XYL - Earnings call 4 2023

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Operator

Welcome to Xylem's Fourth Quarter 2023 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrea van der Berg, Vice President of Investor Relations. Please go ahead.

Andrea van der Berg

Thank you, operator. Good morning, everyone, and welcome to Xylem's Fourth Quarter 2023 Earnings Call. Chief Grogan. Matthew are Financial and today Bill Officer, me Executive Pine, Officer, Chief With provide perspective outlook will XXXX XXXX. They their results full quarter and year and discuss our and for on guidance Xylem's fourth

our and information on please then the the keep return Following related one question you I'll covered remarks, to address the we questions prepared and to ask to call. to will a queue. follow-up

Investors midnight, and call presentation a webcast of accompanied by A this slide of be the As a call available in replay are our section website. February our will reminder, today's available XX. until

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

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

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

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

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

Matthew Pine

exceptional team revenue share. a of for The thanks both Thanks, on the share Xylem QX Andrea. year full fourth quarter It's and everyone, the the in exceeding earnings delivered results us. expectations Good pleasure enterprise. performance for morning, to and year a transformational joining and team's per

execution, revenue With backlog now delivering XX of is drove double-digit of basis fourth more EBITDA at drove billion. growth points, our demand disciplined expansion $X the quarter, and strong that X%. than organic Looking margin growth, orders

year and overdelivered cost year capped rate Our the very plan. XXXX us full points margin stayed and our XX% XXX strong give a growth a even with of in team the run serving of momentum earnings dynamic combination basis up XXXX. Despite Evoqua entering The share synergies the ahead organic QX and expansion Both per with team off of focused year environment of which every performance adjusted in EBITDA the revenues quarter. Full XX%. on quarter our Evoqua, in were delivered customers. excitement the team

value segment our customers we water intensify. and Xylem our in of effectively to an capture revenues. even by the growth industrial recurring services serving who made supports are breadth we're between we outsourcing the the increasingly full And management for On then, stronger services the as call, and of traction to forces in to it services synergy address position seen the in And Evoqua a Evoqua Joining earnings with put advanced we've offering. creation of Xylem's to water wins even and of the offerings seeing of to expansion open Water with challenges. In build the legacy segment, combining and even of capabilities water since January continue the the team business in continuing easier as combined a X, about dewatering business our the has marketplace their business. momentum customers our Services Evoqua access The Solutions customers capabilities portfolio last the up in new hands most of put opportunities sector's realigned move water our with stresses more bit our structure. shared Xylem

outperformance in a continued a of are close for is dynamics in our strong off M&CS. momentum major healthy markets. starting we're continuing backlog strength, prudent in are Water, our demand we a Applied demand view forward, 'XX, XXXX on end keeping our Looking taking the and eye from the end source in China Though especially most which markets of across in business and cyclical is segment, with our

the continuing We well confident our growth. Overall, parts ability to in the also feel very our business we're expansion the and of profitable sustainable for energy positioned drive by focusing margin on value. delivering greatest

and solid XXXX results be XXXX turn earnings through more EBITDA now organic and walk to for share per outlook in between Bill quarter's in detail. expect margin We resulting to X% up to the expansion, $X.XX. I'll it with revenues our X% $X to over

William Grogan

Thanks, Matthew. Please turn to Slide X.

pleased we XXXX. throughout focused the and finish expectations delivered per our share QX and are for the full exceeding year, consistently team As Matthew stayed were the year. revenue strong and The to mentioned, on with has earnings

the billion We $X.X our rose resilient grew while X continue in to of and organically greater see which X%. supported XX%, guidance quarter, for and the for approximately book-to-bill Total to demand exceeding full orders with our backlog, by X XX% revenues the quarter organic for X%, than year. the X% grew year. Organic are revenues grew X%

from XX.X%, over MCS more Our grew, incrementals the productivity volume infrastructure. with Island savings, performance. We on margin the All than prior year regions performance by U.S. EBITDA the XXX this year. and led nearly XX.X%, finished XX was prior growth offsetting of in up water margin EBITDA basis price year. was by XX% led basis double-digit points higher the With up reflects inflation, and legacy's points

over $X.XX, quarter EPS the of our up high of in $X.XX, end XX% the guide above excluding When EPS Our year. $X.XX. Evoqua, by impact prior was was the

approximately with improved conversion billion. and year adjusted free of in Our cash with liquidity billion over robust Slide of cash turn position We $X to $X X. our available exceeding year. Please flow the versus expectations ended and last remains XXX%, financial significantly

backlog XX/XX performance. in with transition this demand points XXX environment was down margin book-to-bill due earnings versus X.Xx, We impacts with & driven important implied points orders above a backlog, to will as focus a EBITDA for strong strong the revenue Measurement of improved X, basis more finished for of and assessment presentation the revenue spirit XX the XX% growth and turn by book-to-bill what slightly To we quarter, segment's offsetting the line offerings. slightly at our metrology forma developed demand. Before the led want you'll execution prior exceeded our year largest volume. Please was all have In the reflection demand format to performance, M&CS were [ X. orders grew ], guide by with quarter Revenues margin grew, and our earnings excluding other is Slide fourth touch robust simplified our I forward. segment as productivity each some XX%, flat, insist productivity solutions XX.X% impact most offsetting basis Solutions points, to When is of services. robust changes in and XX.X%, price Adjusted Solutions orders our was OpEx X% guidance higher digital our on for metrology our markets investors. up growth the cover growth price, growth our Segment up driven to down portfolio, see growth I quarter, basis by across unfavorable across the healthy with inflation I regions. work basis segment going margin pro of mix. In on by margins also continue AMI Evoqua, the Pro the points exceeded saw basis, on for treatment saw and markets. on highlight X% services. saw book-to-bill with by portfolio. primarily appendix. And quarter reported inflation sequentially emerging strength have for legacy the was in than X%, Services, materials the to of Evoqua. of XXX realization and volume and total robust XX%, margin year. expanded Applied is with to Control decline EBITDA and volume the by offset than X. of was in $X.X we forma EBITDA historical softer strength we the of and Backlog segment demand and we U.S., growth across now our and by up and strong in EBITDA by the our declines. Integrated growth an geography. XX in with although provided the and of offset the was billion XX orders in materials was more and up organic EBITDA volumes. Water basis Water, demand Infrastructure driven our points driven Demand price with across XX%, outlook Revenue of led productivity, expectations globally. with expectations driven portfolio on price

and creation in announced Solutions mentioned, we December, Matthew Services segment. the As Water of

we We financial are guidance month, our based on to providing will this revenue organic provide segments. Later reporting new recast information the previous aligned segments.

However, earnings low QX for remains we Demand new outlook momentum the call. In largely solutions growth M&CS, be we'll in strong. our in structure line teens. order segment the we segment with to as expect update guidance our needed expected of and and AMI

In XXXX Water throughout robust of a see expect mid-single revenue backlog. digits. expect sequential We Infrastructure, by supported we to improvement growth

resilient our and We OpEx demand. of healthy nature due demand expect to a CapEx mission-critical applications

of business continuing Applied utility closely Water, expect to monitor the our where modest is decline softness we market. In low single digits. majority China are a of in We the end in

continue business. our We which to XX% pockets up softness of across markets, make about end markets, our developed in of see particularly

historic with expect capital growth and as increases returns also to more services. mid-single is growth across We be price lap headwinds to our expected we both digits to and see backlog levels. ISS

as is by activity durable to an and high-growth continue billion in sciences. business in and segment such model. service as on particularly funnel organic And a beverage, basis. This our is life strong a energy food backlog reminder, supported ISS outlook growth We and the in see $X verticals

full growth total XX% revenue guidance. to growth be to range to let's our $X.XX, translates the an points in volume, This This expected higher driven price represents offsetting $X.X inflation. for XXXX midpoint versus yields and XXXX $X to billion, of year. up organic to revenue to basis at EBITDA by EPS XX.X% year, $X.X segment prior margin growth of of outlook XXX XX% Now productivity X Slide by to the resulting XX X%. X% of over to and expansion prior is to revenue QX X% The billion of turn XX.X%. and

XXXX, We guide. is basis to expected will and the down a XXX% total in synergies cash be is Free our of quarter. the XX% approximately exit on XX% embedded X% of to reported the year for conversion first rate income. Drilling growth are $XXX flow revenue run on which expecting X% cost net organically. in to million in We anticipate be range

higher by and driven margin expect first EBITDA $X.XX. XX%, yields EPS This $X.XX quarter up to gains. XXX points, continued first quarter price of approximately volumes, realization We be basis to productivity

We are position momentum entering a strength. the from of and year with

our Our and balanced position the strong outlook our of reflects portfolio. durability commercial

continued X, call and While particularly cost I'll actions needed year continue expansion. volume strong Water, our positive focus we margin to Matthew In market comments. China shortest-cycle ensure broader take our conditions, expectations declines, Overall, to to we're additional turn momentum. With for that, in and turn which we on the the remain over the ready Slide our monitor is build also of larger-than-expected case back business. please as for on closing to as Applied to

Matthew Pine

India Middle challenges there, and inspiring. a Bill by to in incredibly been and year scale momentum spending and in at customers modernize I the began as a and Thanks, ambition up for Xylem. I step such the time great frankly tackle and colleagues of India, water infrastructure Bill. off is with awe in time It's opportunity big started of the the CEO exciting to East.

is those and have a visit customers competitive team We doing that to on both increase work and We system Bangalore. experience communities. some as in manufacturing provide their for the got that just of every We teachers an school the with honest, it's experience educational And and water outstanding now hard community. markets, to lives flow, celebrating the likely in on and describe. to and started the area not In I'll outcomes, of the XXXX. be That scale interconnectedness clean those our fundamental their and drinking East with us life drove great a water but of commercial Whether mega a kids hands value focus, took of reminders focus a complexity me profound. the water gives to be simplifying outside advantage. we're or of the Reducing the have you provides challenges. that and a and And rural solutions, out the our small-scale of colleagues just easier that impact in city, of to opportunity. to into to water. great it what communities bringing project present school economic value time home the expansive health also well, at a improves quality importance clean we India building India know Xylem localized water for Middle water students big of serve their social both markets solve our the treatment R&D make creation customers reinforced scale sustainability does of it to of there, platform is from real business. These

far us easier services all most water with challenges is of And far outcomes the with deliver creation empower in solve critical this the We solutions have across value complexity. We comprehensive for year the great integration to access, capability strong track opportunity of is less both products, our make customers on legacy the pace them on the XXXX great well and to to in creation deliver and combination. and sector. a value off full of of in great opportunity their front execution QX most started Evoqua The businesses. assembled to to legacy that with advanced Xylem and most portfolio back

impact as are take to markets team even continue resilient, long capabilities of and the all our customers. our is in energized end long-term trends deliver to Our our intensify, as water to for greater

strategy continue Day of into you that look XX thesis We Washington, and direction at many insights social sharing positioned us remains will forward the to on creation. we further on and us. investment Investor priorities economic when strongly robust, and so has I join execute further for May value Our to in our hope D.C., strategic upcoming our

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

Operator

Dray RBC Instructions] Markets. first Capital Our [Operator Deane from question with is

Deane Dray

priorities. start going for love hear some broadly. what lot optimizing everyone you we're mind Matthew, on the potentially. on love I hear to as we to Analyst you're more for the I and a the to think get at would I'd And specifics path portfolio your year, of top improvement opportunity what's know more just the about early but the thoughts margin Day, thinking

Matthew Pine

Great. Thanks, Deane.

the year obviously, there January. Followed [ globe. First, to we leadership want lot a QX year We of Xylem. partnership. We just Evoqua that and the combination. ] I that acknowledge really for team's had announced the challenges transformational Adrica full performance around then change, a out in while had during the a And by all dealing with macro

an has team humbled to lead into platform excited past decade. staying said an the built, before, chapter. and as So next the We the Xylem incredible job incredible I've over done focused. I'm really

did If exist. you ago, company or X even look years back half X the not

And of we're to us leadership to solutions a moving value provide lot of our chain. So And on in platform holistic water have from really this that a good visibility really there. across our kind customers. And platform. continue my to XX-year perspective, build optimized to with unique momentum forward, going of we're journey to position this the very enables

Xylem. the last process COO planning year, strategic As I lead did at

our So we year. last later and the we going the in thing I'd lastly, -- got don't And Number That's about strong productivity we'll on this as acceleration, the we've And drive expansion Number business. ability you continuity value call deliver segment after scaling have, we on digital, on. I've the the we're continuing get in for do to and transition enabled that's probably to about that have really it, hit that mention is focused soft that which services business, through do we're of XXXX that and two, capture. deal foremost. did X talk by then That's Evoqua one, to strategic strategic and margin transformational first is to to its say, we execution a talked excellence priorities kind help year. through that. One us the I'd it's WSS culture. we talk lot, and side operational

in lot of bring behaviors focus culture culture it around our area. is of all, and And a to alignment X of we high-impact inspired people don't and innovate. have culture. that's going want large We to are, a to put want failure. that really our be innovate next As top we people We fill and behaviors company. to in We drive the and drive first that important, there's companies them fear together, flows to those line growth call cash the

The want second to empowered to to and accountable want them deliver. is And business. then thirdly we importantly, the be in be most empowered them and we lead to

really And And -- Maybe help the let's we've call get so execution months, alignment that working pushing I that's our us comment company going on few going we're the everybody those around to strategic want to knows the we're will, past on. our things think, is tagline and is have that I to solve we which which priorities, on in would focus simplify the action the a to to what really organization last are water, make means forward. is been bridging we aspiration, really is that water. what which our over

rallying in XXXX. in that's going be the So organization, we're to that's the focused where and really cry

Deane Dray

the update plan to asked know on existing the out have America who an as all then Bill, on customers appreciate synergy revenue a just like. plans the recast which of Europe. follow-up facilities successful would a could roll And to I North the to of have you the And box, the that in outsourcing check I I slides, update lead there's also on specifically? rollout in a really similar get Evoqua XX/XX for color. I on love besides

there, update please. an So

William Grogan

Sure.

off, start And a part is multiyear I'll the the journey. of first with first maybe question. XX/XX So

of highlighted, the on cultural a weaved fabric of As corporate. evolution into culture. it Matthew the we gets just are

pilots tool the is Day, your Investor Some off new the complexity organization to And comes months. QX North numbers Water really margin Applied and systematic just within things done. Obviously, that but put term, and North around better innovating longer-term Metrology around a to in some look margin we reduction. a and transformational late ideas. within that really some takes be organic America X able out focused have around get XX we part as I some time we'll by as that to set, It resource M&CS. opportunity tremendous business. Obviously, performance in longer into about And the see really story. methodology, But kind our drive allocation organization. for teams of most kicked behaviors tool X And you be quick I tool overserving to American to remember, going the a XX/XX specific evolve benefits customers exercise aligning to with it's starting takes within analytics. you're a the it's improvement matter about tools that. best and the the It's and We've roll there's to growth a more not be best it math to your to of It's big think time. do

Matthew Pine

drive us in phone around long the like leads also on on leveraging most to not of for integration regional announced really synergy one, thing going broader capture -- the across thing globe, And the was X WSS was helps is pathing infrastructure, bit place sales Deane. about term, Maybe We've appointed cost side the I our And to really to easier Yes. customer And can intuitive, creation our December, internationally. the accelerate help the the APT makes proud execution. focused been that utilization calls, our phone few training maybe And technician to for and career feel picking synergies, it's then with and you we're service said, completed to little their the well and segment to WSS our of the revenue thing big is provide make as focused XXXX. which that incentives leverage important enable one going as side, well international team a can are both a there. Number teams. the the it's problems. leverage do for does as as at in I we better focus. of in we as our the us the is water know, revenue synergies, we've on color to portfolio where the One thing, think in as forward comments QX. it instead And deal. of technology. we big a of customers which solve revenue We as Xylem our the pick going as so teams it's it of well them then for end customers up biggest day, us, they I And X technicians it 'XX, for the it because make most. expansion

Operator

Mike is next Halloran question with The from Baird.

Michael Halloran

Bill, couple to a you. questions of

of First, this projects. utility on are so? What saying talk little a industrial about the on put acceleration? customers markets. about you for signs at forward How that bit and markets capital CapEx-related trends. that Maybe you sustainability softness to are thinking in commented of point, end Any and confidence willingness the existing

Matthew Pine

mean Yes, I continued we've momentum I there. the this on -- from seen could out. start CapEx front,

very our Orders up For double the full digits. and us, business. QX strong, both is the in treatment proxy year, were

not And U.S., confidence. only is in global just -- a of number. that that's so And that number a gives us that's lot the

in So is very performing every treatment. region well

with bill, That with about which if into contains of CapEx of the includes regulation a in not And industrially, new going assessment life little WSS, good of X we've which the seeing dewatering strong. that XX% AMP PFAS even a pretty do globally. markets remains now. funding in but any resi be revenue, gives concern a or segment, Europe also legacy feel the next Recovery get which in the or it's bid and pullback big lot We've continue to see and seen the Whether about it's a to focus confidence any on a power, and is the services of our and over bit utilities U.K. cycle our ISS say you the there. the this a microelectronics. OpEx -- us in lot Resilience Act well. I'd on activity the that's next that term. and portfolio obviously, in momentum and the side, especially especially is we'll then from [indiscernible], business, in the strong year We're long So a seen infrastructure focused And about [indiscernible] mixed there, X haven't that. it's by part U.S. that's It's the a to perspective, bag year, ]. We're years, talked those [ or little seeing sciences, especially applied there we water markets, of in of lumpiness bit end we

income people applications. where to that investing has pandemic are their And that the of of discretionary played a lot weather out their into ag resi upgrading coming of is a in applied of is just due were [ and products our also ] some role Some houses.

And so Western in U.S. a Europe. lumpiness and bit the in seen little some we've there

the bit So of view that's of a landscape. the little

Michael Halloran

that. Appreciate

the And what side tool portfolio? other journey going pricing One, the things, thinking for I you opportunity as you think be on and here question, how all implementing, think as guess, multiyear 'XX? is about for Second kits the just you're the pricing to you rolling out you're of about about broader the pricing are XX/XX as twofold.

William Grogan

Yes. I'll Mike, that take maybe one.

it the as we than a opportunity next So X we point. expectations are forward. capture look in year going But price to significantly little pre-pandemic over ramp That's that will still down experienced for an be higher versus pricing. is XXXX

as as As varies capture the we opportunities for forward, probably our additional And stronger of tail point for to within look skills we and done our up productivity calibrate the out segments. that With leveraging The then the X longer offset one offset capture products to roll to that AWS portfolio. good M&CS as have. Obviously, be methodology a different some continue across Obviously, to lever WSS going inflation. they've second does pricing we capture and of job just hone driving plus and will team I analytics opportunities. inflation. across XX/XX, some think we're in we price as better on and the the operational price customers a really value components

price margins to really and enhance cost we're going also and for Obviously, goes to our So little will compress as cost then and we stay a price down, bit to look next expectations will productivity positive. that relative year material positive move be material as manage but pricing inflation our forward.

Operator

The is next question with from Scott Research. Melius Davis

Scott Davis

bit there versus held peers be up there, bit a to just out some comments there what on China surprise you helpful. okay, but little a some your maybe cautious, at we've Wanted -- granularity least -- is has a which incrementally made given heard business seemed more But what not a more from others. little would like it looks

Matthew Pine

being about orders XX% With of new mid-single for largely public up there. Thanks water with of exposure an now year utilities. to combination us, tied in the Yes. decent terms standpoint, our pretty that infrastructure seen revenue. of from Scott. the up the is QX for XX%. question, over China, orders company were digit XX%, We've full

look side, X%, low in if on revenue back a stack, X-year the China. digits mid-single full year But down we on up On the you digits. were single about we're

in of slide we to to right to yet. So the building, backlog is the that terms continue convert funding. revenue seen haven't Things but

more in little investing environment, you the some to see, demand away believe thing it's China, that we we of XXXX issue. that's if over you from and the side, exposure, in on of expect utilities. with a I say the continue for in again, a bit Across news, flat little continue up of to healthy would the overall, to to held some similar we'll resilient, think and the the a pipeline that's funds business. taking a utilities funding. I industrial we be to read economy government's see I intervention honest, a continue last monitor infrastructure. short-term bit the But that's the And China there, the would roughly of say more and be

Scott Davis

helpful. super That's Okay.

talk Your or balance that about of would Evoqua your much doing deals. could you M&A in just we the bolt-on the given That expect about as sheet perhaps interest natural you backlog? of talk question And some fantastic just kind anything structure leads your the should way in perhaps in And talk is deal, -- 'XX be shape. just pipeline, a helpful. kind acquisitions about me

Matthew Pine

following closed our Yes. No, We thanks. history. largest deal question. in strong very transformational XXXX, the good our out close It's a of

And bolt-ons. we're on have making so the flexibility longer-term integrate medium share we we continue do your one a going again, well medium short-term that the the point, And Scott, structure at we we'll and be there's with near parts Evoqua to with disciplined to to fairly is capture bolt-ons. laser to small a us the inquisitive, we to focused with May. focus, the allocation To Evoqua, can more be the sheet. The of M&A allows about the the portfolio deal of value on in capital approach, And strong we'll strong within in pipeline. Day small Investor where our other framework, our we're and want evaluating focus to get of is that Evoqua we and ring-fenced sure balance do term. things business, but continue

Operator

with from Citigroup. question is next The Andy Kaplowitz

Andrew Kaplowitz

translates the how the margin you a by give to on color M&CS. that for XX XXX focus you us mentioned improvement at a could expansion segment. And then when Matthew, pilots 'XX, points you more XX/XX little basis Bill, look of on with margin

M&CS have did -- improvement in QX. nice improvement You margin in

particular potential So think that margin term? over in about the business you the longer do how

William Grogan

Yes. solutions resolved. the are able as value go leads the they've margin for kind most of record year, journey for largest to meet into facility their I next mean continue the added within the shortages, incremental year. which gone had. Obviously, think expansion I they've and of I out price incremental chip M&CS improvement part, started products They've on And to relative the with the They've improve next impact our to think drive pricing to levels margin has within the production we recovery to I of quality gone margin the capacity on through backlog. pack. that we've as think, supply the and backlog

their as EBITDA is leverage and material around I of they to continue historic footprint volume the and some products. drive year their pretty they near record levels at target, as to exit their at labor So think their margin look productivity ability the significant

made improve continue So to about in to we're the we them look progress year progress sequentially they've the for through XXXX. that as and excited

Andrew Kaplowitz

algorithm and question And in for That's longer-term a want Matt, only M&CS, strong to guide very had Xylem's this for just still being I know got X%. picture a to guiding in put business you. in year. to a such bigger X% you're but you of Applied conservatively helpful. X%. maybe growth you've China, X%

to growth still So the right as given worry you [indiscernible], the focus, take do of the you these things all, all on focus over digitization, number rate? CEO that's at higher that kinds self-help all that's

Matthew Pine

Yes.

said a China. We've flat has the that think, changed being we've Andy. there. it's watchful It's in with Applied and is cyclicality not balanced a think I And about of that to again, our from just, that we that, some Water, what potential year-over-year, approach with and some timing got of as lot there eye be I think, which but could past. headwinds also in

There's largest really standpoint, about year. the know QX terms we across of lot of normalized. approach. We balanced business in the the a look context balance out how and of I of end So changed. of through It's the that's going the you a change ramp our it's from healthy have demand seasonality long-term seasonality more framework, XXXX and our in with about year from from a markets. at thinking thinking do no When a just

I XXs think the incrementals. I'd too, you forma thing reflects is low leave our margin guide pro with,

delivering feel so the about well on that as growth. strong And the margin we really we're

Operator

Mr. next next with The question open? question Jones from Jones with Nathan is is Stifel. please your is line Stifel, Jones Nathan ahead. go from The

Nathan Jones

margin to going I'm up follow the on question.

expansion and I XXX of your pretty the margin basis Evoqua out operating something target. Which leverage. points margin math you're your synergies the obviously M&TS top XX going well me think get do in gets some when end to cost basis get the I points, excess like good of of you expansion

of or you offsets can of be some about anything that the kind talk that margin So otherwise expect? increased muting growth that's what could there or I expansion investments might

William Grogan

Yes.

significant invest segments. biggest that term little were bit sure want highlighted. And to continue and ability all to is make around the product things exciting the make the long relative market that high-level to to relative math synergies to of pressure to think up. of that we relative want for X resources and put Nathan, your obviously also, we're an the I some we allocating things a -- come that that across over evolving piece we've got we There's probably we macro prudent have significant in that business. you sure productivity guide we Obviously, in the environment growth launches to there's then account the that accretion the expansions on opportunities that

fairly So margin is to guide I our the balanced. relative think expansion

at a forma XX% strong think really highlighted, that's just flow-through. incrementals I Matthew on pro basis,

So that implementation. exit into the we longer term. we're journey. And starting team will strong with think a longer end try opportunities add year the look on as tailwind us XXXX That expansion to laid has excited I out the here higher margin the range we as to really obviously, the term, year and some just at XX/XX of about our for get

Nathan Jones

you I is? whatever get today basically that to guys and mentioned supply think when is follow-up, on you has to comment itself past due backlog my a chip out. backlog just Bill, then expect And in that where past worked the Can of normal Great. the issue level M&TS new you

Matthew Pine

progress Yes, Matthew. the it's due it, we're past take I'll making backlog. Nate, good on

you If we XX%. XX% in the XXXX the exited past feel going at And We get to due due. XXXX. past we to started remember, we're backlog bulk of around that

part, with again, Some little but due bit a that 'XX we confident get XXXX, the may past backlog 'XX. through pretty stray in the for most feel we'll of that into into of carryover

the out from over to it really our in years We've comes customers' Chip so And investments go capacity. our really bottleneck is past execute supply down the standpoint, to a few and deployments made falling. ability just

our internally at here view Xylem capacity there's of from walls. So our and point limitations X no

Operator

Joe is next from The question with Giordano Cowen. TD

Joseph Giordano

guys [ the like on how and of I to I'm over utility judge turn wanted set get like What kind to we term? high Endrica water, a more kind interesting how like curious medium connected meaningful you where to I kind guess how go can do ]. of level, touch something this just maybe real how -- about just of can into about go? think And near one where type within stories could expectations we success? this, of that

Matthew Pine

I I've pretty this. on mean, Yes. bullish been

much home. teams it's about get got data it's under pulling on play as have the me we year are talk thing once utilities, months be progress partnership combination being world is we is well management data. the made We core one We only utility in start. building globally, things and really closed. in And built about like about be The X capabilities in You've the off the building we as have one leader to to had heard to through in products. the the but the to through or of folks at believe aggregator the aggregating last good this the belt the platform of in able a residential We're significant talked our I've our pipeline. utility, applications the about a great

as and bit like is the networks or platform little applications, in place, our I it, get AMI a well products, would help land them expand our through treatment frame with as et of optimize their products how pulling So a water cetera.

some wins. had we've significant So

new I've in and about have the city treatment management being in in putting and we sell for is with to East, products. whether fully the done system it's as across I Middle specific talked region, digitizing a highlighted U.K., deals Like the this a momentum. prior on world, those U.S.. platform. I've just of a of said, in able and the AMI We've the terms in Spain not of won deal And Some as and build it's big the deals calls, we past with wins Italy, the well that's platform in continue their water some to which

on So for as big our really a bullish I be lot you XX Day, we think give but we'll more can closer May opportunity Obviously, partnership. Investor us. at to the it color get we're a

Joseph Giordano

would to out. you a to anything to would to some of be U.S. in base existing revenue like leveraging solution selling about synergies. long build to prepared time But and on the if ISS going point Evoqua imagine That's the great But late. do there's can color. an channels solution on like just I you I a which take had this then And than you I'm remarks, Europe that -- like mentioned put apologies curious try have outside know product to like through, a lower I if is I joined lift side sell.

Matthew Pine

We through legacy South the just Yes. some the capital legacy took had business the kind we've a of wins. we to medium-term Africa. Evoqua already Xylem Africa had That's business from and one objective, in where shorter in actually South

application, folks to that able having infrastructure. capital deploy ground were to we on the have execute really industrial So and without service into and an

on medium Evoqua we're the focused that legacy through kind leveraging product in channels is as and in the to term the things internationally. side Xylem well the are of capital really those So short business as the the of both U.S. side

see So we are starting to there. progress

Operator

session. This closing to turn to I back concludes our the for would question-and-answer conference any Matthew remarks. like over Pine

Matthew Pine

great on look by Investor to speaking today more long-term want we're We our followed call Xylem. your again it a May XX, outlook. thank make interest in and Yes. our our I to for details forward going just where Take early provide day. Day and in for everybody to care joining on May,

Operator

you concluded. Thank now has conference The attending today's for presentation.

may now disconnect. You

Xylem (XYL) 6 Feb 242023 Q4 Earnings call transcript