Xylem Inc

To the Stockholders and the Board of Directors of Xylem Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Xylem Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill — Measurement and Control Solutions Reporting Units — Refer to Note 12 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The goodwill balance was $7.6 billion as of December 31, 2023, of which $1.7 billion is allocated to the Measurement and Control Solutions reporting units. The fair value of the Measurement and Control Solutions reporting units exceeded their carrying value as of the 2023 measurement date and, therefore, no impairment was recognized.

To determine the fair value of the Measurement and Control Solutions reporting units, the Company used the income approach. Under the income approach, the fair value of the Measurement and Control Solutions reporting units was based on the discounted value of the estimated cash flows that the reporting unit is expected to generate. Projections were based on management’s estimates of revenue growth rates and the selection of the discount rate, taking into consideration industry and market conditions. The discount rate was based on the weighted average cost of capital appropriate for the Measurement and Control Solutions reporting units.

Given the significant judgments made by management to estimate the fair value of the Measurement and Control Solutions reporting units, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenue required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of future revenue and selection of the discount rate for the Measurement and Control Solutions reporting units included the following, among others:

•We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Measurement and Control Solutions reporting units, such as controls related to management’s forecasts of future revenue and the selection of the discount rate.

•We assessed the reasonableness of management’s revenue forecasts by comparing the projections to historical results and certain peer companies and information included in industry reports.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) discount rate, and (3) long-term revenue growth rate, including testing the source information underlying the determination of the discount rate and long-term revenue growth rate, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate selected by management.

•Our fair value specialists also assisted in evaluating the reasonableness of the Measurement and Control Solutions reporting units’ fair value by considering comparable EBITDA multiples of peer companies.

Evoqua Acquisition Intangibles Valuation — Refer to Note 3 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Evoqua Water Technologies Corp. (“Evoqua”) for $6.9 billion on May 24, 2023. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including Customer and Distributor Relationships valued at $1.4 billion. Management estimated the fair value of the Customer and Distributor Relationships using the multi-period excess earnings method, which is a specific discounted cash flow method. The fair value determination required management to make significant estimates and assumptions related to future cash flows and the selection of the discount rate.

Given the fair value determination of Customer and Distributor Relationships requires management to make significant estimates and assumptions related to the forecasts of future cash flows and the selection of the discount rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of future cash flows and selection of the discount rate for the Evoqua Customer and Distributor Relationships included the following, among others:

•We tested the effectiveness of controls over the valuation of the Customer and Distributor Relationships, including management’s controls over forecasts of future cash flows and selection of the discount rate.

•We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and certain peer companies.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, and (2) discount rate by testing the source information underlying the determination of the various assumptions, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate selected by management.

/s/Deloitte & Touche LLP

Stamford, Connecticut

We have served as the Company's auditor since 2010.