Xylem (XYL) 7 Feb 232022 Q4 Earnings call transcript

Company Profile

Participants

Andrea van der Berg	VP, IR
Patrick Decker	CEO
Sandy Rowland	CFO
Matthew Pine	CCO
Andy Kaplowitz	Citi
Deane Dray	RBC Capital Markets
Joe Giordano	Cowen
Mike Halloran	Baird
Nathan Jones	Stifel
Scott Davis	Melius Research

Call transcript

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Operator

Welcome to Xylem's Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Andrea van der Berg, Vice President of Investor Relations.

Andrea van der Berg

Thank you, operator. Good morning, everyone, and welcome to Xylem's Fourth Quarter and Full Year 2022 Earnings Call. Chief and Patrick Pine. Chief are Officer, Chief today Rowland; Sandy Operating me Executive Decker; Officer, Financial With Officer, Matthew will discuss on year perspective for provide quarter They full and XXXX. Xylem's XXXX outlook our fourth and and guidance results their

call prepared and questions to Following presentation accompanied a our covered webcast remarks, the a As www.xylem.com. available in number will available will the [Operator +X today's slide section replay Investors call. are Please the Instructions] we +X reminder, replay information or be address website, midnight, our the A XX. related our XXX-XXXX February (XXX) on until this call by XXX-XXXX. of of note (XXX)

heading will playback available for call section via the of be Events. under Investor Investors Additionally, the the our website

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

to turn Please Slide X.

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

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

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

Patrick Decker

everyone. Andrea, good and morning, Thanks,

continued region. operational healthy That XXXX. and we in solid and fourth team's quarter indicated across fueling backlog margin the delivery exceeding revenue built execution performance strong delivered release, very each year, EBITDA through in into the our performance the delivered segment demand team Resilient growth and expectations As coming quarter, the a for the expansion. strong press and XX% upon momentum healthy our

strong year XX% grew share Infrastructure the demand very Europe, the robust a and up was finished and quarter XX% the utilities in On fourth quarter U.S. XX% earnings to was grew revenue supply the year. industrial XX% growth with This and and execution on XX%. in grew quarter posted XX% and up the segment in bringing year year. full on X%. full demand, per XXXX segment grew from the and M&CS improved for strong quarter for in XX% Western Water Water backlog the full growth chip performance. basis, continued Applied full

customers and solving positive saw XXX versus volumes in same ago. our our on commitment growth margin cost a healthy points continuing our performance resilient price demonstrating year proud team's team The margin year, of and period were sequentially. Overall, quarter, basis of X%, And performance their am the globally. durability of orders significant higher EBITDA performance in expansion purpose, the so the up full business. water. for We up I that the orders drove serving to delivered the and demand growth

we with serve delivering approvals. recent deal into And to greater ago, X will results seeking address The systems positioned Until as in announced we That remain Evoqua weeks scale. water to stakeholders global challenges to focused midyear, we of a and strongly important them. be for create to the platform the powerful the world's very water of closes, continue and agreement most We've to are success trends the we up today. driving anticipate capability, set planning intensify. necessary the will our depth results the combined on investment already integration well critical begun work company acquire are today's to address process demonstrate, said, the which

of basis, backlogs utilities, improvements ongoing further stand-alone Execution we possibility particularly that of flow a softness, largest and free resilient see On discipline, macroeconomic with to continuing end price demand cost in our XXX% cash supply the conversion. despite our chain return markets,

of will We per XX% expect with that share expansion, revenue $X.XX, up to $X the growth organic EBITDA this in mid-single versus allow year deliver us at the between earnings margin solid and digits the XXXX midpoint range. in last resulting

on we on first, XXXX. hand before and outlook guide color to at moment, dig a it the I'll the briefly in more give look but results ahead We'll quarter's to in over Sandy

Sandy Rowland

X, Patrick. to fourth turn results. Thanks, quarter Slide our Please and cover I'll

chip growth was Patrick by in year-over-year, driven mid-teen improvements the closed markets. M&CS, another XX% with XX%, and in the margin by Industrial growth in grew robust Western in strength the quarter and Infrastructure. a team utilities on demand In highlighted, a XX% demand robust of up Water Revenue expansion. performance led XXXX Europe strong the U.S. detailed XX% segment. particularly out As and you I'll Europe U.S. markets and in emerging and growth emerging a strength by with sustained short, supply strong in give the in OpEx grew Western in But U.S. and moment,

offset in by sequentially. execution Europe. XX%, versus in markets, driven period mainly quarter the Commercial were And backlog U.S. resilient demand in to emerging XX% down Compared but softness due the in Western to same last in continued residential line prior strength XX%, partially underlying up U.S. and by was orders X% year, the in the was year, up and up remains

up XX%, Infrastructure were following year. Water last XX%, orders AWS exceptionally down high M&CS and down X% orders

were and XX.X%, in ratio sequentially offset margin book-to-bill up the and X.Xx. last which line basis more strong the prior than with a of inflation. orders EBITDA with on from was up M&CS points quarter basis However, points XXX XX price, volume year

with solid double strong grew XX% on chain. Foster detail. driven and quarter's robust double dewatering up review a with on strength performance Our I'll Europe continued by healthy was utilities digits, markets Geographically, low demand. Growth supply more improvements low price quarter. led activity Latin EPS portfolio, demand emerging in the in XX% utility OpEx Slide quarter revenues and the realization year-over-year. emerging in was expectations Orders in in America up up up XX% and U.S. our the also continued the the were segment was across in bit utility was in to with X, outperformed dewatering Infrastructure $X.XX, digits, turn and the in up markets the business Please U.S. wastewater the the U.S. fourth industrial continued driven and dewatering by quarter demand by emerging in demand in industrial strength XX% solid markets Water Africa. and

and of net investments. for EBITDA margin the XX was offset strategic basis volume points than as more conversion up segment price, inflation

commercial on offsetting double was healthy residential U.S. volumes. Orders quarter, chain supply U.S. mid-double and execution. Western were Please price turn XX% East backlog strong the the The price offset Middle in realization with driven industrial as basis and in continued by by up moderating was up supplemented by demand. and than XXX and savings. were down digits demand revenues by up realization was the and was was margin Margin XX%, on in Europe, Water Emerging Markets Western strong chain X. realization, low demand up to segment Page exceeded expansion improvements X% EBITDA supply U.S. Applied in strong points and and digits offset led improvements over quarter Europe fourth quarter. more up strong also industrial with price Geographically, expectations India. residential partially further inflation productivity residential the Segment by slowing The orders.

versus turn and chip strong by cover & XX%. up execution And supply than was measurement year-over-year by and and Slide our assessment orders $X.X XX% in in billion project test versus up businesses. AMI during let's strong EBITDA of volume quarter growth in basis margin for now inflation, M&CS business. and orders XXX all our in price offsetting realization X, prior the is the year XX% was importantly, of basis backlog our Strong remains revenue services expansion. constraints. to down with over M&CS chain regions points points prior the the I'll and Geographically, compare coupled peak XXX M&CS offering Control U.S. prior the quarter, our were recoveries a segment led driven growth XX%, Demand up pipeline Measurement XX%, sequentially. lapping year more conversion, were of Solutions drove for year. up supply XX% and

company's fourth previous the The free to X cash and turn generated the flow quarter, flow outlook a free In an the down for $XXX hit cash million. working XX% let's cash capital financial flows now driving conversion And job to great team position. overview for did year. of of our of Slide we

as QX term, us longer be to are stock the supply of that targeted XXXX. we where still versus safety return in elevated conversion gives that in remains chain pockets to inventory our necessitate carrying, While are performance to path in XXX% our extra there we confidence the

robust Our $XXX debt financial over million position December. available paying million year over in with after cash of $X.X the this billion. exit And we liquidity in as $XXX and down remains is of

XXXX. Patrick Net hand look at debt-to-EBITDA back forward Slide to turn I'll to leverage is to XX, X.Xx. and Please

Patrick Decker

Sandy. achieved, chain lingering and tumultuous they I'm environment. XXXX. geopolitical team proud economic China; and communities already and that everything commitment momentum, carrying and excellent year customers a stood supply effects, team are global The commercial XXXX. and for out especially of uncertainty; operational in our very a all Thanks, in the an during did Their challenging delivering into resilience discipline performance job of and pandemic

despite of economy. macroeconomic we forward, markets certain see we the As healthy look possibility of demand our softness the in major in continued global sectors

secular chain end our we our underpin continues We can demand we to down that of to to we billion expect the progressively solutions work will nature supply friction in to expect the ease, And attractive, be essential $X.X in even trends able better and stable continue serve demand the as water that serve. backlogs. and markets that

advancing are acquisition our ahead, Evoqua. solutions of of strategic we Looking to delivery the

until you As that in and no only industrial growth. global the But I combination organic attractive expect, strength markets closes, utility Evoqua's of scale and are the guidance Xylem's platform a as for providing doubt deal for stand-alone on basis. a we mentioned earlier, powerful there's would creates Xylem end

Xylem's areas international channels synergies customer of expect respective cross-selling via revenue global North growing and such in relationships. and America, portfolios Evoqua's exposure and as We industrial significant our in utility

in shadow just not we're they tremendous companies of the the also are those customers more it's customers globally, and the them solutions solutions especially to the areas forward In helping partnership value with need end where big growth We've what But to the inorganic move resilience markets. most to the the deliver communities under give important our of potential taken only to X of our increase big utility expand in the Now water to announcement see customers step our to and radar, water we another enhance to adopt add essential making number of digital attractive a accelerate the will combined more flew of around one most. digital world. a Evoqua, need they the of the ability infrastructure. which

that partnership Valentia, Spain, leader It Idrica onto GoAigua process of data utilities. integrated and new of utilities and Last analytics signed an management make for quarter, capture, more and in operations. technologies interface secure together and Idrica's X and faster management them customers. platform we operation affordable commercial is with one gives a digital adoption platform. data any Idrica digital simplifies water in our utility deployment in easier, asset water analytics capabilities brings to for exclusive Headquartered

operator become it, will Having been partnership, we world. of about deployed by in will very to built utilities, stake the the power the the platform itself, distributor a and for around utility been over look as Under We're and take of Together, minority utilities it's Idrica been and technology. a the connected progresses. of to forward we their of enable more XXX sharing has global more utility having the born already solutions. exclusive harness we advantage out by partnership the customers excited

Operating faster-than-market capital appointing to same Matthew all enterprise segments my We announcement margin recently. important to the continuing some of deliver commitment operational as before growth Chief At Xylem's it's the perspective end from Officer. expansion. we our focus was the continue capacity and and freed our and evolution that Pine have one across The strategic year, one of move up on ensures business made excellence regions to This just on other deployment. on delivering time, also an revenue

the his the we'll new focus Matthew? But role call In key a a for want moment, back invite of in areas more our words our some Matthew to on detail first, color Sandy turn few guide. market to and I on say to on outlook. end provide

Matthew Pine

Patrick. Thanks,

accelerate complexity, efficiencies. scale We're growing and to end time across My the of technology our strongly focus margin local base increase This we remove expansion. leadership taking communities driving deliver continue We intensifying our on and is customers this the Operating to even growth world. attractive business, further Across course, at as serving same continuing large Officer margin focus and aimed, at more deliver and customers further with trends all in particular enhanced aim at agility installed Chief in we a unlock the enterprise, value the and is profitable better are positioned satisfaction. very markets. productivity customer to maximize around we the

as we well deploy in new improvements introductions supply back enabled segment, build from delivering us productivity backlog, innovation. the product to momentum, to chip M&CS as accretive resources the in example, For

to digital Patrick portfolio, continue as our Secondly, covered. we enhance

need problems cost Our solve that effectively. customers technologies their digital simple, integrated

meets profiles. portfolio with attractive margin and demand increasingly growth that Our

our deliver Xylem partner support. Lastly, customers as a on ongoing trusted depend to

So standardizing our into This is our will focus our deeper offerings. third solutions services. installed sales operational base creating aftermarket and us with in and take new

and needs and outcome-based address capture condition-based expand reoccurring revenues. enable such as offerings us solutions will to New customers' maintenance demand,

and their all It's customers Each in for and even privileged improving about X talk making growing that a do continuing not our our by them our no and their to business great from us work more critical mentally better, or that's with fortunate simply, more being face. thoroughly privilege a about our also view to strategic creation a with position, through there's serving more challenges that we to of accident It these and It's When solve we running theme and to them revenues of it also kind reflects margins water refer for our positioning. stakeholders. customers is that shareholders, easier to all challenges. the of are a do, market priorities. opportunity they communities alongside solve partner value we

market Now walk end let's turn Slide and outlook. I'll XX, our to through you

proposition our single of nature We continue balanced largest which products. backlog, markets, taken end and most XXXX. We've value overall, end anticipate expect be strength view of our grow high our digits the based our is in will on critical underlying of and of end demand will differentiated business utility continued largest XXXX. our We market, a healthy the markets through to our

the continuation On developed benefit the growth of global markets. well spend expect as resilient we wastewater emerging mid-single-digit as as We CapEx offerings side, steady of nature anticipate see demand demand. a we OpEx critical our in continued the markets due to in of

The and bid spending outlook remains project activity capital longer-term robust. for

through improvements anticipate robust This water supply demand is clean for teens. our being the for in ship low side, solutions continued growth up On we driven and expected by XXXX, AMI and and allowing backlog. on significant infrastructure challenges. climate large measurement secured our focus businesses test We due in deal to deployments and our already healthy in pipeline foresee assessment service our increased momentum revenues

digits industrial steady our we go solutions expect for the market, mid-single demand at low to to globally. on end Looking

strong in markets see benefits our deliver end and and execution, in on growth offset construction. mining demand replacement due business. strategic U.S. by low dewatering business solid growth backlog and of the moderation emerging our to market single-digit new in commercial European continue The to We investments should partially dewatering in

half decline of single-digit continued due smallest and expecting In second we strength to the first our in through expect to in to XXXX. are end the continue would commercial backlog as market, low markets. residential, emerge partially work residential, both half offset U.S., results we moderation by demand in In emerging we normalizing the the in

guidance. updated turn it over you walk Now to Sandy to through I'll our

Sandy Rowland

Thank Matthew. you,

XX. Slide to Turning

we Until to mentioned, is mid-XXXX. expect join then, X full companies. in and us an on our organic We basis guidance the As of excludes year combination Evoqua the

solid Water in revenue overall, low of Xylem low industrial; and We offset Measurement commercial, year as partially and by utilities & Applied Solutions wastewater For Infrastructure growth Control X%. up from X% breaks the expect to residential; both Water growth XXXX growth in teens. we foresee by mid-single-digit with single-digit down be This range in industrial in growth in full segment follows: growth to

to For represents This up $X And XXXX, an of expect year. point of XX% in margin year. range basis to to at EPS the this yields midpoint to XX.X% XXX we the EBITDA be XX expansion versus XX%. a range $X.XX, over prior the prior

Free cash flow of XXX% conversion is be income. expected to net

rate line capital other In annual earnings. addition, with to supplement aligned a today, our in assuming sensitivity announced conversion the of slide and grow full is X.XX included with allocation euro-to-dollar our to in XX%, year a dividends number be appendix. an we the assumptions table of our foreign can increase also in We've provided you dividend your of FX models. in a We're with exchange framework volatile,

revenues X% quarter, By the And high Infrastructure, growth first segment, the Applied in we single growth now Water for to anticipate down will growth. digits Water and total teens M&CS. on drilling company single-digit of be in range low in high we expect X%

be XX%, and dynamics. We expect margin cost more first quarter approximately by higher price EBITDA to volumes favorable driven

And to Slide closing with that, and XX, Patrick for I'll call over comments. turn turn please to the back

Patrick Decker

We're into Sandy. coming positioned. strongly very Thanks, XXXX,

confident expansion operational team show in and Our outperform continues growth markets on demand. to strong continue margin the to delivering mid-single-digit underlying end resilient and and We're revenue commercial execution. strong

track on our to strategic well financial and remain milestones. we XXXX, Beyond deliver longer-term

Evoqua of and for sustainable We resilient by value are combination very while creation will the towards excited offer driving secure, a water of of growth and Xylem shareholders scale. the our about and all more world, accelerating

in met our at headquarters week The last integration team D.C.

of Keating, Evoqua's X people. us heighten traveled appreciation incredibly of day strategic on potential our to with their my CEO, companies. spend of the of first week, for many to opportunities I to confirm key sites Ron strong the meetings ahead And X. cultural talented up and number visits only a success and their Those time The with set last fit

the having in required We've filings in filings the here regulatory also taken the U.S. submitted in the the next step progressing relevant international toward process, and jurisdictions.

open X deal deal to will continue we companies A great when bring of our midyear anticipate opportunity We the closing up together.

During Meanwhile, our will continuing on execution. focused commercial progress. delivering XXXX and earnings momentum our squarely commitments our financial next we on remains call, our an business and on our update provide

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

Operator

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

Deane Dray

congrats This I say a for just and I lifting. on the to And lightning target And that sense there's the made strategic has again in know year, Evoqua. so margins. finish long. view. Strong altar to our to getting both on is want finally closing of midyear revenues heavy lot have a fast

So best luck. of

Patrick Decker

Thank you very much, Deane.

Deane Dray

M&CS a It here, the for in through seen the that we contributed you margin steady the much have And of of past a with all backlog? And drivers what's that? driving quarters. sounds chip the segment? How of and the improvement improvement much for nice the supply margins? been pipeline assessment. Is has then improving, couple Can and kind start supply X shutout how worked to like this chip story this I've pure

Sandy Rowland

the thanks for Deane, question. Yes,

Matt add some me here. start, can color Let and

we from other QX twofold So unfolded compared it better our we are And other about. would very in in thought half came in upside don't supply. improvement some as continuing forecast, pleased upside has much with half chip The our the to saw in that we story like We The came year of is the we actually QX what some of portfolio chip had a M&CS. the story. much talk upside supply. businesses very from that with and of performance some

entire business. really potential lot has margin measurement our results -- in business, were services QX, good So completed a our and pipeline all of assessment portfolio across leverage. in And of good M&CS the good and test projects

we're the drop we've as line really that again, seeing encouraged top that the so bottom to And going got you're line.

Matthew Pine

Yes.

to thing of the I QX we only off improvement product continuous we is a roll started our that add, I Deane, think would redesigns. pivot did more to as in

solid look good last recall, momentum. inflation building which if QX, saw was QX, really you segment This in -- rate price was be this to really by improvement. the led the to improvement. a impacted at continuous overcoming the really it exit also margin lift and the QX you we was So and if and cost that And really in in

Deane Dray

color All platform was sounds this Idrica. on good. a And some follow-up, just software announcement to get more hoping investment I the of as at

of but trade get the and they If pain is data, none you formats. and shows utilities for is point so the listen to all conferences, it's biggest all connected, of much it different

if promising really integrate then that of it's sounds able this platform all one this. to So is

SaaS So logos? customers pipeline now. of the will it the some Is Is customers, on-prem? revenue How And got on a licensed? you've pricing. fit the it new new this color business? it in What's for XXX Is terms stream?

Patrick Decker

Sure.

because to more. was So go comments, Matthew the Deane, Matthew I'll over integral I'll that the was year of just make course little and a the courtship few team of this or past part have a deeper

So with to amalgamation along languages, best. But network. it code, coming here. it said refer we different well for to the makes it the power their difficult other the the you versed different very right, It's opportunity he's and utility data different with optimize that you're sources of overall babble, from as team members on data

is and utility for to that's the really really it They great it's them. interface. they where user is channels opportunity effectively a will the But sit utilities way overlaying the the operating along that platform which world, I other as what around So to big getting on interoperable got to easier with operating our described this for already solution our software at. almost the it, make technologies built apps Idrica

do Matthew, and talk in bit the a want pricing opportunity But the just about you upside? little to

Matthew Pine

Yes.

we really just in adoption of hear the again, translate rates the your And the which fee your that's a to model some And believe really implement will So really water It's we've implementation in that this one really, sector. obviously, is fee. amplifying then point, to from partnership built. ongoing platform, the is it's subscription point, a and pricing really of into we a point Software-as-a-Service. Deane, the biggest term digital there's really an cost, view, points pain go a

pilots this systems see together Patrick momentum. teams really We are in few bringing being these terms engaged all we building unpack as the results starting our QX that build an into in from aggregator disparate and to year ramp start our 'XX. And that are that really But as see We've backlog, and in collaboration will of implemented a through mentioned. great to commercial already.

Patrick Decker

I pilot Deane, say we this generating. actual that that these are where would a commercial going and It's And clarify, pilots we're not when case, in revenue are arrangements testing something.

So we've the already had some there talk about hopefully, very impressive quarter. that next potential we'll wins in the,

Operator

And next with our Joe from Cowen. take we'll question Giordano

Joe Giordano

to on decide stuff I move more something that like on to with like that and they that Idrica put So what would just move deployment? would of it utilities want follow like, up go quick like already would Or likely is But that something have? real new on. a top putting they're forward in, they in then if

Patrick Decker

like utilities anything don't A this. lot have of

systems, PLC it's top the interface. on and what have, their dashboard their disparate their their X that's into data ERPs. their integrating bringing platform with really they ecosystem into gets consolidated SCADA all So it's systems, systems, Joe, of and X Anything

And is they aggregate different industrial customers multiple about and lot the lots of passwords, got a challenges of utility the and customers siloed general, think our if information it. applications, you to is of way don't all have they've multiple in a

user them a way the to as say, to all data, get a in. make information able data give would this of the democratize to, aggregation coming to come to that people and So a be on as the layer sense do

Matthew Pine

them on design what place out journey and this they can utility really solution same And how in the to And to when but Joe, where other be that the for, to that solutions -- a space tend we just allows Not sophisticated. say are meets sophisticated of complex it's system utilities they the there by quite are is same needs built or as add, be. there, the are overly every the is utility to to many that journey. the utility

rollout be could maintain. it And to tailored a so easy but that highly regard, of is efficiency And of is in standardized also it that's it's their how the part platform.

Joe Giordano

amount about this were something And like developing spending kind at thinking a then if I'm Xylem, you of decent guys like correct. of resources internally

already here, of how develop that does what not kind to now looks resources made do spending ready money reallocate internally? have you packaged it's the go this this and So you've trying of kind impact which of to for decision that like you, and

Sandy Rowland

Yes.

that's question, Joe. are So money overlaps an perspective. between we're I There certainly think a R&D great on what some spending from

basis. on to of Just structure on the us it's of which commercial minority a sell that and a you, remind product it we a the to agreement, transaction is allows take the global investment. And top that, have

things on really, certainly is some growth there And a leverage be things are certain then synergies play. But And this going there. we're going that we're But are going there so certain to end. are companies. keep there that our X to able to between the

Joe Giordano

Okay.

at, here. in XQ to to bridge to are little bit we kind wanted the a a XQ? Can trying of Just from to where in this Like year move the and I maybe if talk even year. how is guess it's guide being is say, conservative we're where much look you I'm exiting discern for M&CS. uncertain it's an how early let's or example, about of much I -- versus applied

You're digits given would the just quarter that for the up in happening thought then year starts flattish. above it and I finishes that maybe applies maybe have basically and well what's the low year. for guiding single resi,

step through talk a similar XQ that revenue. anticipating off M&CS, XQ kind expected guidance the suggests year. there us and the was what on Maybe down growth of all So you're the we XQ rate like run heading kind of now in. after But

that. through us talk maybe So

Sandy Rowland

mean, unpack I Joe, Yes. there's to there. few a things

will Let what me here you start remind me the and else team asked.

QX some a And on but biggest is have not test at down there a big We has that assessment it is little between revenue there our of we bit Water earlier in The a down business, a highlighted business, seasonality in there's a will perspective, seasonality much M&CS, business, and pipeline you some QX. of to. look, some QX. Infrastructure the look do. in that from we'll step So call, down if revenue always our step business. in step so metrology services our the other businesses It's there. be the actually

I down, $XXX sort million And that QX. QX So between to our somewhere and historical $XXX of million think it's with patterns. aligns step

little As the in seasonality we businesses a the different the and different. year, think about year look bit

with you is on cyclical Certainly, our business And when an the to we're perspective, macro. AWS, backlog. year touched it a entering from AWS which most strong very, comes very

modeled versus have we've we a a stronger first stronger And modeled second so half. business, that as half

The quite other online we built the second work comes M&CS, the other and chip been half redesign better when bigger the than have seasonality of coincide businesses into ramp-up that with calling much don't as have in supply. in for a some plan,

Patrick Decker

would to just here. just a I a from what add of historical things, amplify couple Sandy said So perspective, had

the reflecting guide backlog in softness are first we but our in carries AWS that the of half. into year, We forecasting half second the are in

of quarter then year. QX and slows the us capital the utilities in second and seen. has is QX this in right get bigger of that terms and through of glide recover and that spend their we're So embedding Historically, Water and there in that softness following But we're through kind down be impacted up hits remains we by end side now, ramp obviously, conversion wastewater they the half. Hopefully, guide they because in budgets the things don't serving the a and to faster, again Infrastructure of OpEx that. fourth our out

context some the those So of new may be just you to give story. to that for

Operator

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

Mike Halloran

seems rate a for towards other those about segments? between that the for tracking if a move think more towards balance of consistent orders consistent year backlog. short-cycle you how we on some backlog it work end either context the expecting the more applied and you like that makes little as up Maybe that you're the just it's backlog following how sense some thoughts thinking on you chance normalization of revenue as and last bit year there. the think on Patrick, the conversion. run X you about through It So gave business. a and or And there's you're normalization

Sandy Rowland

Mike. Yes,

I some already think normalization. we are to starting see

second a I'd say as where rate supply at Infrastructure example has customers half behaviors. as stabilized, seeing that had a more normal pockets We've had is stable there. great the to of we're of some of the If chain our chain the the there look we've particularly orders that. Water return you -- year, supply in the

don't And a so we backlog we've that's as order and see where normal patterns, elevated. has more that been seen

I think and a a still past to that thing some getting bit backlog means deployed. do eating quite because good are we in due into start XXXX. of our projects in We that's that's that of have And M&CS, expect our

Patrick Decker

ahead, Go sorry.

Matthew Pine

coming was I Yes. the on have M&CS still We just the build the year. going due to backlog into past of XX% comment.

That's still continue so improve. And in sequentially sequentially see something continues going we're momentum where good good are looking to that forward we'll to and we at. supply monitor the orders chip as that But business, commercially.

Mike Halloran

here the relevant? year surprise, orders obviously, the pipeline on order out a pipeline sit think taking of the at comps, bidding sense. we do And side quarter kind are the What given the maybe the the the given as side? on how comments work that out Makes here. through quoting order areas any you then How balancing where the sequentials that's things, on in the there? looking expectations side today you're some of not in will And

Matthew Pine

the say, and We I a pipeline Yes. bidding From been look, standpoint, pretty there, globally. industrial industry. that's strong remains general primarily play resilient. really would in

strength, a it's of We Index, past is back moderating. bit the than Commercial months. slow in ABI due strong. the new showing construction however, X to XX the index, less continues primarily billing architectural the in be track that's that been -- to half, So expected

also for for biggest us. of improved supply from looking a due are slowing a so the investments. supply the bid slowdown to the activity in construction probably bit little talked pandemic commercial. seen And new chain resi, largely for replacement the that's we've down, primarily chain. area improve and a And It's the for we orders that

really impacted also starting up treatment pipeline M&CS, treatment. And have to so and funnel. to that's a plus we in We're water a And the especially what's really and infrastructure, net ramp then build, continues strong that. see strong backlog

Operator

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

Nathan Jones

the to hungry on you if and I to a I Xylem Evoqua. have of I'm Patrick, that. synergies value that can questions answers going combination and of around get Investors growth-enabling very revenue for is highlighted information any from deal, a clearly avenues this I think and couple of go been kind for add. mean what might

going of to teams be to how specific growth color So kinds in have terms expected is kinds you there approach Any you us give it? going your to around and for color Are the combined of to businesses, growth on things? the can these are of projects? what you're any more kind going of assigned targets color those

Patrick Decker

sure. Sure, Yes.

investors million the -- combination returns make I this so strong And because synergies years. sure So don't of I that to said, justified the within X economic want our $XXX look to are alone. mean, understand that all, as got I want synergies we've first Nate, cost I past of you've on of conviction mean the around those cost

-- will lay talked and et we to, what can the if ownership, out frames, we've exactly about, the Going buckets but we cetera. I those time not forward, only that specific delivery are reiterate need X

around conviction strong synergy. So cost that

that a so depth, long-term as in water not do scale world clearly, at that, many really long-term now do separate is combination companies. could synergies, that view, It of of a things beyond the view the are about this realization there can is and needs on a growth. what on and Then we right we together but company not taking terms

talk company. We be of number Now I the a to get But can as accelerated specific there's clearly we an there revenue going clearly, we we of target growth yet. expect little process. as going put And finalization that, the will do rate bit that a about this. out you give will on combined and synergies closer not of to a to specific I'm

clear off. work going that's terms a kicked the to is process, our In of integration there ownership within already be

be one before to the been that synergy. each on teams Obviously, assigned that approved go we have deal have after by We have of the some of we laid got gross several areas a view we boards, go of see areas I those remarks might in but as to where looking out prepared both other what are. beyond there that forward. we're opportunities my even

side organic of we highlight few services, Last enhancement, digital the aftermarket my in and opportunity of tremendous whether in enablement A were of the already believe on focused area around given digital others inorganic, progress joint combination we and not that the to be product our or digital side. between comments companies. doing more that is, of enablement the in is team that a really growth, both productivity of nature the Ron their and continue quite the R&D, Evoqua we area and I service did is businesses. and complementary and there fair on nicely the amount in in portfolio innovation enablement

So deal right on with the that's excited focusing share Nate. position at a this, what out right Obviously, as closed. I are we're you all you getting -- but can around come numbers share now, we in being we're as to now, and

Nathan Jones

for and do Xylem their service-based question footprint? on this see on a portfolio the product -- follow-up the implement one leveraging to kinds revenue been have I new legacy there developed historically a models Evoqua you business of model. company service of Is opportunity you service-based synergies. avenue specific Xylem

Patrick Decker

will Yes, traditional But on frankly, aftermarket few already And And not likely I are be journey. I year bringing just they're X services, even synergy. a and on That that mean Two, last their appreciated around whole at that take we spent to we certainly certainly a that would enhancement services -- do. some legacy I there. multiple work, cultural absolutely, Ron time. the still more realized days whenever going offerings. elements model of will sites their I is that not our with an much to out some synergy outcome-based see day best-in-breed that it quite we be done week they've believe a a is service him product-oriented very terrific focused and say they're solutions. X

know, that think -- I as you Nate, to a the there side but both our an be so complementary whether there's business offerings There's on on amount enhance fair models opportunity And some products the nature also there's that we treatment versa, on their terrific of industrial. and enhancing our the in through what and do their side within of industrial they complement deliver there. vice what portfolio, can pulling services business offering. They've got APT treatment utility

Nathan Jones

of growth it to be Yes, seems lot a for avenues there.

and few quarters. over about next more So I it look hearing the forward to months few

Operator

with Scott Research. And Davis we'll take question our from Melius next

Scott Davis

are 'XX that couple real a you or now to the 'XX we're in raising you of -- and pretty did just kind of price enough -- much clarification But then question. Every one still increases into offset your point a price inflation. here

Matthew Pine

in Scott, did of Yes. increases We round did the -- XXXX. price we back last of November

this So 'XX increase, of price really, the into for essence in year. heading be would kind

continuing in monitoring sure making that market. on. sure it's accordingly still not -- our to we're we're but the and just environment also and that moderated only obviously, So some, watch and It how appropriately marketplace continues understand also win-loss really we're up make priced in it's the the and marketplace the inflationary rate

Scott Davis

makers. about chip do or you to that flexibility not where hostage doesn't words Helpful. companies right. use every chip the just describe or XXXX, redundancy just And of sure -- of the issue make to so there's sort but whatever back of we much is forward going kind that and more year, it the other All by design in then yourselves future? come time And guys, that want perspective most dislocation to see think how were I guys held kind you this of some

Patrick Decker

is this Patrick. Scott, Sure.

sequential I the a a suppliers even of of know and health, the wondering at our and and in going right now on of that there way to woods about weakness whether just means, allocation. or yet, load Clearly, are say, out of looking seen all the get sudden, doesn't boat people strengthened. not we're I auto work It chips show up. that and terms hearing of this the all we've first the stabilized that So all, themselves discussions we, have that by chip I'd say improvement. both all would have no though with are we intermediaries

space. We in continue aren't easy substitutes the -- this

and thing frankly, did, to to alluded quite year, Matthew the And past lot our we spent offerings money and to redesigning was a this as so time generation. the of main energy we next get earlier,

think us, in baking we're recovery I that perhaps for for best So sectors or outlook but the year. not now do that strengthen slowness we line. on the simply that as further that other right could be our counting into show will

Scott Davis

Patrick. helpful, That’s

commonly are Just chip? in clear, consumer where design going to sort from talking of a and between level at that used more be there ubiquitous when you redesigning, is that’s next-gen to some talk more about in you so about chip you’re Or electronics?

A –Patrick Decker

so the on to next-gen allocated It’s on is legacy future, built more being for getting capacity chips, where being the yes, chips. those capacity that the down capacity we bringing just have are we’re really because designs they’re

Operator

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

Andy Kaplowitz

strong to or see markets? then talked for noise? I QX? you any Water, in in was China or you channel Patrick in But you've in like that commercial. looks half And as customer you related in especially reopening destocking have second behavior evidence separately, forecasting sows contingency about China know Applied in any for potentially concerns It commercial slower Matt, new your begun guide a have put construction other of you still

Matthew Pine

Yes.

the on Andy, channel inventory. on first So one

teams addition to We have actually into our we really contact. calls counsel visibility given meetings channel The partners. good in relationship monthly with weekly quarterly sales the inventory and in our meet with

and the inventory, have sitting and is good inventory. healthy which levels insight into really reported on us. excess The we back not are to So normalizing they're any

in some recovered. the and not say, terms is improved is normalized pandemic softening investments. resi, of inventory. would are due have back There not Commercial levels the chain to to pockets kind from supply prepandemic of I that But fully

of a more really the lot that's stock. industrial not an of front, There's to product. build On engineer-to-order

it I'd the And channel there. leave so on that's where inventory

Sandy Rowland

Andy, part your take me China let the question. of

in China. guide China the and moderation of of to stronger a year. a the us And measured expect QX approach The COVID seen of stronger of we outbreak our were and little QX in XX% side. more given the slowdown about first acute bit than China the for performance I down taken this more as industrial on been We of in think a the a recovery second business, in on half and We QX. more So China half for was side saw we've tough -- -- we've in the year. the half year utility the XXXX. the in has We do second

momentum And the long working so is China. again. of building remain our team there dynamics just our very now. And bullish some for we orders focus on through term We're

Andy Kaplowitz

the industrial cyclical, like dewatering seems it much be the given continues you amount there. then be does And tend Sandy. hold activity know I but mentioned more business historically that, it cycle less that's could mining. Appreciate the during to out current of well to up as cyclical

Maybe you're you the doing could there? comment as exactly growth what investments well, strategic on getting support you're from your

Matthew Pine

business, fleet to effort seen We just that more we've which And portfolio of technology. balanced ago and back grow making of in part a Yes. our investments our and be stable. a bit segmentation is shifting constant our a more in muni that the more side, years to also a upgrading bit especially few the made

our productivity for customers. are the those remotely so those connectable and We we assets digitizing can improve making

of I'd as the thoughtful as the being being well say, So bag it's some a mixed really, of business. segmentation about in innovation balanced more

Operator

any for remarks. this questions over have additional It appears further will now at to closing we back I time. Decker program no that turn the Patrick or

Patrick Decker

Thank you.

very everybody, Really our of year. travels, you. providing Evoqua very So around then, again, everyone your this best. continued all time now the in the Xylem. for know between transaction. appreciate to forward very the progress updates ongoing and safe you're much on thanks, today. And at I time all you Thank and look interest busy very, I your

Operator

and concludes This at you. lines your Thank have fourth day. quarter earnings year disconnect XXXX call. Please conference Xylem time, and today's wonderful full this a

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