Xylem (XYL) 4 May 222022 Q1 Earnings call transcript

Company Profile

Participants

Matthew Latino	Director, IR
Patrick Decker	President, CEO & Director
Sandra Rowland	SVP & CFO
Deane Dray	RBC Capital Markets
Michael Halloran	Robert W. Baird & Co.
Connor Lynagh	Morgan Stanley
Nathan Jones	Stifel, Nicolaus & Company
Andrew Buscaglia	Berenberg
Pavel Molchanov	Raymond James & Associates
Joseph Giordano	Cowen and Company
Scott Graham	Loop Capital Markets

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Xylem First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Matt Latino, Head of Investor Relations. Please go ahead.

Matthew Latino

Thank you, Ashley. welcome First and Conference XXXX everyone, Call. morning, to Quarter Xylem's Earnings Good are Patrick Executive Financial me Chief With today Officer, Rowland. Officer, Decker; Sandy Chief and They outlook. quarter Xylem's the perspective quarter will and second year results discuss first full and provide their XXXX on

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

A call a this X. call of by be available presentation slide Investors midnight reminder, XX. and section accompanied on today's X-XXX-XXX-XXXX to As Please replay in website X-XXX-XXX-XXXX. our replay available until www.xylem.com. note Slide at a turn Please will number our webcast of or the May are is that

We subsequent undertakes subject events XX-K those factors future anticipated. annual in to reflect and may could the will company the including occur publicly actual or statements in as statements developments to report subsequent from call, materially uncertainties, future. differ such SEC. will results today's references events Form that to events reports circumstances statements These recent on no future or make any the to filed most risks are forward-looking and note with some or that forward-looking described on or and update those we Xylem's obligation Please in anticipate

We our the have appendix. with key provided GAAP -- you non-GAAP of with in metrics a performance summary both a number of and metrics, including

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

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

Patrick Decker

the was of for global digital Orders XX% comes were through technologies backlogs guidance fastest the demand. a while realization, EBITDA region, in demand expectations. reflected with of quarter, there. was which year-on-year. pushed deliver was shortages our in margin robust of growth team and time, at XX% in demand further continues The But to same above the the segment. chip across the at globally. as with growth due record and our business. clearly impact given EBITDA order mitigated growth every simplification robust the quarter strong above quarter a for expansion previous healthy up momentum, in China, is margin sequential pace Revenues inflationary broad-based business. proposition advantage to most portfolio our to performance taken Thanks, Matt, order bookings strong performance also the which metrology pace continue and they've grew X% delivering and every Revenue business, surpassing strength good excluding revenue everyone. supply ongoing guidance. first quarter. in the results organically, the value throughout drive Europe our XX% our of the world we came already offering productivity Despite standout, around healthy to constraining pressure, with operational underlying in price fuel utilities full our XX% the growth to into morning, also improving, much is M&CS surge, our order Western COVID intake. the Orders slowly saw We XXXX

began of COVID the fresh euro challenges. $X.XX, time result is global some ongoing it delivered good a some the that present expectations. did to rate we from And and impact The As effects having business, of will team, business unfavorably. delivered above significant work EPS quarter again, supply exceptional move flow-on revenue our European have in China's growth, our chain. our to for while on the response

global the quarter's managing an a challenges basis. what the it control results show and the So team conditions can doing that are on navigating is excellent operational But dynamic. job,

structural demand where as in Looking end strong ahead, is leadership solutions. demand we're the and be digitally-enabled market And greatest, continues in robust have in in markets categories we all to position. especially regions. very a

So longer-term at we Investor guidance and and are our we raising the growth to for fall. out our laid milestones Day strategic last track the are year, on deliver

by whose of the over team of want and both to well-being for partners of and to away families. turning to for our extraordinary become Xylem the our response and include up the am right shown team their out, colleagues money successful and war refugees. most humanitarian proud of NGO services not of safety the providing and the mass for Before Sandy all broke the in support Ukrainian partners, the I performance how giving activities team segment, Ukraine. essential their detail I with our and stepped Xylem water mention our I campaigns provide Ukraine prouder to When It's raising one team. be our work has Similarly, sanitation ever, the relief could of by for in war

to Sandy by results segment. the review Now I'll over quarter's to hand

Sandra Rowland

and Slide our Patrick. color give X, some results. I'll to on Thanks, quarter turn additional first Please

excluding Western excluding Western all our constraints Europe on down and on ongoing activity outsized in performance particularly by quarter's China, a regions, commitments utilities challenges, performance and U.S. China, mid-single-digit Industrial all short, by affected I'll up But double-digit was a led their in offset was the did in moment, by U.S. team in Revenue up XX%, the the chip driven impact was in COVID a with emerging XX% shutdowns. was detailed metering supply business U.S. grew with also segment. strength orders Organic single our were offer in growth Given and Europe residential in healthy smart in Strength geographies, markets, price backlog gains healthy X%. revenues job XX% Western XX%, strong increasing in and U.S., by result which on on Europe. grew In in led by the delivering execution. the quarter. the particular up the great was In growth Commercial high by was digits

realization technologies margin was above for by driven EBITDA healthy realization. productivity segments. volumes they primarily by was solutions. across chip smart basis which price guided quarter intake high higher-margin margin metering range, more XX.X%, Patrick mentioned, We historically EBITDA order As the from our lower but robust price all points. our set offset with stronger-than-expected and Year-over-year demand and shortages than inflation, our impacting contracted got benefits, XXX were

As previously mentioned, we'll continue to with offset inflation price realization. progressive

than margin strong X% were showed was we X. high XX% industrial from all of investments. segment, revenue points were U.S. realization were segment. in up Applied due double as detail. segment on single-digit the increased orders new first margin with and price they in remained global the Please and Water and infrastructure, a on the China product low in markets, quarter. healthy and Our traction for but driven And the prior and by productivity were price prior recent Western underlying productivity digits more mid-double The more markets. strong realization. up increased and price quarter the mid-single lockdown. XXX and in down delivered U.S. basis Markets now Europe strong, our Geographically, Europe water solid we Page to realization to the and XXX activity. backlog Segment Western XX% review Europe to U.S. down for U.S. U.S. saw the digits by points challenging were and the Emerging in inflation. offset turn turn quarter. Please EBITDA markets gains treatment across offset the results up was EPS organically, Western the utility all demand. execution in benefits, we impacts both Infrastructure in basis quarter our quarter let's the revenue was Similar declined than in demand to particularly turn a COVID by I'll up digits execution business. in wastewater strong for and versus as growth end the pipeline a organically year Water backlog regions. OpEx for underpinned segment In order demand by cover Geographically, $X.XX. was Slide and strength, last assessment Control and demand were end X, in price deliveries was healthy digits. X% Solutions services. in grew as with orders from launches. and along to revenue Industrial bit orders Water Infrastructure eased. I'll Slide mixed utility benefits led solutions end conversion activity solid EBITDA inflation well mid-double year, quarter All performance increasing large delivered organically our healthy X, accounts. by with growth Emerging quarter, markets, continued compare benefited XX% dewatering, across up and quarter's in and demand reflecting sustained M&CS and markets was metrology our delays Revenues wastewater to business the up in business acceleration utility emerging the in & Measurement more

While a up that portion than backlog It our billion. $X backlog chip XX% M&CS prior M&CS is versus now includes shortages, have been the is delayed our more due of orders year. to

due anticipated, supply. X% we declined As revenue chip constrained to

compared resilient. in gradual the down markets our both quarter services metrology AMI accretive U.S. We noting margin down Geographically, business. EBITDA backlog Chip Europe with basis that There growing sequential pipeline XX%. year, points shortages from are significant assessment cancellations improvement availability, is than higher the to and the were and encouraged of been but awards. last by realized quarter prior revenues gains. flat margin Western the worth some growth in we have pressed XXX was no and It's emerging Segment quarter.

let's volumes price and able to Consistent supply-constrained first turn This flows the gains. those orders. year, patterns, in business noted We cash with safety volatility higher being chain in typical of calls, supply partially and those gets our higher to offset and to by leverage sheet. balances. operating seasonality carrying we've with the back revenues, previous were of strategically are increased for an and productivity conversion now effects mitigate and And very we balance As we used overview from are still quarter. inventory strong the held stocks also cash Slide X

billion of to and liquidity available the billion. position remains robust the X, forward to Our debt-to-EBITDA look $X.X I'll leverage is the and Slide year. rest at $X.X to back turn X.Xx. financial approximately with over And Net of Patrick call cash please hand in

Patrick Decker

increasing is strong use growth demonstrating our trends exchange our team our cases, and in the mentioned, foreign to holding are to many guidance in leadership the outlook moment, of drive order level Sandy. EPS turn in bottom $X.XX, reflected and revenue even while raising are due of and The as as able to detailed gaining backlogs. We're realization. despite continued increasing also share Thanks, We'll that demand higher end headwinds. we I by to price a market expanding guidance price we but our

team, the job distribution to our out shout big such doing channel for inflation. of a give a and our including making great effects to pricing want I sure fact, In partners the moderated

We've We to and with chips and to majority impact most quarter the of conversion, remain positive you'll to have Sandy moment, continue playing lifting business. more for our we demand Supply euro expected we also to as level will exchange in this to critical is able of current easier more year deliver on strategic reduce maintain headwinds see anticipated. as expect our factor, price for them remains continue navigate moderating revenue business just detail early that on team, full we milestones, strategic our backlog continue each will a keep to to picture in we've our the In realization to milestones. new modified significantly anticipated track for and needs while we much of in us and growth will our that and business and deliver foresee we the customers the a colleagues the When longer-term way us we included supply complexity. confident below They through out supply customers quarter, improved XXXX. we're appropriate. Yet, also puts year, Inflation a to ability still progressive them. further making those had to on a operationally. that the EPS, those so our successive trend chip capture With at overall our current at driving to significant price reported minutes. expect course, our do But be along continue guidance. to assumptions, easier it winning that would laid and our year. will team give with well challenge but out and it surging previously we suppliers few and that continuing our to be squarely through is least with making segment order us, serve than will enable on pillars color cover the a

to and So Since and our and interface today, that offering results, segment, alongside record commercial a utility some backlog. for that simplifying necessary strong successful has are the announced from in our segment Xylem, we've we created create to acquisitions which we unifying our new separate customers. further quarterly a M&CS deal wins time maintained and This achieving focused proven leadership. regional was

America. Now access we opportunity the rest across customers leverages journey single and We've the of and the the phase our to of done believe to we a next the easier breadth for move our world, market-leading North makes have to that that portfolio platform, previously it building one it. except of

customers moving Americas that we we across our today, So the for to X well. interface as announced are

to the and the of Europe, as will emerging assume leadership Water operations continue commercial the lead and the to across integrating leadership continues Hayati now to now will Americas They offering Sabinco markets. well build-out Arcadis Matthew commercial of In commercial services Fran and lead lead M&CS Xylem who as team. And of will both Infrastructure are unifying Pine, globally. report also We segments. the will segment operations AWS the

As Sable focus period a during after provide the Colin know, handover you to changes of will leadership support me Xylem of a announced will advisory Colin. and the leave he transition on which Most leadership today, smooth team. a and result we've

with to commitment. emergence he to a digital has market leader with XX Xylem's his strategic talent a benefited stalwart ITT, both and growth beginning. as years And I insight at profoundly story growth the center the since contributor am been company, his considerable his and and our know M&CS have our our vision. our In in from been to Xylem you has has predecessor, contributed grateful unwavering leadership shows, His the so as orders technologies of

We will leadership as our miss and table him him miss will at colleagues a leader. the

Turning to sustainability.

social the Our value. and emphasizes framework growth creation economic both of

happy versus a is performance sustainability and water more won't I our of month. creation emissions. later schedule this by driven We've on which his ahead reducing steal is XX%, our but of too emissions. Scope X carbon much accountability doubled we of recycling am The by Our rigor to transparency across value leader. reflect thunder, rate just Since in and our social commitment annual and I we'll ago. greenhouse intensity gas X share of down Xylem our also X own well publish report, use XXXX, than highlighted as our reduced and sustainability years XX% water our reporting to that

differentiation the to thesis because dig to comes out sustainability I you So into invite so strategic investment our our when and report fundamental is our growth. to to it

and guide. over to more I'll our outlook Now back turn it on Sandy color for

Sandra Rowland

in each Thanks, with Patrick. appendix. the key market Consistent have presentations, previous for facts provided our we end

continue end will modestly demand stronger and the markets. price our better volumes year realization underlying with through the healthy across expect We remainder of

outlook quarter few with notable view market end last changes. with the largely consistent a offered Our we remains

expect single to continue low to utility We digits. our business grow

side, in to shift the second spending though well low longer-term public wastewater to our remains COVID globally. benefit to some mid-single-digit localization as The by the anticipate OpEx on in activity markets the project is for to One utilities, and strategy. demand. expect growth continue demand resilient On capital solid China. note global bid as in activity We being emerging very wastewater due investment driven the impacts from of closures healthy outlook we half

expect static the growth remain meters water broad revenues momentum increasingly very the as the continue an flat. demand and half to chip of clean revenue year continue utilities. with robust the improving double-digit gain advantages we to be on spectrum to side, AMI With expect we to of a On second in full supply,

Please XX. and momentum on and Slide businesses expect infrastructure in focus due to continued climate We services Test challenges. increasing our to assessment turn

markets from and strategy. as end foresee mining the expansion dewatering, demand robust growth in our expect Western product order introductions Western account the new replacement activity from our growth light demand. XX, Europe. walk in now The growth, and in U.S. updated demand industrial expansion our to to new at solutions to turn you mid-single-digit mid-single-digit on mid-single-digit Slide rates Europe. applications expect to mid-single-digit In continues growth in up introductions high our let's Europe, healthy We and continue now channel smallest to end Looking and on healthy product for steady the U.S. guidance. commercial now industrial expected end we growth market single-digit market, especially emerging backlog and from activity in to we globally. with solid traction deliver through activity expect on considerable up large In and is growth ramp And mid-single from we and solid I'll residential, single-digit low market,

guidance As outperformance to momentum, and how takes the range. us Patrick and the now is revenue first are risk the puts and year. increasing quarter raising you the full in we I a for mentioned, we end EPS take organic full through our year the of adjusted giving growth want to moment see of walk low

We will stronger X%, we up X%. revenue X% X% to organic price lower X% is growth primarily full a increase organic perspective, realization. offset by to are growth from anticipate lifting by from But The be a to year it driven reporting euro.

significant EPS inflation which low reflects partially FX us. to euro to to end a headwinds. emerging from by range realization, be $X.XX, strong is $X.XX narrowing The offset impact the $X.XX. the boosts weakening are will and This the which We euro price from

euro Our of assumed initial a full X.XX. year guidance

at headwind the year to $X.XX guidance the a euro now is X.XX, updated full assumes EPS Our guide. which

appendix. table an included we reference, the your have in sensitivity FX For

Slide chain shown proactively we've global from COVID of down China's guidance our monitor supply breaks effects in and We the the lockdowns the how and will continue environment On manage closely warrant secondary to Ukraine. impact segment. by XX,

to growth growth in continue mid-single-digit due infrastructure, expect mid-single-digit from price. to Applied growth high up in We water Water, single-digit stronger

the Measurement Solutions digits continue to the down This up in to & Control expect first year We half. of the be flattish. in digits and double half assumes double roughly second

of is by progresses. the gradual to year return growth as supply the constrained still Although likely be chip

range And And to EPS XXX% cash this we range still that to net to For free we expect still I the of mentioned. $X.XX XXXX, flow adjusted be conversion just expect adjusted $X.XX EBITDA XX%. yields to in XX% income. of of be

provided with We year growth have double of full down X%. and up and low Infrastructure We flattish you revenues in on digits. also growth anticipate models. mid-single-digit be on decline slide to low includes a supplement And quarter. the to expected now assumptions number Applied other organic the This drilling company total is M&CS Water second in single-digit to will your Water,

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

Patrick Decker

into came position, and in chip XXXX inflation. in supply We a from of Sandy. Thanks, the strong headwinds face and enviable even

a despite the Our performance shown and around have dynamics been market of our quarter to showing team's business. on team leadership And Demand agility experience with the sheet a in global and in ability has never world. giving greater, we discipline commercial has the capitalize truly managing flexibility. us the balance first various a we have momentum, strategic resilience, we challenges strong great the powerful have deliver and

the small water and sector water is support well water and is in us Xylem That one While puts Still, as are both position of handful the of play only our biggest local of is, global a leadership challenges in internationally. to a mission increasingly water global, our players. sector strong role are a to water. networked as customers solve the

around for to sector. Washington one the world is likely D.C., new reimagine We'll including and ways society. taken We've Xylem's Street. opportunity main footprint you all sector, made it's not civil convene, I of The forward you Water our on of our saw and the headquarters. policy. where Water U.S. So which is of the Washington, world, March decision in move D.C. Street, flexible over to when multilaterals, location private is the the water the move the and working announcement, crossroads leaning mid-June, as global we leaders all to the officially of space River. be the headquarters of opening in just the to more It's right the from on Yes, and water on academia welcoming look seat simplifying you Anacostia thought of from governments also visit water our

announced have This Xylem, the for your Matt his new chapter special that Before years from Investor over and kind to call is Matt's more new that comments persistent of many role note encouragement turning made of one professionalism, so exciting Relations. Latino's from the every is last energy, know quarterly I helm Matt through you in benefited earnings insightful an it's thanks. I him. counsel We of questions, have positive and circumstance. I at taking his of a and accessibility and deeply value you previously

thank Matt. you, So

the and the Analysis Relations of Vanderberg, already met Planning great Financial Some for have impact Investor as taking reins has Xylem. of leader. Andrea as Head our who's you had Andrea

of to Andrea enjoy IR. and will confident with I'm deep knowledge find value business getting insights from the distinctively and brings perspectives. leadership in she So you'll to of and her great her working her know really

to over questions. Now for you call operator, turn I'll the

Operator

we'll And Capital. Dray Instructions]. first with our question from Deane [Operator take RBC

Deane Dray

sense, And a -- degree. maybe just these start giving customers are news sense we and a going Good they're Can knowing you orders, are. morning, I'd us be record give to encouraging so to is implied be what some got you've shortage everyone. interested hearing backlog the in you on margins can about delayed front. chip -- that the more now Maybe with MC&S

like sound you've So it any doesn't competitive lost positioning there.

So there. can maybe start we

Patrick Decker

in margin Sandy more speak the of with question, then start the half Sure, profile detail. I'll Deane. to have latter I'll your

I job also done both working the but You're of great chips, team on hanging and right. on think -- suppliers with I with customers deals backlog. the a to we've has our mean,

we're So which of cancellations. greater as terms is as utilities seeing losses no momentum, around adoption there especially in really traction what of seeing is good had we've we're Also, terms deals of in really here encouraging. midsized well,

so time. be And we is to . comments, would said over going demand as our kind seen What say it gradual the what of a our smooths chip on that supply, in is we've recovery. out we

so outlook just the we're our And not in full year. It's confident of terms for more changing what we're there. seeing

encouraging. margin So Sandy, want speak to really you profile? do to more the

Sandra Rowland

Yes. Patrick. Thanks,

I we bringing of know, we're already to the when the encouraged orders leverage. really structure. in, about we've company. at the the Deane, think, And It's gets that look this as accretive you been good profile business really margin

I grows. sequential at can QX line improvement $XX good look million as revenue think margin QX, quarter see pickup very where this we've from when had that recovery you about revenue you a even the and to already seeing in

orders the So we've the with very of profile been satisfied that in. bringing

Patrick Decker

mean, Deane. still we've yet, risk out embedded for our got there, in year. full woods Not the of the think guide I obviously, that we but

Deane Dray

headquarters in is And on some true how update follow-up reopening. just and roughly how just reflect of your me Shanghai, expectations And on always know helpful. math, been glad that. your all are recent about of And question the that's the the this on the -- expectations out. it's how FX and what's and But know revenues, you've plays out? exposure, really -- up X% look, on laid real-time We China, that then headwinds. has we That's I'm the

Patrick Decker

million, Yes, million in Sure, quarter Deane. our $XX first in total so is the revenue. was roughly of about X% revenue. exposure $XXX revenue The our about impact

implies guide million $XX QX. another Our in

the XX% in about year So first of be will now half down revenue. right

half, in saw We've we the still about China. impacts Second even X fourth factories up quarter, of XX% in in got because China. the we to expect lingering lockdown be some of

of sites our headquarters opened for in Shanghai. All we XX% our utilization. at As were few Three they capacity. you right at up weeks. now of X are Later, said, a closed factories those got XXX%

China Our which actually closed. Nanjing quarter. AWS And it the growth never our first the why Applied plant, business, in that Water reason one mid-single-digit is had the in that's supports actually here

the about the gradual did we there on half to risk off guide. there people chain guide. card embedded of our manageable our deliver wild one is the be expect we they're a commitments. got make in our there. a there's But We it's our kind that's Obviously, sure sound backsides think and So safe that but within and into are we in We opening working think to all China. supply we've all really we year, effect. global feel And second talk that going the that also the that is of their

Deane Dray

water helpful. the and lastly, just sector. with all all That's I on miss And to Colin want the comings best. him. wish the class We'll all goings, He's a act, great insights

them let possibility. I For as welcome his know that cell to have And just Andrea Matt, still well. well-deserved phone, promotion.

Operator

question Baird. Mike our from take we'll with And Halloran next

Michael Halloran

echo comments and want goings. I just to Dean's the comings on

are the particularly the And look et because water broad the there, underlying wastewater you first, really lot of side. it kind tax question with utility the feels So side momentum, there's emerging that regions. of it's across But tailwinds it's a for just receipts like on the equation, are, of at and backlog, both cetera. the the demand a where

what take momentum it's back, point? got a you've pretty you there, but track. on you this It geopolitical at do some concerns think and step seems like derail could good a out obviously, If that

Patrick Decker

question, a Mike. -- think I great it's the

will have don't storm in and what's oil horizon some on from That's and in moving towards on where standpoint. we right the be way around even a or happening money I et water see directed Europe utility know funding from we I there. a even many focus questions in standpoint, think geopolitical are the just now, here standpoint the clouds demand gas alternatives, cycle. from work mechanisms that cetera, the Europe not may overall investment a derailed

So we time. point think in even that's pretty robust at . this

execute what the chip think remain, challenges and we our the term, just able to have near supply in our pipeline. -- I in in being I continue think case, the to

Our time. bidding point of pipeline bidding healthy, at this in very billion north pipeline the $X.X in almost remains

again, to paranoid. I'm So paid be

looking at that possibly So pretty there see. we're But we any right now. healthy it feels storm could clout

Michael Halloran

out a you at more stretching Just that's are this -- what how your think conversion is at How far looks the some all like. shortages. We about into I'm can visibility typical for compare everything stretched how given that broad this do out the And But backlog cycle to hoping that conversions? do point? of And a you point? and magnitude comment. XXXX, far help have chip know give getting you

Sandra Rowland

Yes.

question. typically think been When as it challenges. AWS delivery But have really there, that's obviously, high, from the very past orders because constrained look carry And chain backlog. small I at months we've supply our perspective over of and been by look segment. great a varies we a where we XX segment, we

in there, So gives a case coverage mixed next us it's a of bag. infrastructure, couple of really water that bit for quarters we the have good that In out. backlog little a

there. we longer We businesses businesses there, have some and have some short-cycle cycle

M&CS, take balance supply revenue that we're we up us on the deliver. rest of today between getting is the that years we catch coverage we for that are to I look more able have for to as going have X typically the we and cycle, out than as out the year. we chain. And keep demand we And of think it's orders have there And shorter amount about outpacing the so story the the in coverage look to

Patrick Decker

a on overall just to Mike, up, offer the around treatment visibility I pipeline, in market -- and being I question sentiment even side your why visibility I the the with would think being bidding confidence would market the especially sentiment our standpoint, that's and got X wastewater least pipeline there and level the on overall metrology, of X treatment bidding from an to years And we're side what And out. around speaking we've at of water is. clean

Michael Halloran

how pipeline seeing seems follow-up constructive the that is. deployment to you've like? few on actionable just And it's of it it ability then then pipeline? quarters last the and a convert in the looks been optimistic some on capital update pretty in side, on what what Maybe you're an the And market your

Patrick Decker

Sure. Yes.

various near opportunities and still in to So really But got that the good, medium-sized excited we're we are even able to execute pipeline feel be some the of on. term about things they there. range hopefully, in in moves opportunities here larger that terms Mike, pretty that markets. opportunities, small- we'll of from the We've about end into

So I But continue more feel be the feel over is we -- ever coming as we it's as But certainly, to say the there -- M&A general pipeline to we or on been. we're quarter in X. disciplined healthy -- valuation. sense,

Operator

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

Connor Lynagh

to that wanted conversation. up Just on allocation capital follow

do the that, I'm So How repurchases? just given and sort how assuming the you and organic view share of for of share buybacks about in price of between share interested done, what you you for how curious currency calculus that deals. competing But capital the M&A? you has less -- investment, think would be you using how M&A uses pay

Patrick Decker

Sure. Yes.

laid at Sandy I deals. in sheet. really would this in our with on in deployment year a preclude So balance point really in capital used time, from come into being are around but again, strong disciplined is to our we not first not out firepower not we're going valuation. around it's Obviously, what do equity hesitant the lean and general. we right to lever to be the situation,

both be are shares opportunistic still odds other. repurchase And share case. again, do decisions, there In to we our as to But now the dilution any now We given on think also time used being in These at with well binary out offset be there M&A. we strategic have that grants. our environment. current of we are past, as don't repurchase each not we've authorization able right realize incentive to repurchase see opportunistic of share M&A we're long-term and the

Connor Lynagh

sense. have bigger relationships these Makes customer earlier, wanted line basically, Where deployments, to ordering time existing stayed the the of this changing aggressive their or changed bidding? you to how related be they the what's I'm And behavior on you're some of follow chip point And time in seems terms how of -- Is it is of much customers I aware curious, questioning pace decelerated? from seeing around in on like other you're the being side, or projects your of new a line at you're just have sort steady, most deliver. separate that at are on pretty supply newer of to given accelerated, to awarding of on contracts? going chain. which up

Patrick Decker

Sure. Great question.

parse me let So it apart a bit.

In terms contracts of deals, of and existing kind we've no seen there. cancellations

well the the our thing many are cases, same seeing competitors they've very of along In aware from they're challenges. way. and customers got the Our so multisource,

alone forward that are to The approval gone large it's them realized AMI these returns want generation they substantial on to for and move -- execute they we're But the deployments. that work that much the so revenue has these things. terms investment getting of into in just here. continue of secondly, fact So not so regulatory

metrology it's though spec, but meet of And find a the implementation back may a of them been so forward, to the all be minimized while now, is alternatives them this right approved not they course, their frustrated? they But working closely clear context. Are what now we've been like. needs, the good is with are. even of and look that going enough going we with we've it originally original move weathering likelihood for view still to Of to in to level

encouraging In us. sector, terms with this a number deals, of new of really for medium-sized We're way, just the new along not customers. part utility is which of existing the yes, that in winning customers especially is

open own along In very overpromising terms being delivery forthright we've I'm customers of winning. very we way now we on transparent own changing so are that lead with that as them transparency not I disciplined their new to about what underdelivering that our been competitors and think sure any right we're on the clear delivery our are. -- that. as and are on what deals being very appreciate are are being We're frictions well And behavior, times

Operator

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

Nathan Jones

on this technology. adopt utilities AMI Patrick, medium-sized starting comments to the I'd there like follow about of some to up

I've conferences larger has any it and point that's getting there's hit, the utilities doubt is of are ubiquitous All been don't been -- going going like attending seems that, and I to those. here to, which, the adopted. the inflection probably AMI it's are to think shift But admittedly, become that

that it's beginning So you about present? down and the utilities about you ago, get board the that definitely utilities market that, bought leading targeting drive that with years kind was waterfall hear into larger Because Sensus, when really of to opportunity few those and to medium-sized encouraging talk market. that stuff. I to try Can on know a

you on give there, could order that long what out high you're opportunity us what update any just level you? this So of can seeing be, how market that drives for growth

Patrick Decker

good Sure, question. Nate. Again,

right. You're

could you utilities from very et been lead for cetera, large will in city. cases, the it larger their got Oftentimes, looking maybe to that smaller always. their . know plans. entire you but as focused medium own those that the looking terms the as the I metro Oftentimes, have they're they've AMI a own initially implementations investment be of at not area, will of many and medium on of minds ones to in mean proven a for opposed some larger sections to utilities utilities, are We attend. because, conferences technology, of

takes bit decision the choice make it's bigger to for that scale, they decision because little when full them make go them to strategic a to longer So it make. a

encouraging their the tied the is that And more of to typically adoption their that to see level they happening. existing have communities. within it so is timing deployment of cities -- metrology They also or retirement

staged or see or time because time. really are getting conversion we U.S. a least going across at course a to they things to may the the study phased within steady It's going stream years. few decade upgrade this be so for out being while for over more, These out all AMI It's ready happen complete of over a not healthy, overhaul. of a as And over a while,

Nathan Jones

has been for long-term trends. good Which demand

I that, to to trying of have that in ask you think stream point business. is just to I should Go continued the I'm M&CS orders ahead. the on. that get that one out of want steady

Patrick Decker

U.S. just just think this about the alone, aware talking sorry, majority you. are not. data mean, maybe and quickly, XX,XXX largest small really you're are and another the of you I mean, medium more point of about know utilities, I those Nathan, water I we're size. than to when for again, others

has that's why that And about than part this the AMI. market excited we're adopted So market. of half still of less so

Nathan Jones

the cost, margin you compression mass I year-over-year. portion cost. that responsible the want for million gap Yes. you in this that's price quarter. to saw generate about did a that points Can quarter The in the price to the to on morning basis basis this and to to ask on and Great XXX $XX about talk cover business? that XXX saving continuing from up step one shows price of you pricing you're seeing negative see inflation large more for that to points close the in fourth outlook

Sandra Rowland

Yes. to took prices And we we to implemented Great start work our question. year, that In very some focused effect. rise teams Great question, last Nate. new saw on. the since something increases. through inflation had numerous cases, backlog we've have This price is before been existing

to ramp quarter. forward successive our saw to expect each year, that we we big as realization. in . QX to we so look continue in up from the price throughout QX a And step And would

our price inflation you're -- our QX, look inflation. But we still we we As underwater. inflation, were right, and at cover freight. our didn't did labor overhead We of cover material sort

out year, also we of outlook. QX, what it we outlook And for to As inflation that neutral. look experienced in did our up in the outpace think our then did our to half the to be stronger it expect I is realization what effects. based And in second for on And guide, note next quarter. the is should inflation price important the we QX and we increase we price

Nathan Jones

first and So cover going those numbers that of is all inflation? half the point are to of the price the of by going deck page slide inflation year, that price the there that the is put on -- you second

Sandra Rowland

That's our expectation.

Operator

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

Unidentified Analyst

Brian for had questions This is from price/cost quick Miguel real Lee. just I prior On the on ones, follow-up quick. questions. X

in So quarter. the price/cost was seemed negative first

Is the year. of it expectation you price the and the expected, improve positive? still year was mentioned expect for to that you rest cost that the full think be the would I just then for

Sandra Rowland

That's the Yes. for expectation our full year.

Unidentified Analyst

appreciate I then the the And all backlog on helpful. color M&CS. on That's Okay. additional

X gives you think lead orders spot I their any at Or times makes out? sense. become to stretched point canceling maybe well about a in you customers line? to cancellations way years. think on I the haven't know but is backlog consider get Hopefully, next to orders would orders X the if in So you customers there for, where intentionally projects advance visibility are placing seen so said yet, of it, what that

Patrick Decker

Yes. Sure.

seen very regard. these the the team we know large we've endpoint in And the thing So mean, nice around that any been ordering about metrology implementations disciplined there's is is need. that. -- I double is not no what count that they exactly

closely our there And we're orders. customers work sure with we not duplicate to very make taking so that

prioritizing customers. are We

We someone in time. are to have Obviously, we're prioritize point that those trying most allocation. at stressed this

been think, again, point regulatory implementations some to somebody say own earlier, critical generation that a demand possible, I very on through very in a as and in suppliers. with and never gone we've that as such these customers. the never we're well We long kind rigorous other long-range talk so a our they're as approvals, as best full about the their are to at have and give capability few time, But their meet pleased You able these terms mentioned as customers things basic lot working in them as of understand we alternatives chip I canceling. as can there of and with revenue proud them transparency as

meet suppliers customers' so the -- proud here patients. our this, and in of including here, There's We as closely for needs own a are it's redesigning that's products to of with navigate next generation. the our minimum immediate angle of why our chip to term. our requirements working possible effort team multifaceted redesign I'm to as number a the We're

Operator

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

Andrew Buscaglia

wanted your I looking -- guidance growth organic range. just to at

that are surprised, underlying Water up. And that, comment could you see take that we only bear was So start this I -- you shouldn't And to water weren't you then can benefits the secondly, you really Infrastructure, one this you to applied that guys front? water off? of willing is on stimulus up. year? nudged infrastructure fruit on later some first Or of what thinking like the

Sandra Rowland

Yes.

our is that reason we're think we revenue segment. we looked that our other more stronger and in seeing the primary it when for I price and than forecast, adjusted at guide a AWS realization, adjusting any

When QX. the infrastructure, in concentrated we rest high As of and from were the water has monitoring saw year, impact chip largely out concentration in China, the in look still China. a infrastructure for see they water we're in we supply And segments. for the the that's QX also other we'll impacts where

Patrick Decker

the on a 'XX here big continue as mean going out. in to to positive being bill, it's And a that really as impact I that be see We more settle we no infrastructure change beyond. things see meaningful there. benefit time. don't do in real 'XX think and a over I

Andrew Buscaglia

No.

Okay.

beyond price so is pretty Or nice tailwinds anything tailwind cost does or incrementals recent margins that anything a there QX Okay. specifically some that in the based or that cost? half to guidance, cost back in it be expect obviously expect of half. it just on else in the assume the savings second something higher And your big price clear, would year. provide But that? like Is you drive will really you then step-up just

Sandra Rowland

things. four really It's

the on touched You first thing.

price is cost, will year. and improve to that throughout The the first thing continue

chip half, is as second it revenue ramps contribution M&CS The the in second very supply has that thing margins. good and

The is China. say third point, I would

declines in half the We're then changes. a savings And those China. drive cost the some have good We as we in in pop year today well. see have expecting back in revenue China. We're and to in pursuing half first back simplification some of leadership half we will some the modest a opportunities very announced the of

Andrew Buscaglia

working and there. you're generate over management probably capital of goes thing, cash then but kind Okay. from same Yes. I free EBITDA you'll up, a assume in And that QX, hole presumably, more cash as flow, takes in

Sandra Rowland

the in first in historical with our quarter. Yes. We perspective a cash saw QX use What free flow in cash from we is patterns. line typically very much

As is was note the on up. is the of inventory you of That the incremental may we year, rest to taken purposeful. our We've work some things balance one inventory through try in we're to we the as And to to the impacts . of that down of try supply mitigate year. work of half challenges. back the chain thoughtful the be that some going

Operator

question we'll with Scott Markets. take Loop And next our from Graham Capital

Scott Graham

again, Patrick, Matt. once Sandy and congrats,

You'll be great.

Sandy, beat on the this, the dead but So sorry cost. pricing to here the price I -- have and horse

because increased you prepared your the you whatever pricing around I helpful, the you're is whether be us still pretty you pricing large had think what gap inflation quarter, for expecting year go say would right give that where wondering assumption second metrics it's now. your in will be heard that to during your can I'm just other I ramp comments full

by you little anything us give bit to color more a on mean So on can you give ramp. us pricing what

Sandra Rowland

Yes.

I and points you QX, we basis would think just impacts give increase. we price QX, XXX about XXX to some in to expect context, doubled That increases. that to Scott, from in basis had to points our continue

Ukraine around which of by Now impacted costs, of invasion increase, particularly is we've some our stainless by commodities since the steel, seen nickel. our Russia,

quarters, million. the see And neighborhood assumptions we in X more the headwinds so forward million for as $XX roll next $XX of we inflation to

put together and that, we contemplated actions, that price out to And incremental budget. were our they our have teams when so not implemented response gone in some

a We've lag now And across down we're weeks increase our than between quickly. price when the of when a went some effect. price businesses. into to used XX-day And practices announced X so and We to time have acting teams our it are changed less we around over increases.

Patrick Decker

think And up, of I and really some parts the again, cases, even with in in business. pleased been is certain that share the of would gaining resilience And Scott, I just offer we've our share. volume our what

area. has area. things market in we've we so of to . pleased as -- this And we'll And a think, to in the responsibly. acting standpoint, continue again, an from been resilience level continue And I really and shown a this leader move as act inflationary

Sandra Rowland

margins the lot is price/cost add, of is on thing has gotten a attention. other our would I The impact Scott,

year, is down margins. The mix, we've high revenue with this secondary lost with because of revenue the our the mixed. comes at M&CS supply look When being that impact chip you constraints

Scott Graham

who it's world going pricing, out was it. thought much brave have Get I would on have but say given so a would utilities new up there. to

are Okay. shortages, held being percentage kind My is for what's of by -- got other of up ship you percentage? the around, X M&CS it you it, can backlog that could questions you is if thing, that the the what

Sandra Rowland

Yes.

of So I look think the outpacing say, been growing up between conversion. that delays. have if backlog, around been revenue at you quarter tip billion. held our M&CS each that's and orders by XX% And it's backlog I we because would $X XX% have is our our And

Scott Graham

certain operating generate I or it. guess, level And Is then that that? know, Got is you lastly, it as here, now. know look I you it a entered the you a I and of sales rate mean, you year Yes. don't guys calculated, you to how need calculated what X%, have Sandy, leverage. at do ago over ever Tony organic X%? I

Sandra Rowland

sure question, your not totally I'm follow I Scott.

model I assumptions we think we plan, around -- when inflation. understand we our long-range

have productivity across in the also We inflation. a manufacturing the organization, goal productivity we outpace both enterprise our And as set across functions. centers targets for and an to

Now a our the little different, but philosophy. have months bit XX that's overall been past

Patrick Decker

other you some I growth the think any I parse is business out to mean incrementals the I And about your get just dollar incrementals to XX% trying line this XX%, I range. bottom of healthy question that to going this in business, mean, here. -- -- think, between the mean we Scott, very if the in drop

mid-single-digit In drives long-term with what really we've expansion, especially out terms range, in our which, M&CS. given heavy margin that the in mix of is guide obviously, laid

frame growth this helps very little mean, is. of a bit. out incrementals that at maybe So But a is I generates that whatever healthy business level there

Operator

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

Pavel Molchanov

struggling the M&A semiconductor -- Does ago? other with you opportunities even opportunistic some say players availability, quasi that on kind a presumably seen create more. front, perhaps would safe given ourselves M&A First, year companies blue of as and component smaller that to are struggling have distressed such that any chip you not are

Patrick Decker

really question. one have we're right long logic run. through coming view mean look of we wouldn't angle. heightened the where terms terms demand. the It's you're not in on I based chip the our with that, It's behind upon I I pipeline, really chip really of for particular We of on the kind that But any we say focus an prioritizing them interesting again, things from cycle now. distress. in this in understand that strategic that's the asset

Pavel Molchanov

Understood.

currency, Following half Europe, does up of underlying second that of kind that volume on the in year? the might in European any patterns GDP reflect impact in the and the softness weakness demand the

Patrick Decker

Not years, as is Based it. see experience many we Europe comes in very demand. Europe our to underlying upon resilient when it over

big well not are really sheltered, economies seen saying that on there tend of it's CapEx. funding infrastructure. there it, there terms in mechanisms to there element at I'm be when pretty installed new is swings no immune CapEx reliant of but across larger So not least, It's OpEx repair CapEx, we've Europe. a economies never heavier in to even much the And on the replacement the less new side. are

In see and is lion's our of repair very is very really attractive is margins. which well stable, the of replacement, do as we as share what terms steady business there

feel the outlook now around today. so pretty right we for as confident And see Europe it we

Matthew Latino

any we questions? have -- more think I do Ashley,

Operator

with go We'll Giordano apologize. to I Joe Yes, next Cowen.

Joseph Giordano

lot and it -- a just destruction to raising, about causing just where you I'm why start make but just sense not about talked -- that's think is just I now? to customers you're the We there buy to it because of price, amount level demand be a like required not projects understand starts but curious going right how price to increase,

Patrick Decker

day. that one every sales that we're kind biggest is We capabilities at where bidding get to ratios. it's our inflationary limit. force looking feel what in leverage challenges, for is of our win-loss that is. our close there and something That's in environment And always a trade-off stay to teams this the Joe, of pipeline obviously,

And look so the that. team on stays very that And to a basis. we at close regular

the ratio, to areas we continue until in that that increases, price impacts. sure is us by meaningful to those in we've growth What volume inflationary to in where make see the tells far taken we see continue thus cover so need And we're win-loss that that we businesses. moves we encouraged

not as something that we're very, healthy good a that's close so any But to. well. indicator And it's for means, something very by take we granted, Joe,

Joseph Giordano

guide low of that other raising kind think it on important trimming there of here last, on such maybe what gets end the for that an around the end you through and I side high as scenario of your And Patrick, guys. the tone and there you just was thoughts the year? that, But talk thoughts this was is the

Patrick Decker

right the point in Sure. end. guidance teams it all of to spend thinking a time lot management yes, imagine We in about just on and to when that. Yes. I there you felt time obviously, raise a monitor And now, path how we we go end, obviously, a is this can you every mean, there, there. and you and top want company confident we'll make path are and horizon . that. to in change but direction. a still continue lower the that -- see the Trimming have clouds approach things prudent seeing was at see the right that to But

of terms It's the to pricing a continue downstream are, a for areas. see well what there mitigate what we're us. outlook some as out need those able on is issue improvement delivery need on momentum. the And we've impacts those ship hopefully, our chain to for China really when to continue to see the demand matter before. backlog of are. the we'll China. supply In supply as chip not in around what We and We it's to see improvements talked about

Operator

And this questions there closing remarks. are further for back to I'll or time. at the no call turn Decker Patrick additional over

Patrick Decker

the stay again the you Thank In forward you. I with safe, and this your now you morning your between for next earnings you catching for all well, wish very up all look and time thank Well, meantime, support, best. and the and and call. I attention stay to

Operator

today's this have lines Xylem this Conference your Thank and conclude Please you. First Quarter day. disconnect Earnings does And XXXX time, Call. wonderful at a

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.