, up chase our not to where that's been so customers really I has margins giving And with and think the here partnership volume important.

Deane Dray

partial just when just those stand? to out assemblies? already assemblies forth, that so and portion doing you you've margins. of so and nearly thought are actually expensed it doing -- where labor you We're so just end that the stay And following does and assembly completed the this and lining companies products is like, quarter, in decent how backlog that do you Are And with moment. partial a But up are any, forth. a for partial, on in hearing the margin reason hallways up is about that important shipping goes

Tony Milando

we absolutely Yes, are.

that come prebuilds ship rescheduled those in being but extra and bit inventory parts is up to ticked can of also in a so part see we out. them You'd waiting our of result coming for a with parts

doing So that. we're absolutely

Deane Dray

about about good companies hearing And color applaud those ships up the other doing I we smaller efforts We're so different and the keep Tony, ports. that, love using and work.

Operator

And question Jefferies. we'll next take our from Boroditsky Saree with

Saree Boroditsky

and and should de-watering you're on color tailwind provide about Can strong. more demand really in thinking like seemed that going for business The it Infrastructure forward, how that was Water you a margins? be business

Sandy Rowland

across the perspective. strong and in was revenue, business a Infrastructure for this helps us do we growth, and we we margin Water saw quarter, from orders the in us. quarter. When third get On bright the the saw business, within when a our look X% it growth spot in portfolio cost structure this We

So good other a out in to markets. of of some really doing business. in this industrial do I that's want Emerging well the seeing our And and part Markets We're been growth. key mining shout strength

Patrick Decker

It's in growth, when is. portfolio definitely it so us into certainly businesses we the one will we And that accretive get the help of of go 'XX. margin that highest kind as volume

Saree Boroditsky

just does then supply work inflation contracts? seeing sticking some pricing that within we of current M&CS. How get term be chain for to the the Will able backlog? of long you're some these currently price And on with

Sandy Rowland

So based contracts this our longer the then we're way adjust escalator to a The think there we positioned most index well on we're is of and able term I where pretty prices work, where ones, are clauses those here. our embedded at the indexes contracts price -- of in is. M&CS basket look

Patrick Decker

alone. the inflation we that past a have we're is been we've when upticks situation there seen not flexibility of reason in And had is, And historically that this supply in challenges. again, consistent this part of or in periods the why

be authorities, regulators utility. approved competitors generating Our supply it because are deals, significant these dealing to going fact for is also challenges. they're when they've been with revenue and being two, also that approved are But by the

value their those what on if So move these comes and ahead it's forward have really interest they things is our to some wait go in escalation. overall take even It or adjustment to proposition with down utilities. price in to best

Operator

with We'll question Buscaglia Berenberg. from next Andrew our take

Andrew Buscaglia

the Applied Infrastructure so on dynamics was -- little margin can Water impacting did thinking. you bit M&CS, was guess, talk well I a you So just bit a but what in little about margins. I Water below

So I two margins are would that segments? differences guess, what impact there between those the

Sandy Rowland

was of of points about there's So a earlier one I an through question. that think talked we the dynamics. couple One

business and good helps You so saw the mix uptick in the that margin. us, that's dewatering for

business. AWS our there's differences impacts what Water inflation I example, other was and Infrastructure business we some think impact our for in the saw, in between

more Water Infrastructure was in our modest it business. So

Andrew Buscaglia

talked seems of that quite initial you dragging at don't weakness. the year? given thought on, infrastructure hesitation this around you point about we'd seeing And we any clarity in signs this this wondering, we be utility have spending, to I'm have stimulus are

Patrick Decker

signs and continues seen And be with, our again, XXX conversations around time to into had that the plus Census. Reach any which of pipeline this No, robust. a -- that actually metrology, the turned is used that we just our we've last of Xylem Reach we conference, be at bidding not these year Conference, very utilities not first to had it was again, beginning

we're working of and nobody on shipping conversations delays at that no very, in in or the way. in portfolio again, a before, orders really And outlook. some subsidization so funding, been But level with ever strong. are activity entire order down is utility reliance of government demand of relying so of there US think very the is utilities across really it solutions. having there seen significant just kind historically that through. not hesitation the we're the Again, port I or the on that up I've the to we've said And comes federal was

Andrew Buscaglia

we see you those long as still guess, So keep there, I the just don't feel demand's confident you there? orders cancellations, as that confident that

Patrick Decker

the but orders backlog And it's not in those reinforce in robust. margin again, on I that the That's the that would remains correct. the it's just orders backlog

Operator

We'll take Stifel. next with our from Nathan Jones question

Nathan Jones

third at way boost like chip I next revenue other the the the revenue quarter. these million and million The that. for this about of just three level quarters, short it's things shortages, to wanted a of think try kind Is $XXX that some just should redesigns go guidance in of the of do quarters until stuff the that's or least logistics restricted loosen of to that product can couple of are under we you with there [M&CS] or you're term? to minute, to that shortages, below in slightly looks starts that back $XXX and to up, revenue or maybe

Sandy Rowland

that ramp. Nate, the supply over right going so you will that that look improve neighborhood. think, and we're We at think time, gradually I for our if in QX, chip to guide is

metrology, other sooner outside some opportunity I in we've grow businesses some to which our of think that. of have seen than strength also

assessment So portfolio. of our part services is

of part a really key portfolio margin is test Our that good business with structures.

the of So will we we couple us recover. but there. constrain to expect chip next supply quarters can over gradually do The that grow

Patrick Decker

a issue. again, I Nate, again, And is this not go demand back,

a matter it's simply these seeing margins orders and not into So convert of any cancellations, of the when able again, we're to remain revenue. And signs strong. we're

I say point an think reiterate. me number a this to morning but heard you've of that important it's know times I So

Nathan Jones

of trying of M&CS… idea what get look first No, the I'm like just to half might 'XX in an

Patrick Decker

trying view. be we're out to amount again, not backlog here. -- There a or is to And give you Nate, a fair of we're to balanced margins trying uncertainty trying responsible but we're prudent around there,

Nathan Jones

it's door door. the not about out getting and it orders getting in Yes, the the

Nathan Jones

importing and that On doing, Asia there technology supply that it that? it's you're localize that contract in the have to possible it's prohibitive localizing and that the to people been because to leverage suppliers Is on mean, that Europe much the Just question possible the Europe about, assume it Is could US. the even manufacturing? chains would it is I doing you're even I asking Asian the from side and manufacturing to than mostly and cost just do US Are suppliers cost higher that? localize be? they're you coming

Tony Milando

actually, we so large contract Mexico the So our US everywhere, contract is largest business. manufacturers really in manufacturing and that our we use but supporting have -- that's one

here. assembly localized the and the largely it's of some So is componentry

from I the be largely -- bit something so localized do electronics that's a coming closer. mean, necessarily to are now. look to that's Asia granted, will we're but that looking we to that Now not at possibilities right That and bring continue

Nathan Jones

that possible it Asia? Is not to just localize from

Tony Milando

something for for from the that suppliers the chip On North a I wait still will most of that side, thin we'll it so comes think is The America, in chip be base supply Asia. base. little supply

Operator

take Morgan Stanley. our And Lynagh next Connor we'll from with question

Connor Lynagh

as made you Infrastructure very point think strong particular, you I wanted a and clarify out to? that or wanted this in business, area you comment the an main of the been called strength. Water I to orders the I of that to return increase to that is year would other before. are there in business But significant Obviously, de-watering and orders areas within have driver

Sandy Rowland

In really strong. business -- and the the largest of board been Infrastructure. the very have we're treatment also transport, there been impacting It's orders seeing across so our is orders good growth, and orders growth in has Water growth the side part on

Connor Lynagh

better how strength, be the question company, might just And to typical this I curious lot because mean, that year but revenue the or history, you risk that called be a for order would thinking actually then to actual just different looks that intake change should whole basically conversion a timing. some order through I'm how out is in XXXX shipment good relative could hoping frame the you quite just to but segments that suggest history. versus for going we a the sort of of intake

Patrick Decker

yes, some challenges port do and issue around, comment that and weathering the come have But give not won't believe do We call And transitory we earnings saw was next in of challenges yet to in demand Infrastructure. shortages. more in QX, really back be it other We'll on 'XX. the around here again, freight 'XX. Water a that we and we're as and in we delays our we for QX to guidance

going yes, about we So 'XX. Water months get into through we'll coming we feel think good And here. those Infrastructure over the

Sandy Rowland

question and was an conversion when demand, time demand. orders you increase certainly, in there revenue. when And And between is converts I placed strong think had it about the to get other

do don't lead is of times recognizing are the longer You getting growth everybody the we're that put orders that magnitude posting. we But acknowledge, up across board.

little earlier a for to than put have. a there And they customers so bias is their usually bit orders in

Operator

Pavel question with our take Molchanov we'll James. Raymond And from next

Pavel Molchanov

chips? fact in same supply some the perhaps players of of the with whom With that that is terms problematic everybody they to even for than are seeing as to complications. are M&A mind, chain in acting in regard any supply consolidator you issues blue terms alluded distressed more are boat chain in You smaller these for opportunities a

Patrick Decker

wherewithal, strong our as an balance We ourselves to financial definitely do in sheet. a position being be, again, and M&A see bandwidth standpoint, financial it M&A, the our whether human, privileged and both from

that are we had so see Industrial, chain Again, around, utilities. on. continued opportunities bolt-ons very that to that I our that chip very with to any area. positive some is necessarily would that takes and do And challenges confident that it be still very two on in commercial continue on we that I already unlocking what shortage building our focused And priorities don't in pipeline. We remain opportunities say really and would we the not are strategically we are front. focused areas supply remain know have some to tango.

pipeline. it's that. And so supply excited I We're dramatically again, the very changed confident. We're say you we'll keep M&A on wouldn't about very updated the But chain situation. of because

Pavel Molchanov

for a XX implemented, in in emphasis quick the seen Union package their a builds the curious customer on from the pickup follow-up the given Fit on opportunity activity I'm infrastructure the Obviously, Washington. climate of being in very within orders if European and is lot the of much you've finalized reconciliation EU policy. that Europe. But and A already context

Patrick Decker

hearing although, say are the term, say I and that. that more I immediate in not discussion we more around would would

that conversations a comments, to being we a mentioned very my an so And the going I sector. as see providing we're further COPXX And around opening And think the prominent are there opportunity bit backdrop. is in as as be out. water even I

And well convert for so time it's think do to that, these down the orders. into demand takes we for It that bodes but road.

Operator

Brian next with take Lee Sachs. Goldman question from And our we'll

Brian Lee

little look and Water. bit versus to I alluded seems like hasn't just I but know you Infra a wanted understand read across it Applied more. all out I Water segments, in M&CS to the as three If this, much price

and is us the the of sort And by case have for that, some line for unregulated if an that the that review? annual case? construct I the, of in mix sort utilities you is can mentioned the same time But and approving is you or meter You in stepping do your then business, then contracts regulators those. some sense inflation the a of of give of of guess, sort the escalators in

Sandy Rowland

So I think to set. level one thing

favorable been If we of been you look hardest, commodities has in it of two greater inflation these higher M&CS at seen because and Those different the all, They segments. at, those types contracts first in coming are inflations It's through we have times purchased seeing that hit business. other that the us outside escalator of M&CS. where price of clauses. we've our it come

Patrick Decker

our basis. reside, to to majority is and are clauses on just business, the So longer typically into negotiated add When metrology we deals them at deal-by-deal of those where a term have you our look Brian. that, escalation which largest price built

those And get so through roll implemented. orders expect to as that we

so in we're margin realization the price our around that less part of concerned company. or expansion And

Brian Lee

sort had. question a that's of guess segue I I into second the

Just the in call general, shortages lot you're on there's been chip discussion the a around of seeing. here

positive QX. see M&CS you go you more the costs XXXX price seeing same sort And that's an about In say sound like Would then into terms of talking read price you you're time in what segment impact as of that a does think in give of versus I for Can the sense or at inflation, is kind frame it's of there? less a here others. you're out? us seeing company it that level, of

Sandy Rowland

we bit year. the and expected turn cost sequentially as that Brian, seeing price call through I I the of realization little perspective we earlier to mentioned a on positive that company, across QX the we're in were ramp QX neutral a from sort think price that in

part so well. see XXXX, feel the like to first that we as And in of we'll continue trend

have hard to thought around be where expectations When and around inflation the to worked multiple price. look it's company our our responsible the price an to year, we've out at of the to X% thought actions. be, and would going beginning annual across turn closer basis. of on So we taken year teams it X% be comes at This thoughtful really down we we be sort it as to would

reason been out gone in that's the to we've increases so balance. with these And that keep price

Operator

next question Ryan We'll Connors Scattergood. and our take from with Boenning

Ryan Connors

macro economy. so of begun we've to sorts of just economists get last to week on the ordering on couple sticking that supply and products about something triple in all chain. of across in take surge the ordering or sort a in questions, your A wanted double from even hear some the I the of

sort terms about both And so on something you ordering and other that customers? any of to hope things Do and is you're excess business. And think there's of on of take stockpile multiple your I'm are supply of orders, curious doing place through in on time? the from you to of sides then seeing on going your orders side, your that chips kind gets that what in any

Patrick Decker

I the the of I'll those that the the in more supply has is and around it. to I go would constraints largely of certainly business, and large to Not orders number say on put actually we're a that people see, logistic first been really chain we and business, within large some been delays, what trying hard the trying the side get book-and-ship challenges some aren't is delays. specific these deals growth, supply people certainly, of Applied talk has But of driven ahead have notably, it's majority seeing port chain and those where to of we order that on doing but of then Water ordering that ourselves. and Tony I'll converting. of of by get some uptick again, that the ahead we've about which M&CS seen Water, think, any some that Infrastructure most orders

segments. there's is two there advance less ordering than So the prominent some within Tony? other And it it's but in

Tony Milando

IDMs. just would can, But doing are that to is up on or double bull we're But distributors multiple working effect try we're suppliers. with suppliers of Ryan, multiple wherever and to And not order working we ordering. to outcome parts We're and I just doing What or brokers it's we or mean, whether add the is things. these that's the not a get double natural triple doing down with triple I that double here.

Ryan Connors

a that's in and to for strikes my like big quarter some labor And lot another thing issues example. other sort and the Deere, news been just the of do then with is in And force Anything companies one had financials you of CBA census. there? own is with that is US reports most terms believe or up unionized, anything in your labor could say that us share there coming your of of negotiations XX% I industrial

Tony Milando

No, unions. nothing with our

the world, the have in We relationships good with around unions very US. the particularly

mentioned tightness, labor much unionized in seeing not not script, in anticipating facilities. But Markets. so US, are particularly any as Europe with We the in earlier our we the we're or Emerging challenges

Patrick Decker

where some our as are distribution US now. is part tight a seeing the well that of that's right we competitively, And add labor around of some locations market centers are labor there very we the high-traffic and in the in of I just would obviously distribution tightness where

attrition. to to really hiring knowing So we've Tony to workforce said, with to get But been do ahead, in, unionized to be taking actions to going more it's workforce. have our we're natural flexible, as the some try try not that

Operator

will this comments. the at additional any back time, And turn for Decker I over Patrick call closing to Mr.

Patrick Decker

XXth Well, earnings we've many conversations journey for I to look of support. thank ours of just you of with you in I Xylem. call. covered again, and of been the this you all stay you here meanwhile, time very to of on as And part anniversary we have trading appreciate your And we'll much. first Really the next our this your a know to yesterday follow-up interest, forward see morning. want I XX say lot our you all well. our last stay as a the thank years celebrated who over safe,

back in you touch. we'll all very and much So thank be

Operator

this Please and Xylem's conclude earnings a wonderful time, you. day. Thank have this call. does your today's third at conference disconnect quarter lines And XXXX

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